Strategic Sourcing and Industrialisation insights with Prof Douglas Boateng
Although poverty remains an ever present challenge in Africa, the continent itself is certainly not poor. Collectively, poverty levels can be significantly reduced through changing industrial and personal sourcing behaviours. Enhanced intra-African trade, industrialisation, SMME growth and job creation are all possible through widespread acceptance and adoption of supply chain management, procurement and, in particular, strategic sourcing practices.
For the continent to succeed in tackling some of its challenges through strategic sourcing, policy makers must adopt procurement innovations that will target local value addition and sectorial industrialisation. Monitoring accountability and governance mechanisms must be clear and overseen by institutions of vertical and horizontal accountability.
The dominance of imported goods on African markets is such that the ordinary African consumer is beginning to think and believe that selected goods produced locally are of inferior quality. Increasingly, they are prepared to pay premium prices for imported goods which may even be of poorer quality than the ones produced locally. Much of this has to do with the relatively inferior position of supply chain management and, in particular, strategic sourcing on business agendas, coupled with the lack of aggressive marketing campaigns for locally produced goods and services.
This continues to negatively impact local industries, the quest for long-term industrialisation and local economic development. The African textile industry, for example, is struggling against Chinese, Indian and Bangladeshi competition, where innovative industrial subsidisation is still happening. Estimates also indicate that in the last six years well over 69 000 jobs have been lost in the clothing and textiles sector in South Africa. The situation is no different in amongst others Ghana.
In May 2019, the Economist reported that China is now the biggest arms supplier to Sub-Saharan Africa with over 45 country defense technology ties.
The big question is, with all the billions of dollars of annual defense spend, how many Chinese owned defense factories are based on the continent to supply these needs? With strategic sourcing negotiations, one is confident that with a long-term view in mind, a win-win relationship can be struck with the Chinese government to establish purposively located manufacturing plants to meet the continent’s needs. Thereby creating some long-term jobs in Sub-Saharan Africa as well as reducing the net outflow of dollars from the continent to acquire defense related products.
Similar industry sector-specific challenges and opportunities exist in selected countries on the continent including food and fruit processing, furniture, chemicals, ICT, education, tourism, mining, financial services, aquaculture, forestry, construction, etc.
The long-term answer lies in Africans strategically sourcing and being prepared to pay a bit more to benefit certain local industries and help create long-term production facilities and jobs.
In Africa, there are currently various national developmental agendas. These include: the National Development Plan of South Africa, Nigeria’s Vision 2020, Rwanda’s Vision 2050, Vision 2030 of Kenya and Ghana Beyond Aid, to name but a few. The United Nations Sustainable Development Goals (UNSDGs) present governments with an opportunity to align their respective sourcing strategies and national developmental goals with the global vision.
For sourcing policy coherence as well as local and regional impact, care must be taken to ensure that national developmental and other local needs do not suffer. For strategic sourcing to be effective and impactful, there has to be cooperation across government departments and across public and private sectors.
Strategic sourcing by its nature is long-term driven. Therefore, it is important that governments and C-suite executives look beyond the short-term. Strategies should thus focus beyond the present generation and beyond national borders.
South Africa, Egypt, Nigeria and Kenya’s economies are of strategic importance to the region. Their long-term fortunes are inextricably linked to the smaller economies on the rest of the continent. It will be a major challenge for countries like South Africa, Egypt, Nigeria, Kenya and Ghana, Tanzania, Rwanda, Uganda, Namibia, Botswana, Ivory Coast, Ethiopia, Liberia, Gambia, Togo, Senegal to achieve their SDGs by 2030 if policy makers do not aggressively position the country and its suite of goods and services to cater for some of the product needs of the rest of the continent.
In 1963, Dr Nkrumah said: “No independent African state today, by itself, has a chance to follow an independent course of economic development and many of us who have tried to do this have been almost ruined or have had to return to the fold of the former colonial rulers. This position will not change unless there is a unified policy working at the continental level.”
In a number of economies, public sector sourcing is rapidly graduating from a more limited administrative and paper pushing exercise to smart acquisitive management. This is, in part, due to effective government strategies to use sourcing to stimulate local industrial development. The less ‘mere suppliership’ mind-sets there are among developing economy policy makers, the more value addition, industrialisation, job creation and poverty reduction there will be.
Therefore, in the interest of long-term social and political stability, it is about time that local and regional wide policy makers revisit their supplier and value chain development strategies in support of long-term economic development.
Africa is a very diverse continent. As such, what works in one sub-region or country may not necessarily work in another. Local and regional knowledge about sourcing and procurement practices and buying patterns are thus critical.
The key to realising the proven long-term benefits associated with procurement is for C-Suite executives and policy makers to accept that procurement is a strategic function not “just” a financial administration process. With this paradigm shift they can then proceed to appoint qualified professionals to strategically manage the procurement function.
For accountability, the appointed value adding professional must ideally be part of the C-suite and policy decision making group. This will enable the organisation to fully hold the individual responsible for any acquisitive method adopted for sourcing a need.
Most public and private sector officials have some idea of single or sole sourcing and competitive tendering. The big question is whether they comprehend the implications of each.
Whilst competitive tendering has proven merits, various developing economies are painfully realising that in an increasing number of case it has not really assisted with local industrialisation and socio-economic development. Nor has it led to value for money, especially within a number of industry verticals where there has been collusive tendering by the big players.
Although sole sourcing and restrictive or closed tendering can assist with local empowerment and industrialisation it can also be abused. To this end, public and private sector officials considering any of these sourcing methods must develop their own up-to-date benchmarks to ensure the price-quality-developmental criterions are in line with the strategic intent of the business, and society as a whole.
Unlike sole sourcing, when it comes to single sourced products there are opportunities for significant price savings. Depending on the single sourced product specifics, the timing of the need and other vertical specific considerations, the associated unit price (excluding other verifiable costs such as tariffs) for the requirement must not be more than nine percent (9%) above the officially listed price. Otherwise a full explanation and documented proof of reasons must be provided by both the public sector institution concerned and the single sourced supplier.
By focusing on the long-term opportunities that strategic sourcing and its connected practices have, African nations can collectively begin to facilitate greater strides towards the realisation of their respective developmental agendas and towards the ubiquitous pursuit of the UNSDGs.
Douglas Boateng, Africa’s first ever appointed Professor Extraordinaire for supply and value chain management (SBL UNISA), is an International Professional certified Chartered Director and an adjunct academic. Independently recognised as one of the vertical specific global strategic thinkers on industrialization, supply and value chain governance and development, he continues to play leading academic and industrial roles in sectorial reforms both in Africa, and around the world.
He has received independent recognitions and numerous lifetime achievement awards for his extraordinary contribution to the academic and industrial advancement of supply chain management from various international organisations including the Chartered Institute of Procurement and Supply, the Commonwealth Business Council and American multi-national Hewlett Packard (HP). For more information visit www.douglasboateng.com and www.panavest.com
