As the U.S. and eurozone economies continue to struggle and the hype about the emerging markets of the 2000s has subsided, many multinational corporations are evaluating African economies for potential consumer market and sourcing opportunities. Although the continent as a whole has not resolved such longstanding problems as political instability and corruption, the social and economic fundamentals in some countries are changing for the better, and opportunities for extracting minerals and other raw materials abound. These developments make it worth asking: Could the 21st century be the era when Africa becomes the "new China" or the "new India"?
Some good news out of Africa
Economic evidence increasingly points to the end of the BRIC (Brazil, Russia, India, and China) "party"—the swift growth that made those countries so attractive for the past decade. Real gross domestic product (GDP) growth for each of the BRICs has slowed considerably. Brazil's 2012 real GDP growth rate was just 0.9 percent; IHS Global Insight expects a stronger but still modest 2.2-percent growth rate for this year. Russia's economy is strongly correlated with the world price of oil; about 50 percent of the government's revenue comes from oil production. As a result, the price of oil affects whether and when Russia's GDP rises and falls. China's growth rate in 2012 was 7.7 percent and is expected to remain below the 8.0-percent mark in 2013 and 2014. And finally, India's growth rate came in at 3.2 percent for 2012.
Meanwhile, the United States is holding on relatively better than the northern tier of the eurozone economies, while the southern-tier PIGS (Portugal, Italy, Greece, and Spain) remain in a prolonged and deep recession. In addition, most of the emerging markets and advanced economies are faced with aging populations, low fertility rates, and in the case of Germany and Japan, a shrinking work force.
In the midst of this weak economic performance and troubling demographic news in some parts of the world has come an interesting surprise: the strong economic growth and improving socioeconomic conditions in Africa, especially the sub-Saharan countries. The changing—and improving—social and economic fundamentals in many African nations are at odds with the West's image of Africa over the last few decades and have placed the continent on many multinationals' radar screens.
For a long time, most of the news from Africa, especially the sub-Saharan countries, was about political instability, the AIDS (Acquired Immunodeficiency Syndrome) and HIV (Human Immunodeficiency Virus) epidemic, famine, civil strife, and war. However, economic data suggest that things may be stabilizing. IHS Global Insight forecasts that for 2013 to 2017 sub-Saharan African economies are likely to outpace every major regional economic bloc except China in terms of real GDP growth, and that they will be second to none in terms of population growth. (See Figure 1.) Real GDP growth for sub-Saharan Africa is likely to be 4.9 percent in 2013 and in the 5.3-percent to 6.0-percent range from 2014 through 2022. Contrast that with real world GDP growth, which is expected to be in the 2.5-percent to 3.9-percent range for each year between 2013 and 2022.
In sub-Saharan Africa, HIV infections and infant-mortality rates are falling, while life expectancies and enrollment rates for primary school through college are on the rise. From the late 1980s to the early 1990s, approximately one in 20 African nations was considered to be a democracy; today, only a handful of the current 55 African states do not have a multiparty constitutional system. Many of the sub-Saharan African nations, moreover, have benefited from Chinese and Western investments, mostly for commodity and mineral extraction. Interestingly, the U.S. East Coast customs port districts have been reporting sizable increases in imports from West Africa.
But there's more than just commodity extraction driving sub-Saharan Africa's growth. Several consumer market opportunities have also entered the picture. One reason is that the commodity booms have led to robust growth in consumer spending—well over double the 1.9-percent gains expected for 2013 in the United States. As shown in Figure 2, consumer spending is expected to continue its upward trend. Increasing urbanization rates (the percentage of the population living in an urban setting) and growing disposable income over the past few years have given many African households the ability to buy their first refrigerator or send their first child to college. Many more Africans are purchasing their first television or cell phone or are starting to utilize consumer conveniences like disposable diapers. This newfound consumer base is bound to have a profound impact on future international trade patterns and supply chain dynamics.
The big "ifs"
There are several caveats to keep in mind when describing sub-Saharan Africa as the "new" emerging market of the 21st century. Several decades ago the outlook appeared to be similarly promising as several African nations entered the international economic scene only to see economic contractions and tremendous political instability. Sub-Saharan Africa is still plagued with poor infrastructure, a high percentage of its population in poverty, and in many nations, fragile economic and political fundamentals as well as ethnic tensions. Sub-Saharan Africans still spend approximately 40 percent of their consumer outlays on food, and local economies are only a drought or a rapid increase in world food prices away from devastation.
Still, with the region's robust population growth, high fertility rates, new consumer market opportunities, and the beginnings of a new middle class, there is reason for optimism. As Africa's economies develop, more companies are starting to consider sourcing raw materials and finished goods from that continent. However, Africa faces challenges that could restrain development. The region should be carefully monitored and evaluated against others such as China, which it lags well behind, especially in per-capita terms. Nevertheless, supply chain managers should keep a close eye on developments in Africa so they will be prepared to serve this potential growth market.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modeling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”
For example, millions of residents and workers in the Tampa region have now left their homes and jobs, heeding increasingly dire evacuation warnings from state officials. They’re fleeing the estimated 10 to 20 feet of storm surge that is forecast to swamp the area, due to Hurricane Milton’s status as the strongest hurricane in the Gulf since Rita in 2005, the fifth-strongest Atlantic hurricane based on pressure, and the sixth-strongest Atlantic hurricane based on its peak winds, according to market data provider Industrial Info Resources.
Between that mass migration and the storm’s effect on buildings and infrastructure, supply chain impacts could hit the energy logistics and agriculture sectors particularly hard, according to a report from Everstream Analytics.
The Tampa Bay metro area is the most vulnerable area, with the potential for storm surge to halt port operations, roads, rails, air travel, and business operations – possibly for an extended period of time. In contrast to those “severe to potentially catastrophic” effects, key supply chain hubs outside of the core zone of impact—including the Miami metro area along with Jacksonville, FL and Savannah, GA—could also be impacted but to a more moderate level, such as slowdowns in port operations and air cargo, Everstream Analytics’ Chief Meteorologist Jon Davis said in a report.
Although it was recently downgraded from a Category 5 to Category 4 storm, Milton is anticipated to have major disruptions for transportation, in large part because it will strike an “already fragile supply chain environment” that is still reeling from the fury of Hurricane Helene less than two weeks ago and the ILA port strike that ended just five days ago and crippled ports along the East and Gulf Coasts, a report from Project44 said.
The storm will also affect supply chain operations at sea, since approximately 74 container vessels are located near the storm and may experience delays as they await safe entry into major ports. Vessels already at the ports may face delays departing as they wait for storm conditions to clear, Project44 said.
On land, Florida will likely also face impacts in the Last Mile delivery industry as roads become difficult to navigate and workers evacuate for safety.
Likewise, freight rail networks are also shifting engines, cars, and shipments out of the path of the storm as the industry continues “adapting to a world shaped by climate change,” the Association of American Railroads (AAR) said. Before floods arrive, railroads may relocate locomotives, elevate track infrastructure, and remove sensitive electronic equipment such as sensors, signals and switches. However, forceful water can move a bridge from its support beams or destabilize it by unearthing the supporting soil, so in certain conditions, railroads may park rail cars full of heavy materials — like rocks and ballast — on a bridge before a flood to weigh it down, AAR said.
The North American robotics market saw a decline in both units ordered (down 7.9% to 15,705 units) and revenue (down 6.8% to $982.83 million) during the first half of 2024 compared to the same period in 2023, as North American manufacturers faced ongoing economic headwinds, according to a report from the Association for Advancing Automation (A3).
“Rising inflation and borrowing costs have dampened spending on robotics, with many companies opting to delay major investments,” said Jeff Burnstein, president, A3. “Despite these challenges, the push for operational efficiency and workforce augmentation continues to drive demand for robotics in industries such as food and consumer goods and life sciences, among others. As companies navigate labor shortages and increased production costs, the role of automation is becoming ever more critical in maintaining global competitiveness.”
The downward trend was led by weakness in automotive manufacturing, which traditionally leads the charge in buying robots. In the first half of 2024, automotive OEMs ordered 4,159 units (up 14.4%) but generated revenue of $259.96 million (down 12.0%). The Automotive Components sector was even worse, orders 3,574 units (down 38.8%) for $191.93 million in revenue (down 27.3%). Declines also happened in the Semiconductor & Electronics/Photonics sector and the Plastics & Rubber sector.
On the positive side, Food & Consumer Goods companies ordered 1,173 units (up 85.6%) for $62.84 million in revenue (up 56.2%). This growth reflects the increasing reliance on robotics for efficiency in food processing and packaging as companies seek to address labor shortages and rising costs, A3 said. And the Life Sciences industry ordered 1,007 units (up 47.9%) for revenue of $47.29 million (up 86.7%) as it continued its reliance on robotics for efficiency and precision.
The warm waters of the Gulf of Mexico are brewing up another massive storm this week that is on track to smash into the western coast of Florida by Wednesday morning, bringing a consecutive round of storm surge and damaging winds to the storm-weary state.
Before reaching the U.S., Hurricane Milton will rake the northern coast of Mexico’s Yucatan Peninsula with dangerous weather. But hurricane watches are already in effect for parts of Florida, which could see heavy rainfall, flash and urban flooding, and moderate to major river floods, according to forecasts from the National Oceanic and Atmospheric Administration (NOAA).
As it revs its massive engines with fuel from the historically warm Gulf of Mexico, Hurricane Milton could possibly hit Tampa as a Category 5 storm, according to the FEWSION Project at Northern Arizona University, which tracks supply chains throughout the country.
With that much power, Milton could shut down the port and seriously disrupt the fuel supply into western and central Florida, which could then hinder recovery efforts. That’s because fuel supplies for much of Florida, especially central Florida, arrive from Texas and Louisiana through the Port of Tampa. That means that anyone who depends on generators or fuel for critical functions should plan for an extended period without access to fuel. And recovery crews and logisticians should consider bringing their own fuel when responding to the storm, FEWSION said.
One of those disaster recovery efforts will be led by nonprofit group the American Logistics Aid Network (ALAN), which is already mobilizing its forces for Hurricane Milton, even as it devotes other energy to the Hurricane Helene response. “In an ideal world we’d have plenty of time to focus all of our efforts on Hurricane Helene clean-up and recovery,” Kathy Fulton, ALAN’s Executive Director, said in a release. “But in the real world, major hurricanes don’t always wait for their turn. As a result, we are officially activating for Hurricane Milton.”
In the meantime, many weary residents of the region are thinking of moving to another part of the country instead of getting hit by vicious storms several times a year. Nearly one-third (32%) of U.S. residents aged 18-34 say they’re reconsidering where they want to move in the future after seeing or hearing about the damage caused by Hurricane Helene, according to a survey commissioned by real estate brokerage Redfin.
“Scores of Americans flocked to the Sun Belt during the pandemic because remote work allowed them to take advantage of the region’s relatively low cost of living. Some thought Appalachia was insulated from hurricane risk, not realizing that the area is prone to flooding and that hurricanes can sometimes cause flash flooding far away from the ocean,” Redfin Chief Economist Daryl Fairweather said in a release. “Americans are beginning to realize that nowhere is truly immune to the impacts of climate change, and we’re starting to see that impact where people want to live—even people who haven’t experienced a catastrophic weather event firsthand.”
The report is based on a commissioned survey conducted by Ipsos on Oct. 2-3, fielded to 1,005 U.S. adults. After making landfall in Florida in late September, Hurricane Helene wreaked havoc across Appalachia, becoming the deadliest storm to hit mainland America in almost two decades. In North Carolina, the death toll has surpassed 100 and the city of Asheville has been devastated.
Shippers and carriers at ports along the East and Gulf coasts today are working through a backlog of stranded containers stuck on ships at sea, now that dockworkers and port operators have agreed to a tentative deal that ends the dockworkers strike.
In the meantime, U.S. importers and exporters face a mountain of shipping boxes that are now several days behind schedule. By the latest estimate from Everstream Analytics, the number of cargo boxes on ships floating outside affected ports has slightly decreased by 20,000 twenty foot equivalent units (TEUs), dropping to 386,000 from its highpoint of 406,000 yesterday.
To chip away at the problem, some facilities like the Port of Charleston have announced extended daily gate hours to give shippers and carriers more time each day to shuffle through the backlog. And Georgia Ports Authority likewise announced plans to stay open on Saturday and Sunday, saying, “We will be offering weekend gates to help restore your supply chain fluidity.”
But they face a lot of work; the number of container ships waiting outside of U.S. Gulf and East Coast ports on Friday morning had decreased overnight to 54, down from a Thursday peak of 59. Overall, with each day of strike roughly needing about one week to clear the backlog, the 3-day all-out strike will likely take minimum three weeks to return to normal operations at U.S. ports, Everstream said.