The impact of Covid-19 in the global economy is highlighting the importance of understanding the supply chain of critical products so that countries can prepare for potential disruptions.
Because Covid-19 has led to lockdowns, suppliers are temporarily ceasing production, and some countries are restricting exportation of critical products.
There are concerns on availability of key products used in the Covid-19 response in Africa due to high dependence on imported products. How high is the risk of this disruption for the East African Community (EAC)?
To comprehend the supply chain risk that EAC countries are facing in the wake of Covid-19, we looked at EAC’s imports of medical instruments and medical protective supplies (disinfectants and sterilises) to highlight how vulnerable the continent is to supply chain disruptions and highlight long run opportunities for consideration.
As the demand for medical instruments and medical protective supplies is increasing during the Covid-19 pandemic, the World Customs Organisation published a HS Classification reference document for Covid-19-related medical supplies.
While there are broad categories of medical instruments, this study analyses products under medical instruments, therapeutic respiration apparatus (which include ventilators), textile face-masks, without a replaceable filter or mechanical parts, surgical masks and disposable face-masks made of non-woven textiles and rubber surgical gloves.
Given that there is some manufacturing of sanitisers in the continent, this study looked at the vulnerability caused by dependencies in the sanitiser supply chain. Sanitisers are made from ethanol or isopropyl alcohol.
From 2017 UN Comtrade data from the Observatory of Economic Complexity was used to ensure consistency due to a lag in reporting by some countries. While 2017 data might not be the most updated representation of current imports, it does provide the closest reflection of the current situation.
Here is what we learnt
EAC countries are highly vulnerable to supply disruptions in China, Germany, US, India and South Africa as these countries account for a large percentage of EAC medical instruments imports.
Africa accounts for 0.25 per cent of medical instruments exports globally and more than 60 per cent of these exports originate from Tunisia and South Africa.
A paper prepared by the Global Alert Team at the University of St. Gallen Switzerland reported that as of March 21, all 54 governments had implemented some type of export curb on medical supplies and medicines associated with the Covid-19 pandemic.
It is too early to say how long these type of restrictions could last but they highlight the importance of long-term thinking for EAC countries on medical imports.
No country has a disproportionate share of medical ventilator exports but Singapore, China, Australia, US and Germany account for more than half. Africa accounts for less than 0.1 per cent of these exports and just 1.6 per cent of the total imports.
EAC countries imported $4.6 million of medical ventilators mostly from China, US and Germany. This small figure (compared with South Africa’s $40.9 million imports) highlights additional vulnerabilities on sufficiency due to the small amount imported into the region as compared to other African countries.
While the likelihood that any domestic EAC producer can quickly mobilise to start production and deliver the type of medical ventilators currently available in the market is low, it has been encouraging to see how quickly some African countries are reacting to this need.
For example, South Africa is currently evaluating proposals from businesses and organisations to develop ventilators to help the country and the continent to build 10,000 ventilators by end of June using components readily available locally.
It does not end there. Some companies in EAC have started producing hand sanitisers in response to the high local demand. We looked at vulnerability posed by the sanitiser supply chain. Sanitisers are made from ethanol or isopropyl alcohol.
Limited number of firms produce these types of alcohol on an industrial scale globally. The biggest producers are in China, France, Germany, the Netherlands, the UK and the US.
For the EAC context, the study focused on ethanol. For Africa, South Africa is a leading producer and exporter. More than 60 per cent of the total African exports come from South Africa.
Key findings from this data show the region’s dependency on a few countries particularly, South Africa and India. Both of these countries are currently under lockdown and there is a high potential of supply chain disruptions that would affect EAC importers of ethanol.
Additionally, governments in high production countries are imposing export bans. For example, France has ordered all IPA made in the country to stay there.
India has expressly asked the alcoholic drinks industry and the sugar cane industry to provide ethanol to hand sanitiser companies.
Other countries could follow suit. There is potential for the EAC to ramp up ethanol production from existing sugar plantations and related industries to reduce dependency on imports.
It is commendable that China and Chinese companies have donated facemasks to most EAC countries that will be used by health officials in the frontline of the response. China accounts for more than half of global exports of facemasks.
OEC 2017 data show that global exports of these products was $11.9 billion and Africa accounted for less than one per cent of these exports mainly from South Africa and Tunisia.
Historical import data for facemasks show that EAC countries imported a total of $6.7 million in 2017 alone from China and India. And any supply chain disruptions in those countries would affect availability and prices in the region.
It has been encouraging to see examples of how quickly companies in Kenya and Tanzania have started to manufacture mask and the support they have received from their respective governments.
The response to Covid19 globally is revealing the risk of high dependencies on a few countries for key products. EAC countries should consider supply chain mapping of critical medical instruments and a holistic assessment on whether countries require reserves for these products to prepare for future pandemics.
With the African Continental Free Trade Agreement in place, African countries could also do a diagnosis of how vulnerable the continent is to supply disruptions of critical medical instruments and have a concrete plan on how to reduce the continent’s vulnerability through local solutions.
Africa can take advantage of the pandemic by building or rebuilding the production industry. With mass production shutdowns and disruptions to global supply chain, countries have been forced to look for other options internally because importation of goods is currently impossible.
For example, some students from Kenyatta University in Kenya came together and manufactured ventilators. Clearly, Africa is very much capable and should take advantage of the resources, talent and human capital it presently has so that it can become more self-reliant and even give in room for innovation.
This can be a chance for Africa to build local industries. And perhaps in the process of manufacturing locally, we can also identify gaps that exist and make systems and process better along the way.
If we are able to take advantage of this as a continent, then we see an Africa that is self-reliant in the long term.
Anita Kundy is trade adviser and Aimée Dushime a tax adviser. They are global shapers from the Dar es Salaam and Kigali respectively.