Compiled by Eamonn Ryan, derived directly from a presentation by Chris Hattingh, head of policy analysis at the Center for Risk Analysis (CRA).
The following presentation was made at the second annual GCCA African Cold Chain Conference held previously in Cape Town. This is Part 3 of a three-part series.
Crucially for the cold chain, there is a lack of trade support infrastructure, such as cold storage facilities. This scarcity limits the sector’s ability to meet the growing demands of consumers. Lack of access to finance is another significant challenge faced by businesses in the HVAC&R sector. Increased financing opportunities would enable them to expand their productive capacity and cater to larger scale demands.
Complex border procedures and limited market knowledge of products add to the difficulties faced by businesses in the HVAC&R sector. Furthermore, the sector struggles with low production capacity and the absence of reliable and affordable electricity. These challenges hinder the ability of businesses to compete effectively in the market.
The cost of logistics in Africa – which currently can load the cost of exports by 75% – can be significantly reduced by improving transportation networks and enhancing safety and security measures. For example, investing in rail transportation can lower costs and provide a safer alternative to road transport. The condition of road networks in Africa has deteriorated over the years, leading to increased costs for businesses. Improving road infrastructure is crucial to reducing operational costs in the HVAC&R sector.
One of the top risks currently faced by businesses in South Africa is critical infrastructure blackouts, which can disrupt HVAC&R operations.
Hattingh listed one of the main concerns as being the issue of subsidies. While governments may want to stimulate local businesses through subsidies, it is crucial to ensure transparency and accountability in the allocation of these subsidies. Businesses that receive subsidies should be held responsible for job creation and adherence to transformation standards. Furthermore, localisation efforts, such as South Africa’s pursuit of localisation, can inadvertently create higher trade barriers through tariffs on imported goods, negatively impacting consumers. Protectionism is also a global issue, as more advanced economies like the US and China turn inward to stimulate local manufacturing growth.
Alongside subsidies and localisation, vested interests and lobbying pose potential risks. Transparency and accountability are essential in regulating the influence of vested interests on trade policies. Likewise, corruption can undermine the effectiveness of the AfCFTA, particularly at border posts. Efforts must be made to combat corruption and ensure that ports operate at a high level.
As global value chains and supply chains shift, Africa and South Africa can position themselves to take advantage of reshoring and ensure mutually beneficial trade relationships. However, trade policies must be carefully crafted on a case-by-case basis to maximise these opportunities.
He concluded that AfCFTA has the potential to drive inclusive economic growth and development in Africa. He re-emphasised that business should not rely on the pace at which governments move but make their own plans regardless of government, leveraging strengths in the private sector, and embracing innovation. Africa and South Africa can establish themselves as key players in the global economy.