Africa’s supply chains have long been beset by issues of corruption, inefficiency, and exploitation. Blockchain is now rewriting the rules of trade and providing a tempting solution. Blockchain is proving to be the most valuable asset in Africa, tracking goods, empowering producers, and resulting in a new era of trade.
African economies can become major participants in global supply chains by harnessing their vast resources of materials needed by high-technology sectors and their own growing consumer markets, UNCTAD said in its Economic Development in Africa Report 2023 launched on 16 August in Nairobi. The top supply chain trends in Africa right now include ecommerce, sustainability, technology and skills development.
The fact that Africa is a large, diverse continent with a population of roughly one billion is not new. According to one perspective, the continent’s supply chains, which are primarily structured like traditional supply chains, serve the entire population of Europe and the Americas combined.
Conventional supply chains function as reactive, and linear systems. They react slowly to changes as a result. Additionally, traditional supply chains prioritize production and delivery of goods and services over customer needs. Africa’s supply chain environment is at a critical junction marked by exciting opportunities and daunting challenges.
Challenges faced by African supply chain
Lack of transparency: Although transparency was not initially a part of supply chain management in Africa, it is now increasingly demanded by consumers and other relevant stakeholders, which puts your businesses in a unique situation. To be fair, no supply chain anywhere is designed to be transparent, but this is especially the case in Africa. Supply chain transparency is the ability to know in real-time everything that is going on within your supply chain and then communicate that to the relevant stakeholders.
Although supply chain transparency impacts every area of the supply chain, it is common in areas such as quality, sustainability, resilience, and risk management. Supply chains in Africa are mostly informal. This can make them incredibly complex, especially those with international reach, because they span multiple countries and involve numerous suppliers.
For smaller supply chains, they may have to deal with poor infrastructures. All in all, these factors make it challenging to trace the source of every component.
Inefficiency
Inefficiency in African supply chains stems from a complex interplay of factors including poor infrastructure, inadequate transportation networks, and cumbersome regulatory environments. Additionally, challenges related to communication, demand forecasting, and cultural differences contribute to these inefficiencies.
A new World Bank report reveals that transportation inefficiencies are causing significant food losses in Africa. Thirty-seven percent of locally produced food is lost in transit due to slow processing times, poor infrastructure, and non-tariff barriers.
Corruption
In many African nations, corruption and bureaucracy are widespread, which has a negative impact on the business environment. Bribery is frequently thought to speed up the expensive and lengthy customs procedure. Delays and higher operating expenses are the results of these factors. Significant logistical challenges are also presented by Africa’s diverse terrain, which includes great distances between cities and few modes of transportation. Supply chain efficiency is further hindered by the continent’s reliance on cash-based economies and restricted access to financial services.
Blockchain
Blockchain is a shared immutable ledger that facilitates the process of recording transactions and tracking assets across a business network. Anything of value can be tracked and traded on the Blockchain network. A Blockchain is a distributed database, which is shared over a computer network. Blockchain stores information electronically in a digital format to make transactions secure.
- Blockchain creates and maintains a digital ledger where new records can be added in cleartext or securely using an irreversible encryption technique called one-way hashing. Blockchain ledgers may be audited to ensure authenticity.
- Supply chain security benefits from blockchain’s shared access to authoritative data. This builds trust and helps prevent fraud.
- Blockchain can already integrate with other technologies in use throughout supply chains, including scanners and Internet of Things (IoT) devices. Potential innovations include integrating blockchain with technologies such as digital identity authentication.
- Integrating a blockchain comes with human challenges, including putting labeling processes in place and getting all stakeholders to adopt the technology uniformly.
Blockchain in the African supply chain.
Although Blockchain cannot be considered as a new technology, it has just begun to boost in the field of supply chains, especially in Africa. Supply chains has experienced so many technological solutions in the 21st century now blockchain has the potential to take it to another level.
3 Things that blockchain can enhance in supply chain.
Transparency: Using blockchain can improve both supply chain transparency and traceability as well as reduce administrative costs. Following the COVID pandemic, transparency has become a top priority in the trade sector, necessitating the use of blockchain technology. It is challenging to alter records or conceal information because of their immutability. The ability for all supply chain participants—farmers, processors, distributors, retailers, consumers, and regulators—to access the same data promotes accountability and trust.
Traceability: Traceability, also known as visibility, is the ability of relevant parties to monitor the supply chain’s journey from sourcing to delivery. With traceability, you want to look out for inefficiencies and opportunities for improvement across the supply chain. Blockchain enables the stakeholders in the African supply chains to track or trace several activities. This is because of the technology’s decentralized nature, which ensures data is distributed securely and housed on multiple systems.
Anti corruption: Blockchain could revolutionize anti-corruption initiatives.
Its success is mostly determined by contextual factors, such as social or political contexts, legal frameworks, and infrastructures, rather than the technology in general.
- The use of blockchain technology in governance has an impact on basic facets of society, including identity, transparency, data and privacy protection, and trust in institutions.
- A blockchain is made to function in settings where people have more faith in data and code than in people or organizations.
- Data entered into the blockchain is unchangeable and transparent. These characteristics may lead to conflicts with individual rights outlined in the General Data Protection Regulation (GDPR) of the European Union, such as the right to privacy or the right to be forgotten.
Blockchain promises increased transparency, efficiency, and empowerment and provides a potent toolkit to transform African supply chains. Even though there are still obstacles to overcome, there is no denying the possibility of revolutionary change.
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