South Africa: 10 facts about domestic supply chain shortages

With the disruptive ripple of worldwide factory closures and ensuing shortages of goods and raw materials remaining a challenge for governments to tackle, The Africa Report looks at some South African industries and sectors experiencing supply chain constraints.

1.Glass

Drinks maker Distell flagged the unavailability of glass after domestic suppliers depleted reserve stocks. This affected the volumes Distell was able to shift for sale in the market.

The industry blames the country’s five-stage lockdowns, which were accompanied by alcohol bans, saying this distorted demand and disrupted suppliers’ ability to plan efficiently.

In its integrated annual report, Distell says: “It is imperative to our survival as a group that we work with and support suppliers, particularly in the glass industry … [which] remain[s] under pressure”.

However, the glass shortage has not placed a dent on Distell’s dominance in the ciders and flavoured alcoholic beverages (FABs) market segment.

2. Cork

In addition to difficulties sourcing glass and packaging material, Distell underscored the shortage of cork – or rather hardship in securing adequate supply.

“We are working with our suppliers to address the supply shortages and expect a gradual improvement in the next 12 to 18 months,” Distell says.

3. Aluminium

The glass shortage stimulated demand for aluminium cans as an alternative for ciders and FABs, as well as other beverages. Although Distell notes that supply has been tight, the sudden surge has helped some suppliers.

Debt-saddled packaging company Nampak is a beneficiary of the shift. In its annual results announcement in December 2022, Nampak underscores the “unprecedented growth” experienced by the domestic can market, which boosted the company’s revenue generation by as much as 30%.

4. Apple juice concentrate

South Africa sources the bulk of its apple juice concentrate, used to manufacture ciders, from external markets such as Poland and China.

The global supply chain bottlenecks, Covid-19 shutdowns, and port congestions have prompted a rethink.

The South African agriculture department changed a key liquor law in 2022 to permit local drinks makers to use grape juice concentrate in the production of ciders – a move that has been welcomed by the industry.

5. Chicken

The American foreign agriculture service has been quietly watching South Africa’s bone-in chicken shortage, which recently resulted in global fast food chain KFC temporarily closing 70 outlets.

South African growers are opposed to imports, and have previously successfully lobbied the government to impose heavy duties on key exporters, including the US.

However, local producers are feeling the pressure of intensified load-shedding and, more recently, water outages. In its trading update published on 25 January, Astral Foods says the company is experiencing a backlog in its broiler slaughter programme and integrated broiler supply chain.

RCL Foods published its trading statement on 2 February and expressed similar sentiments. RCL says load-shedding has impacted production and service levels.

6. Office occupancy

With employers increasingly adopting hybrid work models and some employees demonstrating greater preference for working from home, commercial landlords are scrambling either to convert or sell properties to counteract low occupancy.

In South Africa, the office glut dilemma has been most acute in Johannesburg corporate headquarters districts – Rosebank and Sandton – where commercial landlords are grappling with low occupancies as high as 16%, according to industry estimates.

7. Refineries

South Africa’s move away from domestic refineries to fuel import terminals will undergo its first litmus test in 2023. Sasol and TotalEnergies’ Natref inland refinery is one of the exceptions to the recent shutdowns of coastal facilities Sapref and Engen.

8. Locomotives

One of the key reasons state-owned logistics operator Transnet has been unable to move large volumes of coal and iron ore is because there is an unavailability of locomotives, the company says in its interim results statement.

Following failed negotiations with the Chinese CRRC E-Loco Supply, Transnet has issued an open tender to other suppliers to rehabilitate E-Loco’s non-operational locomotives, the company said in January 2023.

9. Textiles

The sting of China’s economic shutdowns has been a wake-up call for South Africa’s apparel and furniture retailers, with the latter country benefiting from a pipeline of investments intended to bolster local production and manufacturing.

The Foschini Group (TFG) Africa is increasing domestic manufacturing and design to 76% of the company’s apparel purchases in the next five years, according to TFG Africa’s Inspired Living report.

“We continue acquiring manufacturing assets and preserving jobs across South Africa, with Prestige Clothing Proprietary Limited now being the largest apparel manufacturer in South Africa,” the company says.

10. Power and water

Power utility Eskom’s chronic inability to keep the lights on is creating another poser for South Africa’s supply chains, shows the latest set of trading updates from listed companies. An added complication is how load-shedding has spillover effects on electricity-dependent water pumping stations.