Special Feature: A break in the chain (Part One)

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CFOs reveal how they are navigating the supply-chain disruptions brought on by crises.

According to the International Monetary Fund’s (IMF’s) global economic growth forecast for July 2022, supply-demand imbalances continue to play a role in high inflation and low trade output.

Somewhat alarmingly titled ‘Gloomy and more uncertain’, the report says that if renewed Covid-19 lockdowns affect China, inflation rises even higher, and the Russia-Ukraine conflict further constricts international trade and European gas supplies, global growth could potentially decline to a dismal 2.0 percent in 2023 – putting it in the bottom 10 percent of outcomes since 1970.

South Africa is, of course, not insulated from these economic shocks; the IMF predicts that by 2023, the country’s growth will have fallen from 4.9 percent in 2021 to 1.4 percent. However, things are picking up. According to a June Statistics South Africa report, the volume of goods produced in factories increased by 4.7 percent quarter-on-quarter during the first quarter, export orders remained positive, and GDP growth seen during the same period returned the economy to its pre-pandemic size.

Yet supply-chain issues remain a persistent thorn in the side of many South African companies. While demand has increased for several sectors, supply shortages continue to be a problem. Doing business has become incredibly expensive, too, with a 500 percent increase in the cost of using a 12m freight container to send goods by sea from China to South Africa.

Not only must CFOs contend with supply-chain disruptions and stockouts at a global scale, but South Africa has faced its own challenges in the form of the July 2021 civil unrest, a cyberattack on Transnet soon after, April 2022’s KwaZulu-Natal floods, and, for good measure, stage 6 loadshedding. When all of this is combined, it makes a South African CFO’s job increasingly difficult.

“In the current climate, conditions are so volatile that while CFOs plan for certain scenarios, we have seen over the last two years that anything is possible,” says Laila Razack, Equites Property Fund CFO. “There are the black swan events, too – the events we haven’t even contemplated yet.”

This special feature was originally published in the second edition of the 2022 CFO South Africa magazine.

Read the next installments of this special feature:

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