Restructuring of supply chains
About
Shaping sustainable and resilient supply chains: Development of local industrial ecosystems in energy and mobility industries.
Climate change and the Covid-19 pandemic have posed fundamental questions about the sustainability of global supply chains and opening the way to a new geography of production. Recent changes in national and international trade policies are also accelerating this re-organisation of global production.
First, it is increasingly recognised that long-distance trade of commodities and minerals is not compatible with a net-zero emission scenario, even assuming that green hydrogen will decarbonise industrial logistics in the near future. As a result, attempts to reduce long-distance trade is emerging. Second, several advanced economies, the EU in particular, are introducing new green industry standards. While these green standards are aimed at addressing global climate change, they are also operating as de facto non-tariff barriers, which preclude access to markets, especially for developing countries with coal-based energy systems. Therefore, green industry standards will increasingly result in the re-organisation of supply chains and related geography of production. Last but not least, hyper-specialisation of supply chains can make them more vulnerable to shocks, as we have seen during the recent pandemic. The geographical concentration of key manufacturing capabilities – for example in semiconductors – has also spurred new geopolitical tensions. As a result, industrial policy interventions aimed at re-shoring and ‘friend-shoring’ strategic industries are proliferating, although it is not clear how successful they will be. A new multi-polar geography of production is thus emerging.
This research stream focuses on the emerging new geography of production and the extent to which this re-organisation will open or close opportunities for sustainable structural transformation in Africa. A key focus of the research is on how supply networks should – and can – be re-organised and developed for development of mobility- and energy-related industries in Africa.
Most African countries have experienced a partial and often problematic integration into global supply chains. So far, most of them have occupied upstream segments of these chains as suppliers of minerals (and other primary commodities). However, some African countries can leverage the high concentration of critical minerals and renewable energy potential, to induce the industries of the future to locate within their borders, provided that they develop renewable energy sources and meet new standards of sustainable value chains. For those countries like South Africa and Morocco, which have managed to ‘link up’ into GVCs as upstream suppliers while creating some downstream industries using their mineral resources, there are other opportunities and challenges for localising investments. These countries can be the forerunner of green industrialisation in the continent, leveraging domestic capabilities and natural resources, regional markets, and the continental market (made possible by the African continental free trade agreement or AfCFTA). This raises questions about the types of international and regional treaties and domestic regulations which are needed in order to facilitate such geographical re-organisation of supply chains(?).
Picture by CHUTTERSNAP via Unsplash.