Denys Hobson
Denys Hobson

Plan for every crisis right now

by Denys Hobson. Inflation fears, accelerated rate hikes and the return of power cuts fuel supply chain disruptions.

by Denys Hobson. Inflation fears, accelerated rate hikes and the return of power cuts, all fuel supply chain disruptions. And, the SA Reserve Bank has raised interest rates 50bps to 4.75% at its May 19 MPC meeting – the first time it used a 50bps hike in its policy toolkit since January 2016. This is likely to occur again in July compared to what had previously been a norm of 25bp hikes. Shocks have not been in short supply so far in 2022. Escalating inflation and increasing interest rate fears, coupled with geopolitical instability amongst other factors, continue to cloud the broader global economic outlook.

The Rand has fallen to its weakest level since the beginning of the year as the US dollar strengthened to a 20-year high and with market sensitivities exacerbated due to a resurgence of COVID-19 infections, especially throughout China; and the probability of protracted load shedding for the remainder of the year – it’s fair to say the hits keep coming for South African supply chains.

Port congestion remains a common theme across all trade routes and the impacts are being felt in the form of extended shipping lead times when compared to published schedules, capacity constraints, trucking shortages, and trans-shipment delays. Imports from Europe, including the Mediterranean region have been severely affected and shipping lines continue to battle balancing their vessel and port rotations. This has caused blank sailings, excessive backlogs for new shipment bookings, as well as trans-shipment delays of up to six weeks.

Adding further pain to supply chains and shipping lines is the after-effects of the unfortunate flooding in and around Durban in April and berthing delays in Cape Town. Some shipping lines were forced to make last minute decisions to either omit scheduled port calls, or re-route cargo which caused further delays for receiving shipments.

The airfreight market too remains in flux. The most recent headache for airlines operating to and from South Africa has been the jet fuel supply shortage at OR Tambo airport which was caused by a disruption to the supply from refineries because of the Durban flooding. This has resulted in some airlines having to cancel flights or alternatively reduce their loading capacity to reduce their fuel consumption.

Such events do bring about new challenges short and long-term that need to be overcome, but for some there will be new opportunities born from such events as well. Bookings in all instances should consequently be made well in advance of the required shipment dates with retailers factoring in longer lead times. But, more than that, collaboration with all stakeholders within one’s supply chain and planning for the rest of this year – with flexibility- is of absolute importance.


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Denys Hobson is Head of Logistics, Investec for Business



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