November 22, 2016
The analysis, by Ink World Magazine, noted that the “majority of raw materials” are imported into Africa, and so “supply logistics and local currency rates play a significant role”. Accessing materials as an Africa-based ink manufacturer “remains a major challenge” because “nearly the entire demand is met through imports”, and the impact of this is “closely tied to the efficiency of Africa’s supply logistics and the volatility of local currencies”, which have dictated the industry’s performance.
These issues are also “likely to influence outcomes of ink companies’ investments both in the short and medium term”, with Pieter Jordaan, African Vice President and General Manager of Flint Group, stating that “the majority of raw materials required for ink manufacturing [are] imported from outside Africa”, with the reliance on these providing “unique challenges to the ink manufacturer as we have to consider the impact of the distance from the supply lines and volatility in currencies”.
The company launched a “joint venture” with other ink companies to “grow in emerging markets”, with Jordaan noting that “distance from the suppliers increases the cost of transport and necessitates higher levels of stockholding”. His advice on trying to “mitigate the likely raw materials supply crisis just in case a shipping company or transport networks within a given market are disrupted” was that “stock levels must be sufficient to ensure continued supply.
“The recent suspension of services by one of the largest shipping lines, as it had to file for receivership, shows the importance of sufficient stocks”. This was surmised to be South Korean container company Hanjin, which went into receivership recently, with South African ink manufacturers previously hoping that services to Durban and Cape Town would “contribute to satisfying various needs of their customers”.
On the currency front, the volatility “creates high levels of uncertainty and can add substantial cost to the procurement process”, with instability “in many of the African markets and [their] trading partners”. Examples include devaluation in Nigeria and South Africa (impacted by China’s devaluations), with the latter point particularly bad for Sub-Saharan Africa, which was expected to “experience the largest negative impact”.
Countries most affected include Mauritania, Zambia, Sierra Leone and Democratic Republic of Congo, while Kenya has also seen its currency “under pressure”. Crude oil prices have also had a “huge impact” on raw materials costs, with Jordaan noting that since the recession however, “circumstances may have changed”, with ink raw materials prices possibly not having “fallen in tandem”.
The future strategy of African ink manufacturers, he believed, “will mainly be driven by growth of printing companies”, because of the fast-moving consumer goods (FMCG) segment where many companies “pursue opportunities to manufacture closer to the source as opposed to importing finished products”, with the “current raw material situation” said to have a “limited impact on this strategy”.
He concluded that with global economic growth slowing recently, Africa “has also been affected”, particularly with the “slowdown in demand for commodities”, noting that “we have seen limited activity from raw material suppliers to invest in projects to manufacture in Africa, and we foresee that our procurement model will not change much for the short to medium term”.
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