Mideast firms see 50% sales surge from Africa

Issac John /Dubai

issacjohn@khaleejtimes.com Filed on March 17, 2021

On average, companies allocated 32 per cent of revenue from the first half of 2020 to help them switch suppliers or logistics providers and change production or purchasing locations

Businesses in the Middle East expect a 50 per cent surge in sales revenue from Africa while they witness a drop in international sales from North America, a global study on trade flows has revealed.

The study, commissioned by DP World and conducted by the EIU at the outbreak of Covid-19 in first quarter of 2020, found that optimism about future growth is widespread and assuming the pandemic does not worsen, and protectionist policies remain restrained, 77 per cent of companies in the region expect international sales to expand despite the disruption to supply chains.

On average, companies allocated 32 per cent of revenue from the first half of 2020 to help them switch suppliers or logistics providers and change production or purchasing locations, according to the study.

Consequently, 42 per cent of companies saw international revenue expand in the first half of 2020 while 19 per cent reported no year-on-year change from 2019.

"International trade has shown remarkable resilience during the pandemic and will play a critical role in facilitating the global recovery. The business community is more optimistic for the future than many expected, and the supply chain challenges exposed by the pandemic have acted as a positive agent for change. We expect the result will be global flows of trade that are more efficient and more robust," said Sultan Ahmed bin Sulayem, CEO and chairman of DP World.

The study, which captured the perspectives of business leaders across six regions (North America, South America, Europe, Middle East, Africa, and Asia Pacific), found 83 per cent of companies are reconfiguring their supply chains, including a diversification of the countries they intend to trade with.

“In Europe, for example, companies expected international sales from N. America to increase from 14 per cent in 2019 to 21 per cent in 2020. Conversely, in the Middle East international sales from N. America have decreased whilst revenue from Africa is expected to increase by 50 per cent. In Asia-Pacific, 76 per cent of companies are earning most of their international revenue from within the region. The next important continent for them in terms of international revenue is North America, which lagged behind at 13 per cent,” said the study.

Globally, 58 per cent of companies in construction reported a rise in international trade, particularly from North America following a demand for renovations at home. Supported by data from the ITC, South African exports of pulp (the raw material for toilet paper) increased 163 per cent.

In Europe, during the first half of 2020, exports of cereals (particularly to the Middle East) and pharmaceutical products from the continent increased by 23 per cent and 12 per cent respectively. The movement of consumer goods across the world is also helping the global trade and logistics industry to rebound. 81 per cent of major consumer goods manufacturers expect exports to have expanded in 2020.

The study said while 40 per cent of companies indicated that trade flows had decreased due to declining demand, 32 per cent were affected by supply shortfall and 28 per cent by constricted logistics while 43 per cent of companies still anticipate trade flows to recover to pre-pandemic levels in less than two years.

According to the study, businesses around the world have accelerated their digital transformation during the pandemic. In response to the pandemic, 40 per cent of companies were implementing cloud computing for the first time while 38 per cent were using IOT and 34 per cent adopting big data and analytics, 17 per cent were introducing machine learning and 16 per cent automation and robotics.

— issacjohn@khaleejtimes.com