Curbing costs will remain the biggest priority for businesses as they face higher inflation on top of shipment costs. Image Credit: Shutterstock

Dubai: Businesses based in South America and Africa have a more ‘negative’ outlook due amid rising inflation, geopolitical tensions and port congestion.

For example, 42.5 per cent and 49.5 per cent of executives surveyed in South America and Africa, respectively, identified higher transport costs as the top limitation for increasing exports. This compared to 19.9 per cent for those in China, 27.5 per cent in India and 25 per cent in UAE. The study, conducted by Economist Impact, surveyed executive-level participants representing businesses in 26 countries. The research was commissioned by DP World, global logistics company and a key participant in the World Logistics Passport.

“This new data tells us that different countries and regions are having remarkably different experiences of the same supply chain pressures,” said Mahmood Al Bastaki, General Manager of the World Logistics Passport, the DP World initiative that aims at creating a smoother flow for global trade. “With export prospects for businesses in South America and Africa more likely to be impacted by rising transport costs, the private sector is in need of solutions that will help increase efficiencies and lower these costs to help ease inflationary pressures.”

Improvements in port and logistics infrastructure are cited as a key route to trade growth – for imports in particular. One in three of business leaders indicated that improved port and logistics infrastructure are drivers of import growth. Both hard- and soft- port and logistics infrastructure are part of this important driver of growth – with trade routes, technologies and streamlined partnerships being examples of soft infrastructure. For example, over half said that their company had either implemented digital solutions to enable seamless movement through customs and border control in 2021 or planned to do so in 2022.

Improved customs processes have been shown to be important in helping speed the flow of goods and keep trade moving and reducing time-to-trade – therefore boosting cost efficiency. And while the end of globalisation has been heralded as an expected consequence of geopolitical tensions between Washington and Beijing, the research finds companies are instead further diversifying their global trade networks rather than retrenching or regionalising – presenting opportunities for markets able to capitalise on diversifying procurement strategies.

Nearly one in two executives are seeking more diversity of supplier base regardless of location, with approximately three in five saying that choosing suppliers and markets based on the lowest possibility of being caught in a geopolitical dispute is ‘absolutely critical’.

This has been a boon for economies such as World Logistics Passport members Vietnam and Mexico, which even pre-pandemic had benefitted from increased diversification of manufacturing bases due to geopolitical tensions.

“Despite the headwinds out there for all to see, there are opportunities for countries to boost trade,” said Al Bastaki. “In particular, these can be found through investment in trade solutions that help facilitate faster movement of goods, such as improved soft infrastructure and digital solutions. Additionally, countries that are part of growing trade networks and already have the soft infrastructure to service new markets will be in a better position to capitalise on the diversification of suppliers.”