Africa Facing Turmoil as the Rich Take Manufacturing Back Home
The global economic crisis triggered by the outbreak of the Covid-19 pandemic in 2020 and Russia's invasion of Ukraine in February 2022 has intensified the risk of declining trade integration between countries. A process referred to as the deglobalisation of trade.
The pandemic sent shocks through supply chains across the world. As a result, companies in some advanced economies have started to prioritise bringing production that was previously outsourced to Asia back home - or closer to home. The expectation is that this will avert ongoing - and future - supply-chain disruptions, ensuring a steady and reliable supply of goods.
Russia's invasion of Ukraine has exacerbated global supply shortages after the pandemic. It is also further fuelling expectations of major reduced reliance on global supply chains by businesses. This is particularly true of companies in Europe and the US.
This trend risks adding additional strain to economies in Africa on top of the current economic pain from soaring food and fuel price inflation imposed by the war in Ukraine. A deglobalising world poses serious risks for Africa. This has been confirmed by findings in a recent World Bank report. It shows that reversing globalisation through re-shoring of value chains has the potential to push an additional 52 million people into extreme poverty.
A range of companies are relocating their manufacturing plants.
Among them are the motorbike and electric bicyle manufacturer Pierer Mobility. It is building a plant in Bulgaria so that it's closer to its main customers in Europe. The German suit maker Hugo Boss has also moved manufacturing closer to home, reports Jonathan Munemo for The Conversation.
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