Being an entrepreneur, you need to adopt every required measure to reduce production costs. This way, you can reduce the prices of your offered products and services. These days, South Africa has become a favorite destination for sourcing. This country is rich in natural resources and minerals. Foreign investors can avail their required raw materials at affordable rates. In this context, it is important to note that South Africa sourcing is not beyond flaws. Businesses should streamline their procurement plan to leverage the most out of South African procurement.
If you are considering South Africa to source raw materials for your organization, you need to learn about the opportunities, you can gain and the challenges you may encounter. Read on to explore both sides of African sourcing.
Listed below are the opportunities that sourcing in South Africa can offer:
• Access to ample resources
This is perhaps one of the most vital benefits of South African procurement. This country possesses ample natural resources and abundance has made the resources low-cost. In comparison to other sourcing hubs, Africa has a larger workforce. This is another reason working behind the popularity of Africa as a top destination for sourcing. Many research works have indicated that the productivity of South Africa is two and half times more than another potential sourcing hub, China.
• Reasonable labor costs
Labor costs are extremely low in South Africa. It is no doubt an added benefit for the businesses. When the labor costs are minimal, the production cost is bound to be lowered. Therefore, the companies can manufacture their products at lower prices. Availing the lower cost can be easier with the help of trusted sourcing agencies. Customers prefer exercising a grip over the products, which are cheaper but of high quality.
• Trade agreement
The South African government has initiated some admirable trade agreements, which can be a boon for marketers. Some key trade agreements are:
o The Common Market for Eastern and Southern Africa (COMESA)
o East African Community (EAC)
o Greater Arab Free Trade Area
o Southern African Development Community (SADC)
Find below the challenges that you may face while sourcing from South Africa:
• Public infrastructure
South Africa needs to go a long way to compete with China and other potential sourcing hubs when it comes to infrastructure. Its public infrastructure is underdeveloped. Moreover, the power supply, communication technologies, and roads are not satisfying. A power cut is frequent in the rural areas of the country.
South Africa’s economy is still in its infancy stage in comparison to the Western countries. Even some Asian countries have the better economic condition than South Africa. This is the reason why many businesses avoid sourcing from South Africa.
• Lack of skills
Though South Africa enjoys abundant human resources, the workforce, in this country, lacks knowledge and skills of technology. The workers are not familiar with the technical theories; henceforth, they are not able to implement the technologies as well. The high rates of brain drain have highlighted this fact.
A Final Takeaway
Over the past few years, South Africa sourcing is emerging as a potential force for the manufacturing industries across the globe. If you can mitigate the challenges wisely, sourcing in this country will no doubt benefit you in several ways.