The complex interplay of military actions in the Middle East conflict has not only spurred political tensions but has significantly disrupted global trade through increased oil prices, obstructed shipping routes and strained supply chains.

Chairperson of Southern African Development Community (SADC) Business Council, Mr Khulekani Mathe said global trade was currently fragile, undergoing significant disruption due to the recent geopolitical developments, particularly key global shipping routes such as the Strait of Hormuz, the Red Sea and the Suez Canal corridor.

He was addressing a webinar recently, which had attracted captains of industry in supply chain, retail and the financial sector across SADC member states.

The conflict, he highlighted had negatively impacted trade flows including the Suez Canal corridor in Egypt where approximately 12-15 percent of global trade passes through.

“The disruptions have led to vessels rerouting and thus increasing transit times where goods can take 20 days to reach their destination. This has led to an increase in trade rates increasing by estimated two to three times on key routes in the recent months, alongside that, insurance premiums and operational costs have significantly increased,” he said. He highlighted that SADC regional block that was heavily reliant on import and export of commodities and manufactured products was directly affected, rising the cost of business in the region.

The situation was not aiding trade growth in the region, he noted, adding that trade within the SADC remained relatively low and estimated to be around 20 percent compared to regions like the European Union (EU) where intra-regional trade was currently sitting at around 60 percent.

Meanwhile, Mr Mathe highlighted that logistics costs in Africa were amongst the highest globally, often accounting for up to 40 per cent of the final cost of goods in some markets.

“This tells us that the current global shocks are not just a crisis, but a wakeup call for the SADC region, which is also exposed to the global trade flows,” he said.

He thus highlighted the urgent need for the SADC region to strengthen efficiencies on building resilient trade corridors and for member states to invest in logistics infrastructure and improving border efficiencies.

“We need to have enhanced coordination between the public and private sectors and most importantly, we need to leverage the opportunities presented by the African Continental Free Trade Area,” he said.

Bravura Group Head of public sector and external affairs, Ms Shuvai Mugadza of Zimbabwe said in February when the United States of America (USA) attacked Iran under Operation Epic Fury jointly with Israel, the impact was reflected on global oil consumption as the price of oil kept rising.

“The shipping lines have also been disrupted and we are likely to have inflationary pressure. So we need to work together as private and public sectors to mitigate these problems,” she said.

With regards to regional value chains, Ms Mugadza said they needed to build resilient, create trade linkages and if possible, reduce dependence on these distant supply lines. The partial closure of the Strait of Hormuz is affecting businesses across the SADC region, with key exports like crude oil, fertiliser, and agricultural products impacted, according to Mr Juan Lombaard, Head of Ocean Freight, DHL South Africa.

Mr Lombaard stressed the need for developing Southern African trade corridors to boost intraregional trade and reduce external shocks. 

He highlighted the North South Corridor and the Trans Kalahari Corridor, which passes through Botswana, as crucial routes needing modernisation.

“Development of multiple corridors enhances our competitiveness and encourages equitable economic growth,” Lombaard said. The webinar aimed to identify solutions and highlight operational challenges affecting business in the region. ENDS