Drivers of supply chain risk in energy and mining industries in Africa

Abstract

Supply chain management has increasingly come to the forefront of firm’s competitive strategy and hence it has become vital to understand supply chain risks faced in today’s globalized world where supply networks have become more complex. These supply chain risks are quite evident in the extractive industries in Africa where firms inundated by unique supply chain risks which have proven to be financially, ecologically and socially damaging. Despite these risks, these firms are key to African countries as they participate in tax generation, employment opportunities and to some extent development of secondary industries. Further, the abundance of mineral resources on the continent makes this a lucrative industry for firms to operate in. Thus, to better understand what the drivers of supply chain risks in this industry were and applicable risk mitigation strategies, a quantitative research was carried out across supply chain managers working in mining and energy firms in Africa. Data collated from 85 participants was obtained and tested for validity as well as reliability. The probability of external risks was found to be more prevalent compared to internal risks. Similarly, the impact of external supply chain risks was observed to be higher than internal risks. Through regression analysis the data pointed towards a strong relationship between probability and impact of external supply chain risks. Further, government policy changes were portrayed as the main external risk determinants seen to even affect key internal supply chain risks such as supplier failure. The findings of this study therefore provide empirically validated evidence, of the existence and relationship between probability and impact of existence of supply chain risks in the extractive industry.