SA freight logistics: the status quo
SA freight logistics: the status quo
The freight logistics sector in South Africa consists of various transport modes, each of which plays an important role in supply chains. These should not be seen as competing, but rather as complementary, writes GERARD DE VILLIERS.
Currently, road transport dominates freight transport for a number of reasons, such as the inherent characteristics of flexibility (door-to-door deliveries), competitive price, reliability, speed, good security, and safe handling of cargo.
Although the ideal and published policy is to move more freight from road to rail, this is currently difficult to achieve due to the challenges of rail transport, such as unreliable service delivery, vandalism, theft of infrastructure (copper cable in particular), poor security, and more. It is also true that the distance of the corridor between Johannesburg and Durban β about 570 km by road and a bit more by rail β is probably close to the breakeven point between road and rail costs per tonne-km, so the benefits of door-to-door delivery overnight are attractive to many cargo owners. Hence, the move is rather from rail to road.
This shift away from rail in South Africa has consequently escalated the impact of freight and cargo on the countryβs roads. Transnet Freight Rail, the local rail operator, has closed virtually all sidings for general freight to industrial sites in urban areas, and rail services are almost exclusively provided for bulk, containers, and automotive over long distances. Current and future modal split estimates are therefore important, as the road network has to be designed for the anticipated growth in axle loads on the pavements.
State of logistics
The cost of logistics is a key supply chain performance indicator that must be monitored and managed to enable supply chains to compete effectively. Havenga et al. published the last comprehensive local report on the status of logistics in South Africa, finding that logistics costs were 11.2% of GDP and expected to rise. This is significantly higher than the average figure of seven to 8% recorded between 2009 and 2019 in the United States.
The reality of relatively high logistics costs in South Africa is confirmed by the most recent Logistics Performance Index issued by the World Bank (2018). This shows that South Africa has lost quite a few places, from overall 20th to 33rd in the global rankings. More concerning, however, is a systematic downward trend since 2007.
The importance of transport is directly related to the cost of logistics in general and the cost of transport in particular. A breakdown of the components of the estimated logistics costs (11.2% of GDP in South Africa for 2016) shows that transport costs account for 56% of these costs β much higher than the global average of 39%. This can partially be explained by the spatially challenged economy, with our economic heartland far from the coast, and the high cost of fuel and wages. It confirms the need for carefully managed transport costs to ensure that local supply chains can favourably compete with global competitors. Inventory carrying costs are the second largest contributor to logistics costs at 17%, followed by warehousing (14%) and management and administration (13%).
Current policy debates
The recent publication of the national White Paper on the Rail Policy by the Department of Transport is highly relevant, as the proposed changes to the rail policy will have significant impacts on road transport.
As a general comment on the split between road and rail, it is important not to regard road and rail as competing, but rather as complementary modes to ensure a seamless movement from origin to destination. The issue is to have road-friendly freight on road (e.g., perishables and fragile/high value goods) and rail-friendly freight on rail (e.g., bulk, minerals, coal, and long distance containers). Both modes are needed to offer a cost-effective and sustainable value proposition to the market.
The White Paper states that the long-term strategic direction for the rail network is standard gauge (1 435 mm). However, this strategy does not seem to have a value proposition that makesΒ sense, because Cape gauge (1 067 mm) is used throughout southern Africa. More engagement and research are needed, as the cost of such disruptive technology changes will put an unbearable burden on government and the private sector, while current Cape gauge infrastructure and rolling stock still have many more years to serve. This is, of course, with the proviso that maintenance and support are provided for the aforementioned challenges of vandalism and cable theft.
Looking ahead
The challenges posed by high logistics costs and poor performance demand support from government, state owned enterprises such as Transnet Freight Rail, and the private sector. All parties need to work together and industry associations such as the Road Freight Association have a leading role to play. It will help if the former research surveys done on the state of logistics in South Africa can be resuscitated, as this will support government and industry to manage what is measured and to focus on the most important priorities. South Africa has, to a large extent, already lost its status of βGateway to Africaβ due to challenges in the ports and corridors, but it is possible to turn things around, if we can focus our attention and resources where they are most needed.
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