SA Logistics Outlook: 2025 and beyond

Covid-19 may seem far away now, with most aspects of life having returned to normal, but Elvin Harris says that the pandemic has had a significant and lasting impact on South Africa’s supply chains.

South Africa’s response to the pandemic was particularly severe in terms of its “lockdown strategy”, effectively shutting down the economy and its attendant supply chains for many months. Just when it seemed we could return to some kind of “normal”, Russia invaded Ukraine… a conflict continuing to this day. This war has also had a devastating impact on global supply chains and inflation; hopefully a ceasefire or peace deal can be reached in 2025. For the past year, the Middle East has also been wracked by conflict, although this has not had as much impact on the global economy and supply chains.

Taking stock as 2024 closes

South Africa has been reeling from these global events and, compared to peer countries, has struggled to recover. This is concerning and is compounded by the damage caused by local floods, severe loadshedding, a collapse of rail freight, constraints and delays in our major ports, water infrastructure challenges, ratings downgrades, and the infamous July 2021 social unrest.

Had the right action been taken at the right time, many of these challenges could have been avoided, or at least minimised. These various “own goals” had a massive opportunity cost; hundreds of billions in unplanned expenditure – as well as lost income to the economy – could have been more productively spent to put us in a much better position at the end of 2024. 

The National Energy Crisis Committee (NECOM) – established in July 2022 to implement the Presidential Energy Action Plan – together with Eskom’s Turnaround Plan, has yielded fruit. At the time of writing, we had just hit 240 consecutive days of uninterrupted power supply from Eskom for the first time in five years. 

The National Logistics Crisis Committee (NLCC), established in June 2023, has already produced the Logistics Roadmap for South Africa advocating for reform in the rail and ports environments. Aspects of this reform are in progress, such as the establishment of Transnet Rail Infrastructure Management (TRIM) and Transnet Freight Rail Operating Company (TFROC) in Transnet Freight Rail, while a Draft Network Statement has been published for comment and awaiting publication as an official Network Statement after sign-off from the Minister of Transport. 

Whilst some progress has been made, quite literally, on paper, it is worrying that the performance of the freight logistics system has worsened over the past two years in operational practice. As of 1 December 2024, freight rail performance is once again well behind targets, the roads leading to ports are congested with too many trucks carrying cargo meant for rail, the ports remain constrained and well behind targets, and border posts are choking points backed up for days. We will slip from crisis to tragedy if this situation persists for much longer.

2025: a look at the year ahead…

A recent report from the National Transmission Company of South Africa (NTCSA) indicates that South Africa’s electricity system is “adequate” and will remain so if Eskom’s current strong plant performance is maintained. The report suggests that, if several key aspects of the Eskom Turnaround Plan materialise, we should be free from loadshedding until 2028/29, by which time other public private partnership (PPP) alternative power generation projects should have come online to stabilise the grid.

This is very good news indeed, but the news is not as promising for transport infrastructure, although there is some cause for hope.

Rail

Whilst critical steps are being taken towards the implementation of rail reform, several key issues must still be resolved to actualise Third Party Access on the rail network. These include, but are not limited to:

• The final published rate for access to the network.
• The amount of time for which Third Party Train Operating Companies (TOCs) are given access to the network (and whether this would enable them to make a sufficient return on investment).
• The need for alignment between Transnet, government, and the private sector regarding the quantum of investment required to bring rail up to sufficient levels of operating efficiency and capacity.
• Ensuring that the dispute resolution mechanism between TRIM and TOCs is clear and fair in practice, that the rail component of the Transport Regulator is in place timeously, and that there is a comprehensive and aligned plan to deal with labour and community concerns and issues.

Ports

There are plans in place to clear the ports backlogs, but the current slow progress needs to be accelerated. Meanwhile, the longwinded legal process regarding the challenge of the award for the strategic partner at DCT Pier 2 is not a good situation for our transport system and supply chains. The law must, however, take its course. Hopefully sufficient progress can be made at other container ports to offset the potential setback of DCT Pier 2 effectively being on halt for the foreseeable future – most likely beyond 2025 and possibly even 2026.

Congestion at the ports of Durban, Richards Bay, and Cape Town is ongoing and is exacerbated by the poor performance of freight rail resulting in many more trucks than usual carrying cargo meant for rail through the ports. Long truck queues outside port limits, damage to urban road infrastructure, and the lack of adequate truck stops are all contributing to a crisis that needs urgent intervention, hopefully within the first quarter of 2025.

South Africa has also received a very worrying ranking at the bottom of the World Bank’s Container Port Performance Index. We are very far from all our major trading partners, so highly efficient and cost-competitive supply chains are an absolute must. If we are to improve our global competitiveness and regain our place as one of the gateways to Africa, our container ports should be firmly in the top third of global port performance. This will require attention once flowthrough at the ports has been stabilised.