South African freight logistics in crisis
South African freight logistics in crisis
Want to know how healthy South Africa’s economy is? Then look no further than its freight logistics performance. However, as NICK PORÉE warns, it’s not a pretty picture.
Freight logistics performance is the “barometer” of the economy. This is true for all modes of transport as well as for countries, regions or global trade. In South Africa, the current levels of economic activity are reflected in the corporate results of the railways, and the level of business failures of own-account and carriers for hire.
The number of registered heavy vehicles has reduced by 33 500 from 2010 to 2020 (10%) and the attrition continues, with the number of smaller vehicles dropping more rapidly as small businesses collapse. The lack of useful information in the eNatis system means that we do not know the number of operators in the country or the size of their fleets, but an estimate based on existing information shows a reduction of about 16 500 operators. The fleet reduction includes approximately 2 500 large vehicles, which would represent a reduction in capacity of about 26 million tonnes per annum.
The recent report on the condition of South African roads shows that 50% are substandard. As noted by the Road Freight Association, this poses a growing cost problem for the road freight sector and, by extension, for the prices of consumer goods, foodstuffs, industrial supply chains and export competitiveness.
“Serious deficiencies in the railway system”
The ill-informed assumptions regarding the capacity of railways to make up the capacity ignore the serious deficiencies in the railway system, which include cable theft, equipment breakdowns and shortages, a lack of capacity to handle breakbulk cargoes and severe financial constraints on the investments required to rectify the situation. The container projections are a case in point: the port of Durban handles about 1,3 million Twenty-foot Equivalent Units (TEUs) of containers a year, of which 260 000 are transfers.
Of the 650 000 imports, 60% are consigned within KwaZulu-Natal and/or destuffed for processing and later transport inland by road. The total containers available for long-haul transport to inland destinations (not just Gauteng) are about 260 000 of which 220 000 (85%) travel by road and 40 000 (15%) by rail (+/- two to three trains per day). The impact of the recently announced approval of third-party train operations on the national rail network is unlikely to attract investments until significant changes are made to the institutional structure of the railways.
Delays and failures at ports
The situation with South African ports operations is just as bad, with continual delays, equipment failures, lack of equipment, management and staffing problems, and excessive handling times and landside delays. A recent estimate showed that the inefficiencies in the port of Durban are costing the country approximately R1,2 billion a year. The World Bank report, which rated SA ports as worst in the world, is a colossal indictment of Transnet management of the ports.
The recent announcement by the President of the creation of a Ports Authority as another state-owned enterprise (SOE), with yet another board of directors, as a subsidiary of Transnet appears to be just shuffling the deckchairs on the Titanic. Unless the new company is professionally managed by internationally experienced, commercially competent line managers with authority to make decisions without political interference, it will just be another quasi-autonomous organisation (quango) in the Department of Public Enterprises (DPE) stable and is unlikely to resolve any operational problems.
Chaotic situation with cross-border freight transport
The situation with cross-border freight transport is absolutely chaotic: the BUSA Logistics report shows that delays at Beitbridge and Lebombo are costing the trade approximately R100 million per week (R4,7 billion a year). The current inefficiencies are caused mainly by non-tariff barriers imposed by authorities. In addition to the wastage, there are tariffs and fees which collectively contribute approximately 25% of the cost of transport from Durban to Kinshasa. This includes about R250 million a year for the South African road freight exit tax imposed by cross-border permits.
The freight logistics industry is trying desperately to influence governmental activities, but as most of the inefficiencies with freight logistics are the result of authority interventions and failures, the country is losing trade to regional ports and corridors. It is highly unlikely that the African Continental Free Trade Area will offer much scope for South Africa until systems are improved to international standards.
Ministers to blame
The currently disastrous situation is largely the predictable result of the extended lack of professional competence in the management of transport policy for the last 30 years. The creation by a succession of incompetent Ministers, of badly managed quangos as agencies of the government has placed them outside the scope of parliamentary oversight. This has led to the deteriorating performance of most governmental functions which support the nation’s freight transport operations. The inefficiencies of maintenance, planning, regulation and supply impose limitations and costs on the private sector industries and their commercial transport operators.
The Constitution does not define regulatory responsibility for commercial road transport, so it is confabulated with road traffic (as a provincial responsibility) and – in the case of railways – the SOE monopoly is virtually autonomous. The split of responsibility for road freight and rail and ports between the Department of Transport (DoT) and DPE is inefficient, but as neither Ministry has competence in commercial transport and logistics, the creation and management of policy and regulations are whimsical and remote from commercial reality.
There is a serious need for a review of the situation and professional input to the planning of future economic recovery. The Strategic Integrated Projects (SIP) and Vulindlela processes must not be allowed to fall back into the trough of SOE board planning designed primarily for their corporate benefits. The current state of logistics in South Africa will prove to be a barrier to economic recovery unless more competent strategic planning is brought to bear on the existing problems that handicap the freight logistics industry.
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