e-Tolls – for whom does the bell toll?

Some hit harder than others

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With the e-tolling system in operation, many businesses and individuals have found themselves battling to adjust. But even as these changes have been disruptive, they also present an opportunity for those willing to seize it.

Much has been said about the e-tolling system in the last month or two. The colossal initiative is now in full swing, and has become a national talking point.

But as is often the case, one thing can set many tongues wagging, all for different reasons. For some, the e-tolls are seen as political strong-arm tactics. Others are ideologically opposed to e-tolling, as it inhibits the movement of people from one place to another.

Gauteng residents have started to accept that e-tolls will affect their lives and businesses. From the ubiquitous spaza store, right through to major retailers, car hire companies and the food industry. But, of all those affected businesses, it is the logistics industry – with its close relationship between the roads and its profits – that will have the greatest challenge on its hands.

And things have never been easy for South Africa’s logistics industry. Despite the fact that South Africa has significant road and rail infrastructure in place, the road transport component of its logistics costs is disproportionately high. At 60% of South Africa’s total logistics cost, this figure is already far higher than the global average, and it looks set to rise even further.

These high transport costs are the result of sharp increases in the price of crude oil over the last 2 decades, very low levels of development and maintenance in South Africa’s rail and port infrastructure over the last 40 years, high levels of industrial action, and a sharp depreciation of the Rand.

But the upfront costs of using the roads are still small, when compared to the collective affect the system will have. The term “over-recovery” best describes this phenomenon. This happens in two ways. Firstly, the admin fees involved in the administration thereof.  And secondly, through the over-recovery of the costs from corporate SA.

So, if the transporter’s bill goes up, he recovers that cost from the milk supplier. And the milk supplier recovers it from the corner cafe – who in turn recovers it from the man in the street. And in reality, every guy over-recovers a bit. As such, the principle that the road user is the payer actually doesn’t happen. It ripples off the road pretty quickly.

But, where there is a will, there is a way – and South Africa’s logistics industry has always been quick to adapt to setbacks. Innovative companies have already set about trying to minimise the impact of the e-tolls in a variety of ways. Improved scheduling, organisational streamlining, route optimisation – these are but some of the proposed solutions being implemented by logistics companies. 

One express parcel company in particular, has adopted a pricing strategy that augments its sophisticated routing capability. Instead of marking up their prices to recover the cost of e-tolls, SkyNet Worldwide Express has opted to absorb these increased costs on behalf of their customers.

And whilst the debate around e-tolls will continue for some time, it is clear that those individuals and companies that can adapt and innovate now, look set to thrive.

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