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Bad roads and inadequate rail force costs up
The worsening condition of South Africa's roads was affecting the maintenance and repair costs of freight trucks and vehicles negatively, thus escalating logistics costs. Two years after Transnet began its multibillion-rand capital investment, rail capacity is still insufficient to offset South Africa's high logistics costs; and South Africa saw an increase of 6.9% in logistics costs to R339 billion in 2008, compared with the previous year's R317bn, and 2004's R213bn. These are among the key findings of the latest “State of Logistics Survey” released last week.
The sixth “State of Logistics Survey’, published by the Council for Scientific and Industrial Research (CSIR), Imperial Logistics and Stellenbosch University, states that despite the increase, 2008 costs were at their lowest as a percentage of gross domestic product since the survey was first introduced in 2004, totalling 14.7% of GDP – down from last year's 15.9%.
However, when compared with other countries' logistics costs, such as the United States’ 9.4% of GDP, domestic costs remained high. While the improvement in terms of GDP may appear positive at first glance, it did not mean all was well in the local logistics sector, said director of the Stellenbosch University Centre for Supply Chain Management, Dr Jan Havenga.
The survey breaks down logistics costs in South Africa into transport costs, inventory carrying costs, storage and port costs, and management and administration costs. Transport made up 50% of logistics costs in the country.
Havenga said his estimate of the required capital investment in rail was about R200bn. Transnet plans to invest R93bn over the next five years.
Rail traffic had stayed the same over the past 15 years, while the roads workload had more than doubled over that period. For the period under study, 1.4 billion tonnes of a total of 1.6 billion tonnes of freight were transported by road over an average distance of 185 kilometres in 2008. Rail transported 204 million tonnes at an average transport distance of 640km.
Transnet required the involvement of the private sector to create adequate rail capacity. On Transnet's investment plan, Havenga said he expected "marked improvement" in rail capacity after three to 10 years, "if we are lucky”.
He added that the country required more transport to keep the economy going than the rest of the world. One reason for this was that the economic centre is located deep inland, 600km from the nearest port. This meant that a jump in the fuel price, undoubtedly to follow soon after the receding recession, would have a far higher cost impact on South African logistics costs than the rest of the world.
The survey further showed that the percentage of bad roads in South Africa's secondary road network increased from 8% (1998) to 20% (2008), with significant deliveries routed via this road network. The percentage of bad national roads increased from 7% to 9% over the same period, said CSIR Built Environment executive director, Hans Ittmann.
He added that high transport demand and poor network configuration, worsening road conditions and higher storage and inventory costs required increased funding to bolster capacity.
Alex Masianoga, executive manager at Transnet Freight Rail (TFR), said the company embraced public- private partnerships. Transnet was developing a public-private partnership framework and was examining this concept broadly. For example, talks over a public-private partnership between TRF and Sasol were at an "advanced stage".
Commenting on the survey, Mutshutshu Nzumalo, president of South African Road Federation, said the country's roads were not being maintained and repaired properly.
Total vehicle maintenance and repair can increase by as much as 121% for a truck travelling on a road with a bad condition rating, with an increase of as much as 10% in total logistics costs of a company, Ittmann said.
