Share this
Twitter
Myspace
Mister Wong
Bookmarks.cc
Digg
Del.icio.us
Slashdot
Netscape
Furl
Yahoo
Technorati
Newsvine
Googlize this
Blinklist
Facebook
Wikio
Diggita
Hear this text
Export PDF
Print
E-mail
Tags
It looks like a long, hard slogThe road transport and logistics sector is cautiously optimistic that better days are ahead. But industry experts warn that it will be a hard battle to undo the devastation caused by the 2009 recession.
There may be some improvements in business conditions, says Gavin Kelly, Technical and Operations manager at the Road Freight Association (RFA). Little or nothing came of a “boom”, with substantially increased cross-border freight volumes over the festive season as had been anticipated in some reports that surfaced late last year, perhaps giving an indication of how slow and difficult recovery may yet be.
Other reports and commentators have held that 2010 may see the sector recovering in tandem with South Africa’s overall post-recession economic recovery. But there are also those who take a more cautious approach and believe recovery in the hard-pressed road freight and logistics sector is still some way off
and unpredictable.
However, there is substantial concern in the transport and logistics sector that business will pick up in tandem with the countdown to the 2010 Fifa Soccer World Cup event, but that a flat period may follow. “It is a brave man who will predict what 2010 holds for us, but the main concern is what happens after 2010,” says Stephen Temple, divisional director for Freight Forwarding at Barloworld Logistics in Johannesburg.
In December Temple told Road Ahead that both international and domestic volumes “are most certainly down on last year and below what was expected this year, even though most companies would have reduced forecasts for this year”.
At the time, he said that “most clients are experiencing a reduction in volumes and unless there is a late festive season rush, will fall short of targets. Our take on 2010 is that certain sectors directly linked to the World Cup will see an upward trend over that period; the balance of the market will in our opinion remain flat for the year.”
Many share that concern, particularly in financial circles. Only a year ago, many industry experts such as the RFA’s Kelly were optimistic about increased volumes of cross-border freight movement in southern Africa. However, the tough global economic conditions of 2009 soon dampened enthusiasm, although Kelly maintained that “the economic outlook over the longer term remains positive”.
Transnet Freight Rail (TFR) acting chief executive Tau Morwe took a similar view. Engineering News reported him as saying that container demand was expected to recover from the global economic crisis after 2009 and that volumes at the Port of Durban, South Africa’s premier container terminal, should recover this year and exceed 2008 volumes within three years.
In June Morwe said that Transnet Ports Terminals forecasted container growth at 3% a year until 2014. More recently, Morwe said that despite the impact of the recession on Transnet’s operations and a significant drop in container business, indications were that the turnaround has begun. This would be great news for the road freight and logistics industry.
This view is also supported by trade figures released by the South African Revenue Service, the Reserve Bank and other institutions that reflect a recent increase in exports and imports. Prior to the global economic crisis, the South African container sector experienced growth of about 10% a year, says Morwe.
However, 2009 was a “very challenging year”, with the global financial meltdown devastating many operators, says Kelly. “Many were still trying to recover from the fuel price seesaw experienced in 2008. “Some contracts do not allow for fuel fluctuations while others that do, take some time to come into effect. As operators were beginning to get back to break-even – the demand for goods in all sectors fell off at alarming proportions.
“We know that some sectors dropped off by 60%, while others dropped by 13%. Empty container transport prices dropped from US$3 000 to US$500 within a period of seven months – that was a huge blow for shipping lines and road transportation industries alike,” says Kelly.
The continued war against global terrorism by countries in the West placed “huge barriers” on free trade and market forces in respect of supply, demand and prices and added to longer logistical delays, higher costs, more regulation and lower productivity and earning potential. As a result, many companies downgraded or restructured, closed, ceased operations, were bought out or simply went bankrupt.
In addition to these economic challenges, says Kelly, the South African government created a number of further challenges, with issues that will continue to hamper the industry in 2010, he believes. “On the back of the very turbulent and downward spiralling economic health of the world economy, several end-of-the-year moves by our own government created more challenges some even so badly timed that companies already teetering on the brink may have been forced over the edge due to having to pay penalties. The high cubes and axle mass reduction issues were the most well known of these.”
Looking at the festive season, Kelly says “most of the international trade was given a bitter taste with the high cube container issue during December”. In 2010, “most financial views are that there will be a series of bubbles – ups and downs – in the international markets. Growth is set – at its highest, as predicted by some – at 3% for the interim two years. We need at least 8% to turn around the economy to repair the damage and to get real growth for job creation,” he adds.
Kelly believes the sector may benefit from government enterprise in respect of “civil projects and the maintenance of systems that are now beginning to fail such as power, water, sanitation, transport and health”, with possible agricultural development and second-phase enterprise. Apart from the economic situation, the cube issue, the axle mass reduction issue, cross-border trade issues and labour issues, he foresees that the “reality of congestion and infrastructure collapse, coupled with the role that rail will or will not play, may be some of the major transport issues this year.”
Meanwhile, the Business Monitor International (BMI) report “South Africa Freight Transport Report Q4 2009” expects road haulage to grow level with GDP (forecast at 2.1% annually from 2009 to 2013) although “poor road quality in some areas will be a restraining factor”. It adds: “Rail freight will lag behind the economy’s general growth rate due to an ongoing investment shortfall, and despite current catch-up attempts. Sea freight will be broadly ahead of GDP, supported by port expansion plans.
“Combining all factors, our conclusion is that total freight volume across the different modes, measured in million tonnes-km, will rise by an annual average of 2.5% in the 2009-2013 forecast period, a little ahead of GDP,” the BMI report states.
BMI adds that while volumes were weaker on the short term as a result of the recession, it assumed that adequate dockside facilities and port throughput would not constrain the growth of container trade.
Other indicators continue to be negative. Official figures comparing freight transportation income for the third quarter of 2009 with that of 2008 showed a decrease of 8.8%, with a comparative Q3 payload decrease of 9.4%. In September 2009, income from freight transportation fell by 5.4% compared to September 2008. Little indicates that fourth quarter figures will show any improvement.
Stef Terblanche
