Unregulated cross-border road transport industry falls prey to unscrupulous operators

Currently in South Africa, the local transport industry is regulated, hence the smoother running of that aspect of the transport industry. However, the cross-border industry is more complex.

At present, there are unregulated foreign hauliers that not only undercut local hauliers on price, but many are involved in criminal activities.

As we are writing this article, we have approached major freight companies to provide us with information and statistics on the amount of cargo that went missing due to unscrupulous hauliers, but most are reluctant to provide such information, as it affects their credibility and the way their clients view them.

Some have built a reputation of “getting their goods there on time”, and would be shy to admit that they have sometimes failed by “not getting the goods there at all”. Not that it is their fault; once again, they trusted the wrong people.

The following table outlines some of the statistics that we have been able to collect. It must be stressed, however, that these statistics are by no means comprehensive, and merely depict the tip of the iceberg.

In the table below, some of the alarming statistics have been outlined. It is noteworthy that defaults on both transporters and their clients increased phenomenally. In a loose definition of “clients”, this would include brokers; in the definition of “transporters”, this would include all who are owners of the assets.

Not outlined – and something that is difficult to quantify – is the predominance of “foreign nationals” in this industry. Most transport brokers currently are Zimbabweans, but this in no way implies that as a result of foreign nationals, there is a spike in the figures.

One of the contributing factors to the large amount of fraud in the industry is that brokers are entrusted with large amounts of funds, of which they are mere handlers. Human nature being such, they are often tempted to utilise the funds of the transporters and inevitably have a problem repaying it.

One of the functions of the body we wish to implement is the “monetary handling facility” where funds are channelled through a central handling facility, and which ensures the appropriate funds are paid to the appropriate parties. In that way, there can be no pilfering.

It is no laughing matter that, on a year-to-year basis, there is a 234% increase. If, for example, you take fraud as one element, the definition in this case is “the intentional and unlawful use of funds and/or product, without the intention of returning it, and solely for the purpose of self-enrichment”.

The fraud statistics are consistent with the overall crime statistics in South Africa.

A more worrying problem, however, is that because of the nature of the business being international, many of the industry players are non-South African residents.

It is a known fact that many ‘hits’ have been orchestrated by foreign nationals who, after doing the hit, exit the country immediately. Some have multiple passports and are thus very difficult to prosecute even if apprehended.

This is exacerbated by the fact that some in the industry do not want to make public knowledge of the fact that they have been conned.

What is not depicted on the statistics is a phenomenon called “ghost loads”. This is where certain brokers put out fake loads on the market – for whatever reason, only known to them – and many transporters fall prey to this.

Often, huge distances are covered to a loading point, only to find that the loads do not exist.

There is a counter phenomenon called “ghost trucks”. This is where registration numbers of trucks are provided, only to find out they either do not exist or are from trucks in a repossession lot.

The overall cost to the industry by blatant fraud and pranks cannot be quantified, but no doubt cost millions in time and money. Therefore we say, “Enough is enough!”

Highlights of industry problems

Fraud

This is perhaps the most prevalent problem encountered both by transporters and clients.

On the part of the clients: transporters are paid, but the work is not done. This does not include legitimate delays.

On the part of the transporters: work is done, but the client does not pay or, in most instances, had no intention of paying in the first place.

Theft

This is generally either theft of funds or theft of cargo.

Theft of funds is where payment was made for a job, but it was subsequently stolen by the person entrusted with these funds.

Alternatively, theft of cargo is when cargo was entrusted to a transporter and the goods were subsequently stolen.

Graft

This is when elaborate schemes are generated to bereave people of money. A classic case is the presentation of fake contracts, whereby the so-called holder of the contract offers the contract to various companies for a once-off fee.

Another scheme involves procurement of multiple trucks, and an “induction fee” per truck must be paid before any work can commence.

Bad-mouthing

Bad-mouthing involves creating stories of competitors in order to create a negative impression of the possible competitor. This problem is very prevalent among transporters who blacken the names of others.

Price-cutting

Rampant price-cutting, particularly by the bigger hauliers to squeeze the smaller players out of the market, has resulted in many smaller reliable transporters being put out of business. This is tantamount to anti-competitive behaviour.

Circumvention

Often, an intermediary is circumvented by two other parties he/she has put together and deprived of commissions or funds that are due to him/her for work done.

Inconsistencies in demurrage charges

When a need arises – due to whatever circumstance – to charge a demurrage fee, this often takes on draconian proportions. It has been known that some transporters have been charging in the region of R10 000 a day.

Lack of legal enforcement

Often in the time of a dispute, illegal measures are implemented to rectify the situation, more often than not having the opposite effect – aggravating it.

Holding loads or off-loading loads in third-party premises without due and legal process is illegal, but has become industry practice.

Very often, transporters insist on cash payments without proper invoicing or documentation. According to the Value Added Tax Act (VAT Act), all transactions must be declared and accounted for, immaterial whether or not such transactions are VAT able.

There is a grey area of who is accountable for what, and this generally comes to the fore when problems arise. For example, when goods on a truck go missing, and this load has been given to a broker.

The finger-pointing starts when the accountability factor comes into play i.e. who is really responsible for the damages?

This is a rampant practice and the source of many problems and irritations: misrepresenting destinations, price, registration numbers, ownership, insurance, and location of trucks, among many others.

The way forward

In this article, various problems have been highlighted. Many of them exist due to a lack of regulation.

We are currently lobbying various legislative bodies to impose regulation on this industry.

It is our fervent endeavour to have a legal framework in place before end 2011.

Jitesh Naidoo