SA logistics came under fire last year, weighed down by Mozambican civil unrest, deteriorating infrastructure and Transnet’s poor performance.
Logistics are integral to the growth of SA’s economy and fixing them is a critical step to ensuring the country’s global competitiveness, particularly as Africa looks to enhance regional trade and supply chains through the African Continental Free Trade Area.
Road Freight Association (RFA) CEO Gavin Kelly says SA’s rail and port infrastructure needs a “massive turnaround” as there are “so many competitors for the SA global market share”.
He told Business Day that progress is likely to come from allowing “open access” to SA's railroads and ports, while strategic investment is crucial.
How have SA’s logistics affected the country’s economy and global competitiveness over the past year?
The Council of Scientific & Industrial Research’s State of Logistics of SA was last published in 2014 with this important part included in the opening statement: “The performance and growth of the SA logistics industry are both inputs to and outflows from the performance and growth of the SA economy.”
It follows that logistics is vital for businesses of all sizes, enabling them to operate efficiently, reduce costs and increase profit. It is also a significant contributor to employment and infrastructure development, making it an essential sector for economic growth.
In 2022, SA had a logistics performance score of 3.3 out of 5, according to the World Bank collection of development indicators, which is compiled from officially recognised sources.
Recent reports suggest SA’s freight and logistics market will reach a total value of $22.92bn in 2024. Thereafter estimates point to a steady average growth rate of 5.92% a year, reaching a value of $30.56bn by 2029.
The recent turmoil in the rail sector — especially relating to bulk mineral commodities — has put a dampener on logistics total values, which has brought down the volumes of exported commodities and has resulted in some international market resourcing.
This has been closely followed by reduced revenue, directly related to lower and delayed mineral exports.
The fact that there are so many competitors for the SA global market share cannot be ignored — from port operations to supply of goods.
This market has the potential to slip away, as foreign traders see better options from other competitors. Reliable and reasonable logistics have to be maintained within the greater SA economy.
As we negotiate 2025, what are the key challenges standing in the way of improvement in the sector?
While the overall future is difficult to predict, there are a number of certainties that we will face.
First is sustainability, which is often seen as the “green” side of logistics. This must include jobs, operations and energy, over and above our waste practices. While there is the euphoria of non-carbon emitting fuels, the real effect on the planet of the many legs of the process to create these needs far greater focus.
Second is customer delivery expediency (CDE). Covid-19 resulted in exponential growth in the last-mile sector, and it goes without saying that retail and many other traditional trading platforms will steadily disappear. New technology, including AI, will force traditional CDE practices to adapt.
Third, the demand from economies regarding better efficiencies, management and control, smart inventories and consumption/production analytics will drive faster acceptance and implementation of AI.
AI, in turn, will require secure, adaptive and innovative security. Rock-solid cybersecurity should include fail-safes that transcend AI.
Finally, in terms of global competitiveness, SA cannot allow itself to slip any further down the ranking of efficiency, reliability and security, as far as logistics go.
Rail and ports need to have a massive turnaround and to start playing the game. There is no space for any negative competition between modes, whether state supported or not.
Simply put, SA must be seen as a market where doing business is a breeze.
What should policymakers and regulators be prioritising this year to improve the performance of SA logistics?
The priority will be getting our ports and main mining railway lines back into top gear. These virtually go hand-in-hand in some instances (for example, Richards Bay and Saldanha), but the fresh produce terminals (such as in Cape Town and Durban) and the heavy manufacturing ports in the Eastern Cape must also be vastly improved.
Our land borders also need a revamp, especially to improve the physical flow of goods and people.
There is no need for huge control structures as the Africa Continental Free Trade Area will radically change how borders operate, but our ports will become those first points of entry into the African continent.
Therefore, investment into our ports and rail network is crucial. Our major roads must remain concessioned to allow the state to focus on the priorities noted.
Are you optimistic that Transnet’s performance will improve this year?
There has been some good news recently, but it comes off very low volumes and has been accompanied by some unfortunate reports of other ills raising their heads again, with management of crucial maintenance and repair being one of them.
Yes, it will improve, albeit slightly. The logistics world is holding its breath in anticipation of “open access” on both rail and ports. This is probably where the growth will be really significant, leading to an improvement for Transnet.
However, the government’s efforts to liberalise the logistics sector have not yet borne much fruit, and are moving at a very slow pace.
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