An extract from the 9th State of Logistics Survey. To view the survey in its’ entirety, go to www.csir.co.za/sol
National logistics costs and global trends
This year’s survey takes a huge leap in the study and publication of South Africa’s national logistics costs which is in its ninth consecutive year. Dedicated effort from researchers to close the time-lag between data collection and publication has ensured that the 2013 edition reports on logistics costs and freight flows of both 2011 and 2012. Furthermore, the calculation of the four components of logistics costs (transport costs, inventory carrying costs, warehousing and management and administration) is now on par with international benchmarks through on-going collaboration with a growing number of global experts in the field. The calculation of externality costs in this year’s survey has also been greatly refined. The focus of the study has been to dig deeper into the underlying logistics behaviour that drives cost trends and to scrutinise the relationship between logistics costs and the GDP.
Logistics costs as a percentage of total GDP have risen by 0.7% to 12.6% in 2011 and are estimated to have risen to 12.8% in 2012. A starker reality is painted, however, when considering logistics costs as a percentage of only the primary (extraction) and secondary (beneficiation) sectors. Logistics costs as a percentage of the transportable GDP was 44% in 2011 and 46% in 2012. The upward trend of transport costs was identified as a major risk in previous surveys. Its contribution to overall logistics costs in 2012 is pinned at 61%, the highest it has been in the past nine years and far higher than the global average. The vulnerability of transport costs to a volatile exogenous cost driver – the price of crude oil – and South Africa’s entrenched dependence on road transport does not bode well for the economy if the future is to be business-as-usual. Inland freight volumes have risen across the board in 2011 (+4.9% in tonnes, +10.1% in tonne-km) and 2012 (+1.8% in tonnes, +2.1% in tonne-km) with the most significant growth being on the KwaZulu-Natal–Gauteng and Western Cape–Gauteng corridors. Worth noting is the slight increase in overall rail market share, from 11.1% in 2010 to 11.5% in 2012 in terms of tonnes, and from 29.3% in 2010 to 29.9% in 2012 in terms of tonne-km.
Globally the opinion is growing that economic specialisation, economies of scale and the resulting global trade have reached their peak and decades to come will see a revolution in how economic growth will be characterised. These drastic changes in trade will force a re-evaluation of the role of logistics, requiring innovative supply-side solutions to drive efficiency and radical demand-side solutions to reduce the demand for logistics services. GDP will no longer be the trumping development metric.
Investigation of road freight challenges and costs in South Africa
With 70.1% of South Africa’s inland tonne-km on road, challenges and cost escalations in the road freight sector affect all South Africans – businesses and consumers alike. Data gathered from a broad range of industry and government stakeholders identified the key challenges and cost drivers in the South African road freight sector. Respondents felt that poor road conditions (64%), the cost of fuel (52%) and a lack of law enforcement and prevalent non-compliance (43%) are the top three challenges in the industry. The condition of the country’s roads is also regarded as a critical cost driver by 73% of the respondents, followed by the (un)availability of return loads and the costs associated with empty runs (66%), congestion and its associated delays (52%), and theft (52%). Compared to the United States of America (USA), the United Kingdom (UK) and Australia, South Africa has the lowest per-lane construction cost at R30 million/lane-km and the lowest per-lane maintenance cost at R300 000/lane-km.
Lower labour costs in South Africa and the fact that South Africa conducts significantly less maintenance on its road network contribute to these figures. South Africa does, however, have the highest percentage of road transport costs to GDP (4.7%) which is not surprising if one considers the relatively low investment in maintenance and the cited contribution of poor road conditions to road freight costs.
Basically, key challenges experienced by stakeholders in the sector are problems linked to the country’s road infrastructure and government service delivery, as well as a lack of policies and the implementation of these.
The potential effects of deteriorating road conditions in South Africa
The contrast between the state of South Africa’s primary road network, managed and maintained by the South African National Road Agency Limited (SANRAL), and its secondary network, provincial road networks managed and maintained by provincial authorities, is blatant in this year’s analysis. If the 2011 road freight volumes on the 22 major freight corridors were transported on provincial roads instead of the primary road network, there would have been an increase of R625 million in fuel, tyre and maintenance and repair costs impacting operators directly. While SANRAL has done a good job of maintaining the primary road network, the condition of provincial road networks has deteriorated markedly.
The contribution of poor road conditions to fatal accidents shows, however, that the effect of bad roads stretch much further than increased vehicle operating costs. Road-related factors contribute to 5-15% of fatal road accidents, of which 28% can be attributed to poor road surface conditions. The total cost of fatal accidents caused by poor road conditions in 2010/2011 is estimated at between R207 million and R621 million. Hundreds of deaths could have been prevented if roads were kept in acceptable conditions.
To view the survey in its’ entirety, go to www.csir.co.za/sol
