Jun

Contribution of transport costs soar

2013-06-20 09:20
According to the 9th State of Logisticsâ„¢ survey for South Africa 2012, the total cost of fatal accidents caused by poor road conditions in 2010/2011 is estimated at between R207-million and R621-million.

The contribution of transport costs to overall logistics costs in 2012 was pinned at 61%, the highest it has been in the past nine years and far higher than the global average. Logistics costs as a percentage of total GDP rose by 0.7% to 12.6% in 2011 and are estimated to have risen further to 12.8% in 2012.

This is one of the findings of the 9th State of Logisticsâ„¢ survey for South Africa 2012 launched in Johannesburg this week. The survey results were released by Nadia Viljoen, scientific editor of the survey and a researcher at the Council for Scientific and Industrial Research (CSIR) who, along with partners Imperial Logistics and Stellenbosch University, produced the survey, the theme of which is “Connecting Neighbours , Engaging the World.”

Covering a comprehensive range of topics contributed by a variety of research experts in the field, this year’s edition marks a milestone with much effort going into preparing logistics costs and freight flow results for 2011 and 2012, effectively closing the two-year time lag in previous reporting.

In addition, the research process was opened to industry feedback through a pre-launch event that provided valuable input during the compilation of the survey articles.

Given the high contribution of transport costs to overall logistics costs, the survey points out that the vulnerability of transport costs to a volatile cost driver – the price of crude oil – and South Africa’s entrenched dependence on road transport, does not bode well for the economy.

The good news that emerged from the survey is that with opportunities being meagre in already developed countries, big business from abroad is turning its attention to developing regions such as southern Africa for its next growth frontier.

Unlike governments, multinational corporations do not see political boundaries when they consider a region. Rather, they regard the growth of consumer populations, the development of economies, the discovery of raw materials, the availability of labour and the ease which products and services can be moved into, out of and within that region.

Message of action

According to Viljoen, the State of Logisticsâ„¢ survey for South Africa 2012 delivers a message of action.

“South Africa must address critical issues relating to the road freight sector, shift freight from road to rail and address rampant skills shortages and misalignment in the logistics sector. The Southern African Development Community (SADC) needs governments and the private sector to join hands for ambitious inland corridor initiatives and for developing a world-class maritime transhipment community for trade,‘ she says.

 

Cost Drivers
For the survey, data obtained from a broad range of industry and government stakeholders identified the key challenges 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.

The survey also reports that the contribution of poor road conditions to fatal accidents shows that the effect of bad roads stretches much further than increased vehicle operating costs. Road-related factors contribute to 5% to15% 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.

 

Regional connectivity
The survey also reveals that SADC could become a world-class transhipment community due to its geographic location. South Africa and Mauritius currently rank 39th and 50th, respectively, out of 157 coastal countries in terms of maritime importance.

Immense potential and business opportunities exist in southern Africa in terms of natural resources, low-cost labour and a rapidly growing consumer market. However, the top three constraints to doing business in Africa are unavailability of reliable service providers and partners; lack of adequate infrastructure; and long transit times and unreliability.

 

Other Research
The National Development Plan, now adopted by the South African government as its development plan for the future, clearly states the tremendous challenge the country faces by effectively missing a generation of capital investment in infrastructure. South Africa is not unique in this regards. Around the world, inadequate or poorly maintained infrastructure presents major economic challenges, competing for scarce resources from governments already struggling financially.

Public-sector funding for all infrastructure projects is estimated at R844.5-billion for the 2012/2013-2014/2015 period, with Transnet to invest a further R300-billion in rail and port developments over seven years starting in 2012. However, private-sector involvement is non-negotiable for the success of transport infrastructure projects , both from a funding and planning point-of-view.

The unavailability of a skilled workforce is viewed as one of the key constraints to the expansion of business operations in South Africa. This appears to be a global problem with 39% of businesses around the world struggling to recruit the appropriate people.

Nearly two in five businesses (37%) in the BRIC (Brazil, Russia, India and China) economies believe an inability to get the right workers will dampen growth in 2013. It has thus become critical to identify the logistics skills requirements in South Africa so that these acute shortages can be addressed to the benefit of trade in and with South Africa and SADC.

We believe the 9th State of Logisticsâ„¢ survey opens the floor for vigorous discussion between all parties involved to ensure that South Africa curbs its logistics costs as far as possible, while making the best use of opportunities presented, and, in fact, creating its own opportunities,’ concludes Viljoen.

The full survey can be accessed by clicking here:

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