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Apr 03, 2009

SA's logistics costs 'running away' – CSIR

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Transnet Freight Rail container and automotive business executive director Elvin Harris on rail's share of freight moving from 13% to 30% in South Africa (03/04/09) Cameraperson: Danie de Beer; Editing: Shane Williams
CSIR Built Environment executive director Hans Ittmann on how logistics costs have increased in South Africa (03/04/2009) Cameraperson: Danie de Beer, Editing: Shane Williams
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Internal logistics costs in South Africa were “just running away”, said Council for Scientific and Industrial Research (CSIR) Built Environment executive director Hans Ittmann on Friday.

He spoke at the launch of the CSIR's Fifth State of Logistics survey, sponsored by Imperial Logistics. The survey provided an overview of the 2007 South African logistics environment.

Ittmann said that logistics costs in South Africa had reached R317-billion, or 15,9% of gross domestic product (GDP) in 2007, which was an 1% increase compared with the 14,9% recorded in 2006, and the 15,2% in 2005.

“If you look at 2007, things are getting out of hand. In the US, it is just over 10% [of GDP], in India 12%, and in Australia 11%, 12%.”

Breaking these figures down, transportation costs numbered 53% of total logistics costs, which was 14% higher than the world average of 39%.

Ittmann said the heart of the problem was the fact that there was simply “too much freight on the road, and road is more expensive”.

The survey revealed that 87% of South Africa's freight was carried on roads in 2007, and 13% by rail.

In 2007 this amounted to 1,38-billion tons of goods being moved by trucks (a 3% increase over 2006), compared with 205-million tons by rail (a 5% increase over 2006).

Ittmann said container traffic produced the biggest opportunity for change.

“We need to get containers on the train, and then get them on the truck on the last mile. Containers should not be on trucks.

“Some freight must move back to rail – this is becoming critical.”

Ittmann added that longer-distance transport corridors, such as the one between Gauteng and Durban, also presented opportunities for growing rail's freight share.

Transnet Freight Rail container and automotive business executive manager Elvin Harris commented that the parastatal had been investing heavily to improve efficiencies, with yet more to come, especially in terms of new rolling stock, and that this should lure some customers back to rail.

“Over the last five years, Transnet [on the whole] has spend R45-billion on infrastructure upgrades. Then, there is also the significant capital programme of another R80-billion over the next five years for new locomotives, wagons and upgrades to the network.”

Harris said these investments had long lead times, and would not produce results overnight.

He noted that Transnet's new container and automotive business unit, established seven months ago, used to run six trains a day between Johannesburg and Durban, which had since increased to 16 trains a day.

“The average time a train spend on this corridor was 23 hours; this is now 17 hours. On the Port Elizabeth and Cape Town corridors the average time is 40 hours, and we still want to get this down. It use to be more than 50, 60 hours.”

Harris said Transnet still had to show that it could deliver the kind of performance that made “it easy to move things on rail.

“There is still a helluva lot to do, make no mistake, but some of our biggest customers are telling us that they are starting to see the results of our efforts.”

However, he still cautioned that road would remain the dominant freight mover for the “next hundred, two-hundred years”.

“It will be dominant; you just need a better balance.

“Within five years, we probably wouldn't get to 30% [of freight being moved by rail]. Certainly, on some sectors, such as containers or bulk freight, we can get to 30%, 35% in five years, yes.”

Edited by: Creamer Media Reporter

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