Coronavirus causes logistics and supply chain nightmares for industry

30th April 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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A 10.6% decline in March alone for total freight volumes is considered the most significant monthly decline that the company has on record, which goes back to January 2008, vehicle tracking company Ctrack has found.

For the year to March, there was a reduction of 7.1% in total freight volumes, which the company said indicates the depth of the decline in the local goods economy.

In a statement on April 29, the company indicated that, despite not having many lockdown restrictions, the first quarter drop in volumes was still the steepest experienced in South Africa since 2016.

The 7.1% decline is consistent with a 3% to 4% slump in overall economic activity in the first quarter.

Ctrack anticipates that the decline will worsen before the economy starts to recover after the second quarter.

The decrease in March volumes was even more severe than in March 2008, when the financial crisis crippled the world’s economies.

Ultimately, the coronavirus has hurt the freight and transport sectors more broadly than that crisis did. 

Ctrack explained that, while many service areas of the economy like food, retail and teleconferencing were able to continue, the decline in production, combined with numerous supply chain disruptions, has compounded the industry’s woes.

With profit margins of less than 4% in road freight and about 6% in rail, “it is clear that many companies will struggle to survive without government help”, the company further lamented, adding that the 10% drop in road freight in March is of “grave concern”, as the sector is the backbone of the economic value chain.

Additionally, time constraints and other blockages are increasing transport costs as transporters have to pay staff for the long hours worked – this while the cost of transport declined owing to the oil price, and employee costs rose nearly 8% in March.

Further, some trucks have also been quarantined for weeks in neighbouring countries, while coordination between provincial traffic authorities in South Africa is incredibly slow.

Fuel sales, which may have spiked owing to the decline in the fuel price in early March, are now under tremendous pressure.

Meanwhile, the airline industry, from both the passenger and freight side, is unlikely to be the same again as reports of voluntary salary cuts and the taking of early leave are numerous.

Reports in the media suggest some sailors have not been able to get any shore leave - even in cases where cargo vessels are anchored outside the harbour, and oil tankers are primarily now used for the storage of oil as supply far exceeds demand.

Farming value chains are also struggling, the company noted, adding that restaurant closures also mean fewer sales, while too little fertiliser and other inputs are arriving.

Warehouses may not yet fully reflect the massive build-up of stock they are having to keep, and the storage problem is being exacerbated by the urgent movement of freight away from congestion points in the country’s ports, said Ctrack.

“Some ships are acting as storage facilities at sea.”

As such, the company noted that the C-tack Freight & Transport Index is likely to show further freight volume declines in the next two months.

“Like all other businesses, Ctrack is feeling the pressure of Covid-19 in our business,” Ctrack South Africa MD Hein Jordt said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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