Logistics costs, as a share of SA’s GDP, on the rise again

13th June 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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In 2012, the absolute cost of logistics in South Africa was R393-billion. Logistics costs for 2013 were estimated at R423-billion, with this number forecast to grow to between R456-billion and R470- billion in 2014, depending on fuel inflation.

The tenth State of Logistics (SOL) survey for South Africa, released in May, also indicates that logistics costs, as a percentage of gross domestic product (GDP), are expected to increase to 12.8% this year, up from 12.5% in 2013.

In 2003, logistics costs as a percentage of GDP were 14.1%, and total logistics costs estimates were at R180-billion.

The SOL survey is published by the Council for Scientific and Industrial Research (CSIR), in collaboration with Imperial Logistics and Stellenbosch University.

Stellenbosch University Centre for Supply Chain Management director Professor Jan Havenga says South Africa started off “20 years ago”, with logistics costs as a percentage of GDP at about 18% – “we guess” – which means 12.8% is a significant improvement.

However, in the US, logistics costs as a percentage of GDP have declined from 16% to 8% currently.

“Our figure is still too high, and it has been going up over the last three . . . four years,” says Havenga.

He adds that the current sources of increasing logistics costs are not necessarily inefficiency within the system, but rather “costs charged to the system”.

Fuel costs are of particular concern, he notes.
“It is external to us. We don’t know what will happen with the fuel price.”

In 2009, South Africa’s transport sector spent R40-billion on fuel. This is expected to increase to R110-billion in 2014.

Fuel costs recently increased sharply as the rand weakened against most major currencies.

Havenga says recently introduced e-tolls on Gauteng’s highways serve to improve truck movement and, therefore, logistics efficiencies, rather than increasing costs.

Apart from fuel costs, drivers’ wages, increasing from around R22-billion in 2009 to an expected R40-billion in 2014, should also be monitored, as well as the effect of possible interest rate hikes.

SOL survey scientific editor the CSIR’s Nadia Viljoen says seeking improved efficiencies will not necessarily counter the problem of rising costs within South Africa’s logistics system.

“We can’t necessarily do what we do better. We need to do something different.”

Havenga notes that while trucks can be more fuel efficient, and truck drivers trained to reduce fuel use, one of the biggest opportunities to improve the logistics system lays in moving more goods onto South Africa’s rail system.

He says Transnet’s investment in freight rail capacity has seen rail tonnage increase over the last two years.

According to the 2014 SOL survey, rail carried 195-million tons of goods (11.4%) in South Africa’s logistics system in 2011, and road 1.51-billion tons (88.6%).

In 2013, rail carried 210-million tons (12.1%) and road 1.53-billion tons (87.9%).

The 2014 SOL survey notes that a stronger modal shift to rail, as well as successful public–private partnerships, will both aid South Africa’s logistics system. Also, end-to-end integration of supply chain functions is the next major shift required to make business more customercentric and competitive.

Viljoen emphasises that while South African companies are typically “great at what they do”, such as warehousing or transport, increased integration and efficiency across the supply chain can drive down costs in the logistics system.

Imperial Logistics chief integration officer Cobus Rossouw adds that South Africa’s logistics system has to develop into one that is demand- driven.

Instead of owning a truck and making it available when it suited the owner, the owner has to be able to respond to customers’ transport demands.

The world has changed in the last few years, says Rossouw. Consumers are “more and more demanding”, and there is pressure to deliver smaller loads “to more and more locations”.

South Africa faces steep seasonal peaks in the demand for goods, such as over Christmas and during hot summers, while Gauteng’s location also produces some challenges. The country’s economic heartland is in the centre in the country, 600 km to 1 000 km away from the nearest ports.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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