/ 4 October 2013

Freighting South Africa’s future

Freight containers laying at depots and terminals in the City Deep area.
Freight containers laying at depots and terminals in the City Deep area. (Delwyn Verasamy, M&G)

South Africa's geography, infrastructure and legacy issues place its logistics in a precarious position.

According to the Council for Scientific and Industrial Research (CSIR) State of Logistics Report 2012, the importance of logistics and supply chain management to a country's economy cannot be underestimated.

As multinational corporations consider expansion into new territories, one of the factors they examine is the ease by which products and services can be moved throughout a region.

An increase in foreign investment from $29-billion in 2010 to $37-billion in 2011 shows that this is on the rise. However, the survey also indicated that there has to be some important changes made to the existing logistics infrastructure.

South Africa faces problems that are specific to its geography, history and existing framework.

Gauteng, for example, is one of the few economic hubs in the world that isn't placed near a seaport and this adds pressure to rail and road.

Ports are congested, roads are taking increasingly heavy damage due to a reliance on heavy goods vehicles and the rail system is not yet up to a commercially reliable standard.

Terrence Brown, operations manager at Accenture, says: "I think the pressure is on from a few fronts. Our logistics network as a whole is quite complex.

"I think that integration is an issue. We are not integrating with rail, we're not integrating with the ports authorities enough. The network isn't functioning as well as it should."

Martin Bailey, chairman at Industrial Logistic Systems, agrees: "Our core economic hub, Gauteng, is 600km from the nearest harbour, which puts us at a huge disadvantage with the rest of the world as generally economic hubs tend to be near a harbour.

"South Africa struggles with high fuel prices and expenses. Transnet has largely collapsed and as the government has chosen not to allow them to be competitive; we have a lot of challenges in the industry."

Is it all doom and heavy gloom for logistics in South Africa? Not necessarily. Transnet's

R300-billion revitalisation plan is moving into gear and potentially bringing rail into a future where it meets customer demand for the first time in years, and Harrismith is building a hub that will do more than just improve existing infrastructure, it will also bring modernisation and employment.

A bad track record
Transnet has commenced its R300-billion plans with a market demand strategy (MDS) to expand the rail, port and pipelines and encourage a shift from road to rail over the next seven years.

An investment of R205-billion was set aside for rail projects and R151-billion for general freight.

In addition, funding was directed at the ports for increased throughput with a goal of 4.3-million to 7.6-million 20ft containers.

Not only is this essential for Transnet's future, but also for the country.

The lack of reliable rail freight has placed a heavy burden on the roads, which are starting to buckle under the pressure.

"Road transport isn't always the ideal way to get freight transported long distance," says Brown. "Think of the rolling heavy vehicles on the roads, damaging them, and things are getting worse.

"The different modes of transport are not working well together; specifically road and rail.

"Transnet is just not coming to the party in terms of reliability, a lot of stuff just goes missing. Our ports are congested and logistics flow is an issue."

The CSIR report emphasised the importance of the Transnet MDS to revitalise a flagging industry and make a difference to the future of South Africa as well as the Southern African Development Community.

With reliable coastal shipping and improved connectivity there is the opportunity to ensnare shipments along the Cape route, and those that are currently on the Suez route.

This does demand, however, a globally competitive infrastructure which is still not here today.

Transnet may be battling an aging fleet and network, but the latest plans have shown that they have legs and, since Brian Molefe took over as chief executive, the company has moved far more rapidly towards a sustainable network.

The 2013 financial results saw revenue go up by 9.4% and earnings before interest, taxes, depreciation and amortisation up by 11% with plenty of investment into new locomotives, new routes and extensions into Durban harbour.

The road to success
According to the CSIR, inland freight volumes have risen across the board in 2011 and 2012 with the most significant growth on the Western Cape-Gauteng and KwaZulu-Natal–Gauteng corridors.

While some of that growth has been taken by rail, the predominant force remains on the road.

There has been significant investment into the new Tshiame Development Vehicle Distribution Centre in Harrismith, which is the first integrated city model of its kind in the world.

This blend of private and government investment sees both the Free State Development Corporation and the Bremen Logistics Group working together to improve the local economy, create jobs and support efforts to shift cargo from road to rail.

"I think that companies want to work with government and realise that they need to so that they can see change," Brown says.

"We have really good operators in South Africa and they are all making plans for the future. The only issue is that execution and speed to market is quite slow."

In addition, there has been investment into the new Harrismith Logistics Hub that will sit at the heart of one of the busiest corridors in South Africa: KwaZulu-Natal to Gauteng.

"This hub is located here because this is precisely halfway between Durban and Johannesburg. It is going to transform the area," says Joy Matjoa, project manager at Harrismith Logistics Hub and N8 Rail Link, department of police, roads and transport.

"Instead of cargo being shipped along the N1 to Johannesburg, redistributed and sent back to those same places it passed along the way, it now stops in Harrismith and is then redistributed along the N5, N8, and N1 to the N6 and other arterial roads."

Part of the plan is to develop the roads in and around Harrismith and to upgrade the road corridor alongside the rail.

This will improve the speed of shipments and reduce the impact of poor road quality on deliverables, safety and equipment.

"This is the first inland port after City Deep [Johannesburg] to be established in South Africa and the project is going to change the whole picture of the area in terms of economic development and job creation," says Matjoa.

"There is going to be cataclysmic change as a result of this one anchor project including hospitals, schools and a cargo airport. "With a 58% unemployment rate and one of the poorest municipalities in the country this is a ground-breaking investment."

Initiatives such as the Harrismith hub and the Transnet MDS show that South Africa is aware of how important it is to revitalise the logistics environment in this country.

The CSIR report shows that there is a lot of work still to be done before there is a reliable and robust logistics framework, however, the boost in investment and growth may well make all the difference.

It isn't all gloom, but right now you don't need to wear shades. 

tamsThis article forms part of a supplement made possible by the Mail & Guardian’s advertisers. Contents and photographs were sourced independently by the M&G’s supplements editorial team.