Keep SA’s logistics sharp

South Africa has a sophisticated logistics industry, making use of some of the latest global trends in the field. Its performance — specifically its costs — has a bearing on the global competitiveness of all the country’s industries.

A barrage of obstacles, not all of which were unique to South Africa, have hit the industry in the last few years, and the impact on business has been felt in all sectors. The global economic situation and rising cost drivers have resulted in increased competition, tighter margins and the need for improved efficiencies. According to David King and Nadia Viljoen, editors of the Logistics Barometer South Africa 2015, it is evident from their research into national logistics costs over the past 11 years that the industry has responded creatively to unlock efficiencies despite cost volatility.

South Africa has an enormous demand-supply imbalance that is serviced by imports of almost exclusively manufactured and fast-moving consumer goods. The value of these imports is far greater than the value of the millions of tonnes of bulk commodity — mainly coal, iron ore and manganese — that the country exports to pay for its demand.

These goods are moved vast distances into or out of the country, all at great transport cost to the consumer.

Logistics, and its larger sibling supply chain management, each play a pivotal role in making South Africa more competitive, not only regionally but globally. While supply chain management encompasses the planning and management involved in sourcing, procurement and inventory control, logistics focuses on distribution, warehousing and transportation of the goods.

The 2015 edition of the supplychainforesight survey “Embracing Change for a Sustainable Future” conducted by Barloworld Logistics says the supply chain is no longer regarded as a support function, but rather as the backbone of business. Barloworld conducts the yearly survey to gain insight into how aligned the supply chain objectives are to the strategic business goals of industry, indicating the understanding companies have of the strategic value of their supply chains.

As many as 79% of respondents, more than 66% of which were company directors, considered the use of supply chain management for greater competitive advantage as one of their key strategic business objectives.

But just how competitive and efficient is the South African logistics industry? 

According to the Logistics Baro–meter, published by Stellenbosch University (SU), South Africa’s national logistics costs as a percentage of GDP was 11.1% in 2013 and is estimated to have been 11.4% in 2014. 

“This percentage is higher than that of North America and Europe (8.8% and 9.2%, respectively), but it is competitive when compared to developing regions such as South America (12.3%) and Asia Pacific (12.8%). South Africa definitely has an innovative logistics industry, considering the service levels maintained, despite ongoing challenges in the country,” says Zane Simpson, lead researcher for the Logistics Barometer. 

According to the World Bank Logistics Performance Index (LPI), South Africa still ranks above all other African countries by a substantial margin where transport infrastructure is concerned. Egypt, the African country in the 2nd position according to the World Bank LPI ranking is placed 62nd where South Africa is ranked 34th. South Africa’s rail network accounts for 80% of the total network in Africa. 

But Professor Jan Havenga of the department of logistics at SU says there is no cause for complacency.

“Our logistics industry is doing well. The last 25 years since transport deregulation has seen consolidation, the emergence of large global players with operations across Africa and globally. We have many companies of which we can be proud. The problem lies on the next level. This will mean co-operation with state-owned enterprises and more public-private partnerships.”

Havenga notes this includes “friendlier” negotiations with Transnet, the reconsideration of margins, investment in intermodal infrastructure, and demand management. South Africa’s large freight transport bill, which is currently in excess of R250-billion, needs to be solved, most simply through increased supply efficiency and demand reduction.

“Supply can be improved by modal shift, yes, but co-operation among service providers and freight owners to reduce empty loads, better scheduling and logistics, improve driver training and encourage fuel efficient vehicles are just some of the additional ways the country’s freight transport bill can be shrunk.

“Similarly, demand can be improved by less product choice, and the relocalisation of supply and demand by manufacturing at raw material source and buying local,” says Havenga.

Barloworld Logistics executive director for marketing and communications, Kate Stubbs, agrees. “The biggest challenge and opportunity lies with all public and private sectors working together to create and execute a strategy for South African competitiveness which should inform infrastructure development going forward,” she says.

Fuel price volatility and the possibility of rising interest rates have a distinct impact on transport costs and inventory carrying costs, respectively. Furthermore the electricity crisis affects industry not only in terms of tariff hikes hitting margins but also with load shedding crippling operations on a regular basis, reducing productivity. Rising wages and industrial actions have similar impacts on supply chains. It is clear that merely beating at the flames of rising input costs will not ensure South Africa’s continued supply chain competitiveness; the structure of the economy, the way we “do business” needs to change.

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

Sekhukhune’s five-year battle for water back in court

The residents of five villages are calling for the district municipal manager to be arrested

The media is dead, long live the king

The state of King Mswati’s health is just one of many contentious issues that cannot be reported on in eSwatini

Fees free fall, independent schools close

Parents have lost their jobs or had salaries cut; without state help the schools just can’t survive

Special Investigating Unit probes Covid-19 tenderpreneurs

The SIU is investigating 102 companies doing business with the provincial government in Gauteng alone

The Audi TT’s last dance

With its breed quickly becoming extinct, the Audi TT is as close as you’re going to get to a bad boy. This flashy player has one last run in the team before they are replaced by a new practical, statistical-friendly crop.

Businesses should use alternative energy sources, industry bodies advise

Business associations are urging companies to continue seeking alternative energy sources in light of Eskom’s court judgement which would allow the utility to bump up electricity prices up to 15% from next year April 2021.

Sekhukhune’s five-year battle for water back in court

The residents of five villages are calling for the district municipal manager to be arrested

Fees free fall, independent schools close

Parents have lost their jobs or had salaries cut; without state help the schools just can’t survive

Vaccine trial results due in December

If successful, it will then have to be manufactured and distributed

White men still rule and earn more

Women and black people occupy only a few seats at the JSE table, the latest PwC report has found

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday