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Logistics Barometer highlights paradox of local industry

South Africa invests more in beneficiating more of its raw materials, the logistics costs relative to gross domestic product (GDP) will drop, which will, in turn, contribute to job creation and grow the economy, Stellenbosch University (SU) logistics professor Jan Havengasaid on Thursday.

For this reason, he pointed out, first-world countries such as Germany and Japan were faring better than South Africa.

 

Speaking at the release of the SU Logistics Barometer, Havenga said the barometer, which reports on logistics costs calculated up to 2014, revealed that, at R429-billion, the country’s logistics costs in 2014 equalled 11.2% of South Africa’s GDP.

South Africa’s logistics costs as a percentage of GDP deteriorated slightly compared with 2013, and this trend is expected to continue. The ratio generally improved up to 2011, when it sat at 11%, but has been on an upward trend since then.

Logistics costs are expected to have increased to R470-billion in 2015 and almost R500-billion in 2016, or about 11.8% of GDP. “This is moving in the wrong direction,” Havenga stated.

South Africa’s economy is transport intensive and the Logistics Barometer identifies transport as the most significant portion of logistics costs in the country at 57%, or about R277-billion this year. This is followed by inventory carrying costs at 15.2%, warehousing at 14.6%, and management and administration costs at 13.5%.

More than 83% of transport costs are the result of roadtransport, while rail tariffs contribute 15%, and pipeline tariffs 2% or less. The biggest contributor to road transportcosts remains fuel, amounting to about R90-billion a year.

Havenga said that, as a result of about R23-billion going to waste in the logistics supply chain, everything in the economy was about 5% too expensive. He noted that about two-thirds of transport costs were being spent on the country’s corridors, the N3 to Durban and the N1 to Cape Town.

Seventy-nine per cent of costs were spent on corridors, while only 21% were spent on rail. “Rail’s share is about 30% too low . . . and transport, as a strategic resource, is not properly managed from a policy and macrologistics perspective,” he stated.

As such, Havenga was, like many others in the country, advocating for a modal shift, noting that the country should implement a five-railway system. The first would focus on exports, with the second aligned to moving minerals around the country – this includes coal being transported to powerstations and iron-ore to the steel industry.

In the third instance, Havenga advocated siding-to-siding transport of semi-beneficiated goods, for example, transporting steel from Gauteng to vehicle manufacturers in Durban. Agricultural products also needed to be transported by rail, he said, but the biggest focus should fall on fast-moving consumer goods, which made up 50% of total transport costs in the country.

Meanwhile, Havenga said that, while South Africa was outperforming all the other countries in the Brics economic grouping, that also includes Brazil, Russia, India and China, it was slowly losing its competitive edge.

He added that a looming threat was that the future South African supply chain is at risk of losing its advantage owing to substandard basic education, underperforming higher education, and a lack of practical knowledge and skills transfer in the work environment.

The second edition of the South African Logistics Barometer continues the macrologistics research work published in the Council for Scientific and Industrial Research’s State of Logistics survey, which was discontinued in 2014. 

 

Source: Engineering News