The state of the South African logistics industry was assessed in the “10th Annual State of Logistics Survey for South Africa” 2013, compiled by the CSIR, Imperial Logistics and the University of Stellenbosch. Key findings include:
- The total cost of logistics in 2012 was R393 billion and was estimated to be R423 billion for 2013 and the forecast for the total cost of logistics for 2014 was R456 billion;
- The largest cost component of total logistics costs throughout the past decade has always been transport costs;
- In 2012, transport costs accounted for 61.2% of logistics costs; in 2013 this percentage was estimated at 61.6%, while in 2003, the global average for transport costs’ contribution to total logistics costs was 39%. The fact that South Africa is a spatially challenged economy is one of the primary reasons for the much higher percentage; and
- The primary cost drivers for transport costs are fuel and wages. Transport costs as a percentage of Gross Domestic Product (GDP) equated to 7.6% in 2012.
The performance and growth of the South African logistics industry are both inputs to and outflows from the performance and growth of the South African economy – especially in the primary and secondary sectors. The exchange rate, inflation rate and interest rate directly impact the cost performance of the industry. Other macro-economic issues such as the structure of the South African economy, balance of payments, budget deficits and the human resource problems affect the economy as a whole, which influences the demand for logistics services.
Simultaneously, the performance of the logistics industry, specifically the cost of logistics, affects the global competitiveness of South African industries. Logistics costs as a percentage of transportable GDP have grown significantly over the past four years. A deeper investigation of individual cost components and cost drivers shows that the increase in logistics costs is perhaps not so much the result of deteriorating efficiency in the industry but the disproportionate growth in cost drivers, especially fuel. To change the trends in underlying cost drivers or significantly mitigate their impact requires more than just operational efficiency enhancements, it requires bold steps in addressing the ingrained issues that stifle the economy as well as new directions in how supply chains operate.
On an operational level, in the 2014 supplychainforesight survey conducted by Barlow World Logistics, individual companies ranked the following as the top South African supply chain and logistics constraints:
- Cost of transport;
- Ineffective processes and systems;
- Reactive vs proactive approach of the industry and infrastructure providers;
- Supply chain information and intelligence available to operators and users;
- Internal and external silo-based mentality;
- Lack of overall supply chain strategy and operations;
- Lack of availability and adequacy of supply chain skills;
- Efficiency of ports and harbours;
- Labour unrest; and
- Reluctance and/or foresight to change/innovate.
The geographical position of Nkomazi in relation to the Sub-Saharan countries of East Africa, the proximity to some of the major mining and agricultural production areas of the country’s northern Provinces and access to good transport infrastructure provides Nkomazi with an advantage as a logistics and distribution hub.
The South African logistics industry is currently the backbone of Nkomazi’s economy. The demand for transportation of goods and commodities, through Komatipoort to Maputo and vice versa, is evident in the continued increase in traffic on road and rail.
The proposed Nkomazi SEZ offers a unique opportunity to reduce the costs of freight by creating an inland port that can handle cargo containers and bulk materials transport through the transhipment of road cargo to rail (intermodal), thereby reducing the truck congestion on the roads between Gauteng and Maputo Port.
The Maputo Corridor integrates the regions of Swaziland, southern Mozambique and the industrialised regions of Mpumalanga, Gauteng and Limpopo. In the 1970’s, 40% of South Africa’s exports went out through Lourenço Marques, as the capital of Mozambique was then called. The situation has changed radically and South Africa has developed specialised hubs at Durban, Richards Bay, Port Elizabeth and Coega that take much of its bulk exports, cars, container traffic and others. The proximity of Maputo Port to the above regions is evident and it should therefore present a very cost effective alternative to South African ports, whilst assisting with the overall development and integration of Southern Africa Development Community (SADC) countries. This fact led to the establishment in full MPDC. The MPDC has invested in significant port development and has evolved as a multi-terminal port that suits many freight carriers. These developments enhance its geographical advantage for the export of commodities and goods from mines and industries situated in the north of South Africa.
The challenges that the MCLI faces in promoting export growth is the age and operational effectiveness of the road and rail links between Komatipoort and Maputo Port. The MCLI have indicated that there is a plan to spend $204 million on upgrading the rail track and rolling stock. The three operators in the rail corridor, MCLI partners Transnet Freight Rail (TFR), Swazi Rail and Portos e Caminhos de Ferro de Moçambique (CSM) have formed a joint Operations Center that will offer a more robust approach to future needs. The MPDC, spearheaded by Grindrod terminals, has also embarked on a continuous upgrade programme for the port and plans are underway to increase the port handling capacity from its current 7 million tons to 50 million tons by 2020.
The Nkomazi SEZ can play a pivotal role in the export of citrus and other fruits/vegetable from the Northern provinces of South Africa, as the cost of transport to Durban port is becoming prohibitive and there is on-going congestion. The Citrus Growers Association has identified the significant benefits offered by the proximity of Maputo Port to their production areas in Limpopo, Mpumalanga and Swaziland. The use of rail transport in the Maputo Corridor is also considered a key benefit. There is a need for an intermodal hub at Komatipoort / Malelane according to area logistic survey and an intermodal facility in the proposed Nkomazi SEZ together with a pre-cooling facility that will be a major benefit for the citrus growers in the areas identified.
The pivotal role that the Maputo Corridor plays in the South African, and SADC economies, is illustrated in Figure 1 below.