South Africa’s rising logistics costs: An uncertain future

Jan H Havenga,Zane P Simpson,Nadia M Viljoen,Anneke De Bod

doi:10.4102/jtscm.v8i1.155

Jan H Havenga, Zane P Simpson + Show 2 more

Open Access

https://doi.org/10.4102/jtscm.v8i1.155

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Abstract

A country’s competitiveness can be severely hampered by an uncompetitive freight logistics system. During the first decade of the 21st century, two in-depth models were developed for South Africa which provide a framework for measuring and improving the country’s freight logistics system – the cost of logistics survey and the freight demand model. These models also allow for the development of scenarios for key identified risks. The objectives of this study were to provide an overview of South Africa’s surface freight transport industry,identify key risks to national competitiveness and suggest ways in which these risks could be mitigated. Freight flows were modelled by disaggregating the national input–output model into 372 origin–destination pairs and 71 commodity groups, followed by distance decay gravity-modelling. Logistics costs were calculated by relating commodity-level freight flows to the costs of fulfilling associated logistical functions. South Africa’s economy is highly transport intensive. Excessive dependence on road freight transport exacerbates this situation. Furthermore, the road freight transport’s key cost driver is fuel, driven in turn by the oil price. Scenario analysis indicated the risk posed by this rising and volatile input and should provide impetus for policy instruments to reduce transport intensity. As such, this study concluded that a reduction in freight transport intensity is required to reduce exposure to volatile international oil prices.

Highlights

BackgroundThere is an intrinsic link between the logistics performance of a country and its productivity, competitiveness and sustainable economic growth (Arvis et al 2008; Lakshmanan & Anderson 2002; Limão & Venables 2001; Rasamit 2003; Ravn & Mazzenga 2004; Rodrigues, Bowersox & Calantone 2005)
Only five national logistics costs surveys have been completed every year over a 5-year period, with only two (South Africa and the USA) providing a time series of national logistics costs per cost component (Rantasila & Ojala 2012)
In 2012, transport costs accounted for 61.2% of logistics costs, whilst in 2013 this percentage was estimated at 61.6% (CSIR 2014)

Summary

Introduction

There is an intrinsic link between the logistics performance of a country and its productivity, competitiveness and sustainable economic growth (Arvis et al 2008; Lakshmanan & Anderson 2002; Limão & Venables 2001; Rasamit 2003; Ravn & Mazzenga 2004; Rodrigues, Bowersox & Calantone 2005) In all these studies, a reduction of overall logistics costs bodes well for the respective economies. Only five national logistics costs surveys have been completed every year over a 5-year period, with only two (South Africa and the USA) providing a time series of national logistics costs per cost component (Rantasila & Ojala 2012) The value of these time series is evident in that both South Africa and the USA’s logistics cost time series are primary references for the public and private sectors, annually stimulating inter alia debate, policy formulation and investment within the respective logistics landscapes (Viljoen 2013). In 2012, a third of South Africa’s freight transport costs were attributable to fuel costs, estimated to increase to 40.0% in 2014 as a result of fuel price inflation (Havenga & Simpson 2013)

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