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Recovery of transport industry shows potential

  • marimac 

As measured by the Ctrack Freight Transport Index, the overall logistics sector continues to show tremendous growth with year-on-year increases of 26,4%. This might be from a low base due to hard lockdown in 2020, but the quarter-on-quarter growth reveals increases of 4,2%.

More than half of the total number of containers passing through South Africa are handled by the port of Durban (approximately 4 150 containers per day) – an impossible task to complete by hand. photo by Unsplash | Hannes Egler
More than half of the total number of containers passing through South Africa are handled by the port of Durban (approximately 4 150 containers per day) – an impossible task to complete by hand. photo by Unsplash | Hannes Egler

During the last year, every single sector measured by the Index recorded positive growth. The smallest gainer was Pipelines with 2% and the most significant, air freight, growing 86,6% in the last 12 months. It must be noted that air freight also suffered most significantly during hard lockdown, so this growth might seem massive but is truly just a return to normal.

The quarter-on-quarter improvement in the index bodes well for Q2 GDP growth at present. It seems like economic activity was relatively strong in Q2, although one is a little wary that some of the improvement was due to higher export prices and some catch-up of other economic activity after the harder lockdown in Q1.

“While growth in the majority of sectors measured by the Ctrack Freight Transport Index is great to see, unfortunately, a variety of external factors will see this growth remain stagnant or even decline in the short term,” said Hein Jordt, Managing Director of Ctrack SA.

However, it is expected that the recent stricter lockdown measures may have had a negative impact on the service portion of the country’s GDP, so only time will tell if the freight transport and GDP relationship remained as is during Q2.

Road freight the only sector that has fully recovered

Measuring the changes in the activity of the different transport sectors over a two-year period indicates that the majority of the sub-sectors measured by the Index have not yet returned to pre Covid-19 levels. Only road freight has fully recovered and surpassed previous levels, mainly to the detriment of rail freight, which still struggles along.

Rail transport is still about 16% off its previous highs due to factors such as some derailments on the coal line and some problems on other lines that continue to hurt the sector.

Sea freight is very near to previous levels, and that is encouraging. Overall, the freight logistics sector is still about 3% away from its previous highs.

The current performance of the Index is based on data from June, and it is expected that the looting and Level-4 restrictions experienced during July 2021 will have a negative effect on various sectors, including air and sea freight and naturally road and rail freight too.

The recent closing of the N2 and N3 and Transnet Ports due to looting and unrest will most definitely mean that the Index for those sectors will show month on month declines in July and August.

The effects that the recent unrest will have on the entire transport sector is concerning. The knock-on effect of road and port disruptions will include negative impacts on rail, pipelines and perhaps even air freight. The effects of the riots and lockdown Level 4 have not yet been felt, and we will have to wait for the July numbers before we can truly ascertain what effect it all will have on the transport industry.

South African container traffic is growing but not at the required level

Since 2010 South African container throughput has increased with 19%. This, along with recent growth in exports, leads us to believe that South Africa has hit an international trade sweet spot.

A 19% improvement in 11 years is a far better performance than the overall SA economy that only experienced an increase in GDP of 3,6% over the same period. This growth is partly because containers are becoming increasingly popular for the international transportation of goods as containers can easily be transported by various modes.

In the quarter ending in June, South African Ports handled over 13 000 TEUs a day. TEU represents Twenty-foot Equivalent Unit, meaning that the actual number of containers could be far less with many containers these days of the forty-foot size. Regardless, that still represents a figure of at least 6 500 containers a day. More than half the total containers passing through South Africa are handled by the port of Durban, which moves approximately 4 150 containers per day.

This equates to three containers a minute that needs to move in the port of Durban.

While the numbers are impressive, it shows the serious problems Transnet Port Terminals (TPT) face when they must do manual loading and sorting due to factors such as a recent computer hack.

Doing this by hand and with ‘walking talkies’ and a spreadsheet is not possible. No one person can reliably replace a computerised system that handles thousands of containers and trucks every day and ensure that all containers are loaded onto the correct truck or ship.

The recent delays at the ports will have a further negative effect on the road and rail freight sectors, which will, in turn, have a negative effect on the overall Index as well as the South African economy as a whole.

While South African container throughput has grown admirably, this is well below the global average. Global container throughput has increased by 52% over the same period. Slow growth compared to the global average indicates that exports from South Africa are not growing in volume at a satisfactory rate.

An additional contributing factor is that South Africans have become poorer in real per capita income. We can no longer afford as many imports as was possible before 2014, and this has also had an impact on the throughput of containers.

Much of South Africa’s current good export performance is due to high commodity prices rather than improved or more efficient production. In other words, South Africa is slowly losing out on global opportunities. This can be seen in the graph below:

Comparison of world container and SA container throughput