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2007Logistics or

regional growth anddevelopment

The fourTh

ANNuAL STATe ofLoGISTICS SurVeY for

SouTh AfrICA

Proudly sponsored by


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Report edited by David KingCSIR

Contact details:CSIR Built EnvironmentTel +7 84 387Fax +7 84 4755

www.csir.co.za

ISBN: 978-0-7988-5574-7

The CSIr MANdATe

The objects o the CSIR are, through directed and particularly multidisciplinary researchand technological innovation, to oster, in the national interest and in elds which in its

opinion should receive preerence, industrial and scientic development, either by itsel orin co-operation with principals rom the private or public sectors, and thereby to contributeto the improvement o the quality o lie o the people o the Republic, and to perorm any

other unctions that may be assigned to the CSIR by or under this Act.

(Scientic Research Council Act 46 o 988, amended by Act 7 o 990)


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PreAMBLe

With this, the ourth annual State o Logistics survey,logistics and supply chain management remainas important, i not more important, than everbeore. The World Bank report on internationallogistics competitiveness illustrates not only theimportance o this critical business unction, but alsoprovides a very valuable benchmark or logisticsperormance worldwide. While South Arica isranked a comorting 4th out o 50 countries, the

high internal or domestic logistics costs remainthe biggest concern or industry in our country. ISouth Arica wants to compete in the global marketplace the high logistics costs need serious attention.Various actors are, however, going to make thisdicult in the short term.

Ever-increasing uel costs, the general deterioratinginrastructure countrywide, as well as the act thatthere is no indication o appropriate reight movingback to rail are some o these actors. Industry willthus have to be even more innovative in overcomingsuch hurdles.

The theme o the ourth survey is: Logistics or regional growth and development. Weendeavour to portray the role South Arica is playing, rom a logistics point o view, in thesouthern Arican region. We attempt, through some case studies, to illustrate what it entails

to provide logistics services to the rest o Arica.

The CSIR and its associates believe we are again addressing critical aspects on nationaland industry levels in this report. Ports play a very important role, while reight growth is stillpredominantly on road and eorts to get reight back to rail will probably take longer thanenvisaged. The ormat is similar to that o previous surveys and allows or comparisons intrends, which has not been possible to date.

We strongly believe that this report should open the agenda or urther discussions, interactions

and dialogue on various logistics and supply chain management issues. It is only throughsuch collaborative interaction that relevant research can be conducted to the benet o the

Hans Ittmann


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country. Researchers need to be stimulated to identiy areas or urther investigation that willaddress concerns o the industry and government.

We, as the CSIR, are pleased and excited that we have ormed a long-term partnership with

Imperial Logistics, by ar the largest leading third-party logistics service provider in SouthArica. The nancial support rom Imperial Logistics will ensure the continuation o this surveyas well as provide researchers with the opportunity o interacting with and test hypotheses ina practical environment. Both parties are determined to ensure the survey continues to addmore value to government and industry while remaining objective and independent.

To all those who contributed to the survey, thank you.

Hans W IttmannCSIR Built EnvironmentPretoria, South Arica

June 008


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3

PrefACe m Impial Lgistics

We want to thank Hans Ittmann and the CSIR team or aording us the opportunity to partnerwith them in the annual State o Logistics survey. We are excited about the opportunity andbelieve that the survey plays a critical role in the southern Arican logistics and supply chainmanagement industry. The survey is a key reerence or various stakeholders, includinggovernment, analysts, industry captains and supply chain proessionals as a source oinormation and support in the strategic decision-making process. The sponsorship is astrategic investment or Imperial Logistics and a signicant contribution towards the SouthArican economy and our customers.

We entered into a ormal relationship with the CSIR in January 008 in order to contributeand ensure that the supply chain community benets rom the continuation o the survey.Furthermore, as a leading third-party logistics service provider in southern Arica andEurope, we are able to test certain aspects o the survey in a practical environment. With 70operating companies that provide logistics and supply chain management services acrossall industries, we provide the CSIR with an opportunity to extract empirical support or thevalidation o theoretical hypotheses as and when required.

Imperial Logistics is proud to be associated with the CSIRs State o Logistics survey and welook orward to working together in uture. We congratulate the CSIR on the ourth editionand wish them success or the upcoming th survey we will get actively involved in thisone and contribute rom an experiential perspective.

Marius SwanepoelCEO Imperial Logistics

About Imperial Logistics

Imperial Logistics is a leading third-party logistics (3PL) and supply chain management company in

southern Arica. The company provides customised value-added logistics services and supply chain

solutions to blue chip customers in almost every industry. Imperial Logistics is 00% owned by Imperial

Holdings and is home to 70 operating companies. In sub-Saharan Arica, operations are segmented

into three key divisions, namely Transport and Warehousing, Consumer Products and Specialised

Freight. Imperial Logistics has an international arm, ocusing on European markets and comprising our

operating units, namely Panopa Logistik, Neska, Imperial Reederei and Brouwer Shipping. For urtherinormation, please visit www.imperiallogistics.co.za


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4

CoNTeNTS

EXECUTIVE SUMMARY 6Macro-economic perspective . . . . . . . . . . . . . . . . . . . . . . . . . 6Industry-level perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

INTRODUCTION 9Trends in supply chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

RESEARCH APPROACH 13

MACRO-ECONOMIC PERSPECTIVE 14Modelling approach Logistics costs model . . . . . . . . . . . . . . . . . . 4Logistics costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Modelling approach Land reight transport model . . . . . . . . . . . . . . . 9Land reight transport costs . . . . . . . . . . . . . . . . . . . . . . . . . . 0Spatial perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Southern Arican ports: A gateway into Arica . . . . . . . . . . . . . . . . . 7Case studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

INDUSTRY-LEVEL PERSPECTIVE 38Using 3PLs in Arica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39South Aricas potential as a regional logistics hub . . . . . . . . . . . . . . . 4Small, medium and micro enterprises (SMMEs) and the export market . . . . . . 49


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LIST of fIGureS

LIST of TABLeS

Figure : Research approach . . . . . . . . . . . . . . . . . . . . . . . . . . 3Figure : Stack elements o South Aricas logistics costs. . . . . . . . . . . . . . 7Figure 3: Growth in the transport costs element . . . . . . . . . . . . . . . . . . 8Figure 4: Stack elements o South Aricas logistics costs primary and

secondary sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Figure 5: Eect o in-transit time (place utility) on inventory carrying

costs (time utility) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Figure 6: Land reight transport in South Arica (percentages denote share o

total tonnage and ton-km, respectively) . . . . . . . . . . . . . . . . . 0

Figure 7: Historical reight transport data . . . . . . . . . . . . . . . . . . . . Figure 8: Freight typologies (ton-km and percentage share) . . . . . . . . . . . . Figure 9: Historical data or the our transport typologies . . . . . . . . . . . . . Figure 0: Total tons moved on South Arican corridors or selected industries . . . . 5Figure : Comparison o selected industries road vs rail market share on major

corridors and routes or 003 and 005 . . . . . . . . . . . . . . . . 6Figure : Major global ports . . . . . . . . . . . . . . . . . . . . . . . . . . 7Figure 3: International seaborne trade or selected years . . . . . . . . . . . . . 8Figure 4: Growth in international containerised trade (985006) . . . . . . . . 8Figure 5: Proportion o world containerised trac per territory. . . . . . . . . . . 9Figure 6: The Maputo Development Corridor . . . . . . . . . . . . . . . . . . . 36Figure 7: Trans-Kalahari Corridor . . . . . . . . . . . . . . . . . . . . . . . . 37Figure 8: Arican presence o Imperial Logistics. . . . . . . . . . . . . . . . . . 40Figure 9: Geographic position o South Arica in the SADC region. . . . . . . . . 46Figure 0: Road and rail inrastructure in SADC countries . . . . . . . . . . . . . 48

Table : GDP at current prices (rand million) . . . . . . . . . . . . . . . . . . 5Table : Impact o data renements on model results (004 data). . . . . . . . . 6Table 3: South Arican port terminals and major products handled . . . . . . . . 30Table 4: Summary o cargo handled at South Arican ports. . . . . . . . . . . . 33Table 5: Top ve South Arican export and import countries in 007 . . . . . . . 43

Table 6: Top 0 South Arican trading partners or 007. . . . . . . . . . . . . 44Table 7: SADC members with population and GDP gures or 006 . . . . . . . 45


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eXeCuTIVe SuMMArY

While the third State o Logistics survey in 006 ocused on the implementation o logisticsstrategies in a developing economy, the theme or this years study is logistics or regionalgrowth and development. South Arica has a leading role to play in the development o thesouthern Arican region and is well positioned to take up this challenge.

MACro-eCoNoMIC PerSPeCTIVe

Logistics costsThe logistics costs as a percentage o gross domestic product (GDP) or 006 are 5,7%,

hal a percentage less than the gure or 005 (6,%). This decrease, in an environmentwhere the GDP has increased substantially, is probably due to logistics operators being ableto utilise spare capacity in the system better as opposed to improvements in the structuraleciency o the logistics system. Transport constitutes the major component o logistics costsat 56,9%; it is worrying that it has increased by 0,7% rom 005 to 006. The otherstack elements have remained relatively constant and even decreased over the same timeperiod.

Land reight transport costsTotal land transport amounted to ,5 billion tons shipped in 006, which constitutes anincrease o 5,5% rom 005. It is shown that since 997, all growth has been capturedby road, which is a worrying trend. Most transport takes place on major corridors (39%),secondly in rural areas (4%), bulk-mining accounts or % and metropolitan areas carry6% o transport.

Spatial perspectiveSouth Arica is spatially challenged due to agglomeration o major industries in the centre o

the country. South Arica was placed 4th out o 50 countries on the World Banks LogisticsPerormance Index, but was 4th based on domestic logistics costs, an indication o theeect o the high transportation costs on logistics costs. The two major corridors betweenGauteng-Durban and GautengCape Town constitute 40% o all corridor movement.However, rail represents only 5% and 5%, respectively, o tonnage moved, which placesstrain on these two corridors. Rail gained market share compared to road in the chemicals,steel and timber industries between 003 and 005, but lost market share in the automotive,cement, coal, ertiliser and grain industries in the same period.

Southern Arican ports: A gateway into AricaWorld seaborne trade increased by 4,3% rom 005 to 006 to 7,4 billion tonnesloaded. It is estimated that seaborne trade has more than doubled in the past 0 years.


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Containerisation has by ar accounted or the biggest growth in shipping volume worldwide.The global logistics and reight-orwarding market is in a state o rationalisation andconsolidation, but the reight-orwarding market is expected to continue growing by 9,4%over the next ve years. Volumes handled at South Arican ports in 006 showed an

increase in containerised trac by 7% and bulk exports and imports increased by 6% and4%, respectively. A decrease o 5% occurred in break-bulk cargo, partially attributable tothe growth in containerised cargo. A major drawback or South Arican ports is the lacko sucient intermodal acilities and this actor needs to be improved to accommodate thegrowth in containerised trac.

All southern Arican ports ace the challenge o inrastructure development to accommodatethe growth in international trade. Many ports that lack sucient capital to ensure adequate

expansion have concessioned terminals to major international port operators and areexperiencing success through this measure. Congestion remains a primary concern and inan eort to combat this, ports are developing value-adding activities close to or inside theport boundaries, or attempting to streamline the intermodal transport system to the port.Shippers tend to choose a complete supply chain solution instead o a single port to providea holistic solution to their transport problem and ports thereore need to make sure they addvalue to the supply chain in which they participate.

INduSTrY-LeVeL PerSPeCTIVe

Using 3PLs in AricaBeing active on the Arican continent provides experience and opportunities or SouthArican companies to expand globally, but many logistical challenges are presented whenexpanding cross border. Poor inrastructure, low inormation and communications (ICT)uptake, legislation dierences, border-post delays and higher operational costs are someo the challenges aced when expanding into Arica. As a result, companies are turningto third-party logistics (3PL) companies to manage their logistics activities when operatingacross borders. Major advantages o using a 3PL when exporting include reduction o risk

in the oreign environment, supply chain complexity is kept to a minimum, geographicalcoverage can be expanded, transportation costs can be reduced, extensive supply chainsupport is available and less time is required to establish a distribution network.

A case study was conducted on our operating companies rom Imperial Logistics and anumber o cross-border exporting challenges and remedies were identied. All the companiesused road transport as the main transport means and border-post delays were identied asthe main challenge aced. Solutions proposed to solve this challenge included a standardelectronic clearing system, longer border-post operating hours, better-trained personnel andimproved communication between key role players.


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South Aricas potential as a regional logistics hubSouth Arica has great potential to become the Southern Arican Development Community(SADC) regions logistics hub. Both the export and import markets are growing at a astpace and eight o the top 0 trading partners are SADC countries. South Arica is theleading economy in the SADC region and contributes 67% to the total GDP o the region.Geographically, South Arica is well positioned to reach the SADC market with all majorcities in the region within 3 500 km o Gauteng, the economic hub. The inrastructure qualityis good compared to other SADC countries, and current investment in inrastructure willensure this position is maintained in uture. As with ports, the one major inadequacy is thelack o intermodal acilities and integration between transport modes, which needs to beaddressed beore South Arica can be seen as a true regional logistics hub.

SMMEs and the export marketSmall, medium and micro enterprises (SMMEs) nd the economics o exporting dicult andare aced with a number o challenges when exporting. The South Arican government hasan important role to play in SMME development and in promoting SMME exports. Supplychain renement is especially challenging or SMMEs and government should do moreto assist SMMEs in streamlining the supply chain. Collaboration and partnering with bigbusinesses could be one way o managing supply chain risk or SMMEs. The export strategy,the export marketing assistance scheme and the export nance guarantee scheme releasedby government should be used by SMMEs to develop and promote themselves in the export

market.


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9

INTroduCTIoNIttmann Hans W

The CSIR and its partners are pleased to present the ourth annual State o Logistics survey.With this survey it is possible to show trends o critical actors over the past our years,something that was not possible beore the start o the rst survey back in 004. From a dataanalysis point o view, the survey covers the 006 reporting year. The aim o the survey ismuch the same as in previous years, namely to provide a comprehensive picture o the stateo logistics in South Arica, incorporating a macro-economic view (top-down), an industry-level perspective (bottom-up), and a small business development perspective, dealing withlogistics as a developmental constraint or SMMEs in urban and rural environments.

The World Bank recently published a report on international logistics competitiveness.The report benchmarks the logistics perormance o 50 countries across seven areas operormance, namely:

Eciency o the clearance process by customs and other border agenciesQuality o transport and inormation technology inrastructure or logisticsEase and aordability o arranging international shipmentsCompetence o the local logistics industryAbility to track and trace international shipmentsDomestic logistics costsTimeliness o shipments in reaching destinations.

Using these seven criteria, an overall logistics perormance index (LPI) is calculated. SouthArica scored 3,53 or the LPI and was ranked 4th out o 50 countries. The ve topperorming countries were Singapore, the Netherlands, Germany, Sweden and Austria.Both Australia (7) and New Zealand (9) are ranked ahead o South Arica. This positionsSouth Arica among the top perormers in the world. Domestic logistics costs are, however,the Achilles heel or South Arica regarding this aspect the country is rated 4th in the

world.

The logistics costs as a percentage o GDP are again presented; however, there is a dierencein the way these costs were calculated and readers need to take note. The inventory carryingcosts calculation (i.e. the opportunity costs o carrying inventory or nancing stock) wasdone in the past by applying the prime interest rate to the average inventory holding timebased on the value-added gure or each sector. The value-added gure is a standardavailable statistic in the national accounts, but it means that only the carrying costs o eachsectors value added were shown. In real lie, however, the logistics manager in a specic

sector has to nance the total value o the inventory (also value that was added by othersectors). As this study has progressed over the years, much more detailed industry-level

The World Bank. 007. Connecting to Compete: Trade Logistics in the Global Economy. Washington DC.


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inormation o stock value could be analysed and the logistics costs calculation has nowbeen perormed on this total value. The old calculation was repeated in order to showtrends, and the new calculation backtracked to enable historic comparison or the uture.

Logistics costs are currently negatively aected by the rising uel prices. This is possibly theone aspect o most concern to supply chain managers in South Arica. This, together withthe energy crisis, the multitude o large inrastructure projects, serious congestion in themetropolitan areas, the serious skills shortage, and the preparations or the Soccer WorldCup in 00 are putting huge strains on the logistics/supply chain management system inthe country. Unortunately, this situation is not going to change, at least not in the short tomedium term; in act, the situation will probably get worse rst and it is hoped that it willthen start improving.

The theme or this survey is Logistics or regional growth and development. We endeavourto portray the role that South Arica is playing, rom a logistics point o view, in the southernArican region. In this regard the ports play a very important role. We also attempt, throughsome case studies, to illustrate what it entails to provide logistics services to the rest oArica.

For South Arica, and southern Arica to continue to grapple with competing in the globalmarket, it is essential to maintain a comprehensive picture o the state o logistics. The

geographical location o the region is already a major drawback in creating a competitiveadvantage in the global market. It is thereore o the utmost importance that all players inthis region collaborate in achieving the goal o making South Arica, and its neighbouringcountries, truly competitive on a global scale.

TreNdS IN SuPPLY ChAINS

What are the topics and issues that will be receiving the ocused attention o those involvedin supply chain management in coming months? There is certainly no shortage o aspects

that will aect us. The dramatic events regarding electricity supply in South Arica, orrather the lack o supply, have illustrated vividly how quickly things can change. It can begenerally stated, thereore, that we live in a dynamic environment and supply chains needto be designed in such a way that they are suciently resilient to be able to accommodatechanges quickly and eectively.

She Y, 006. The Resilient Enterprise. The MIT Press, Cambridge, Massachusetts, USA.


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Blasden3 lists three o the most common themes currently high on the priority list orattention:

Globalisation and the lack o predictability The growing complexity o internationalnetworks o partners and suppliers, as well as the rapid changes that impact supply

chainsEnvironmentally-sound practices The growing demand or environmentally-sustainableand socially-responsible products and servicesChanging demographics The ageing o the population internationally is a concernand will aect supply chain management.

The Supply Chain Digest4 has identied 0 key supply chain megatrends that will impactsupply chain and logistics proessionals. A megatrend is dened as a power orce that

will shape (the) supply chain and logistics decisions o many companies over the next ewyears, impacting strategy, organisation, business results and more. Each megatrend will beanalysed in depth in uture; only details about the rst trend have been released to date. Itwill be worthwhile tracking these.

The 0 megatrends are the ollowing:Supply chain alignmentPush-to-pullActionable visibility

VirtualisationThe integrated supply chain organisationChinaPerormance managementLean supply chainsRisk managementSensory networks.

These are international trends that we in South Arica should take note o and start

implementing and investigating over time. Some o these trends could be more applicableto the South Arican situation than others. What about trends in South Arica itsel? Hereexternalities possibly infuence supply chains more than industry setting ormal supply chaintrends. We reer to aspects such as the energy crisis, major congestion on the main roadsand corridors that will worsen in the short to medium term, the lack o road inrastructure,the lack o proper road maintenance, the skills shortage, no proper reight logistics strategyacross all levels o government, and the lag in ensuring that the main rail operator provides

3 Blasden R, 008. New skills or the st century. CSCMPs Supply Chain Quarterly, Q/008, p 9.

4 Supply Chain Digest Newsletter. 30 August 007.


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a service that will attract reight back to rail. Soaring uel and diesel prices will, togetherwith many o these externalities, contribute to even higher logistics costs in the country. Thiswe cannot aord since it will make us less competitive internationally.

Flexibility throughout the supply chain is becoming essential and this must be based onproven supply chain design principles, the right culture, etc. Investment in resilience andfexibility will create a competitive advantage in an increasingly volatile marketplace.5

The issue o global warming as part o the climate change debate, together with the negativeeect o economic activity on our environment, has rarely been more prominent. Concernor the environment will soon be part o the mindset o a critical mass o consumers, whichwill result in shippers, and logistics and supply chain operators actoring it into business

decisions and in choosing suppliers. Greener supply chains will certainly become arequirement in the near uture.

5 She Y, 006. The Resilient Enterprise. The MIT Press, Cambridge, Massachusetts, USA.


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The multiple perspectives considered by the State o Logistics survey include establishedareas o research such as costs modelling, transport economics and supply chain analysis,as well as areas such as the role o logistics in socio-economic development. The researchmethodology refects this holistic approach, as well as the relative maturity o these researchareas. A more ormal and quantitative approach is adopted or the development o thecosts o logistics, while a more qualitative and exploratory approach is applied to the smallbusiness and economic development perspective.

The research approach is summarised in Figure .

Figure 1: Research approach

6 SANRAL = South Arican National Roads Agency Limited

Macro-economicperspective:

Logistics costs

Land reight transport

Industry-levelperspective:

Small businessdevelopmentperspective:

reSeArCh APProACh

Global logistics trends

Research Priorities

The model computes totallogistics costs using product-specic data on modes,tonnage transported andstored, distance transported,transit time, unit costs otransport and opportunity costso time in transit.

The model utilises SANRALs6trac counts and also rail datato develop views on reighttrac fows or corridor, ruraland metropolitan reight,based on the average carryingcapacities o counted trucktypes.

A synoptic overview o logisticspractices and the health andmaturity o the South Aricanindustry and supply chains:

Integration o existingsurveys rom a supplychain perspectiveSupplemented with expertinterviews and industryanalyses.

An analysis o constraints tosmall business integration andsupply chain developmentthrough an assessment o:

SMME networking andlogistics interventionsBest practice in inte-gration o small andlarge businessesSelected small businesssupply chains.


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MACro-eCoNoMIC PerSPeCTIVe

ModeLLING APProACh LoGISTICS CoSTS ModeLHavenga JH, Jacobs CG, Pienaar WJ and Van Eeden J

Logistics in this part o the study is considered to be that part o the supply chain processthat deals with the transportation, warehousing, inventory carrying, and administration andmanagement o goods between the point o production and the point o delivery to thenal consumer. By denition this excludes the costs o passenger transport and the costs otransport, storage, packaging, handling, etc. o mail and luggage, as well as the storageand transport tasks involved in the production process.

Study methodology and approachThe logistics costs model (LCM) employs a bottom-up approach to the computation ologistics costs by aggregating detailed commodity-specic data, including throughput,transport and storage characteristics, as well as transport and warehousing unit costs. Theaggregation o logistics costs is based on primary input elements (the amount o a speciccommodity that is produced) and the costs o perorming specic tasks (transport, storageand handling) with respect to that commodity in the logistics chain. The validity o output

data can thereore be veried at the primary source beore any aggregation takes place. Inthis way the model diers rom existing methods, which extrapolate logistics costs data thatwere collected by means o non-specic sample surveys.

Specifc data adjustmentsInventory carrying cost

In previous surveys the calculation o inventory carrying costs was based on the value-addedworth o the aggregated commodities or products in question or the agricultural, miningand manuacturing sectors. In line with the delineation o the survey, value added rom

other sectors was excluded and the nal value o the inventory, which would have requireddetailed industry-level research, was not used (as it was not available). Such research,which refects the total value o the inventory that would need to be nanced, was conductedin this survey and or the rst time the inventory carrying costs based on the total inventoryvalue are reported. The old method was repeated or comparative purposes and the resultsare also reported in this survey.

Gross domestic productThe gross domestic product (GDP) was updated rom the ocial revised gures published by

the South Arican Reserve Bank (SARB). As is customary, the SARB backdates the updatedgures, which are presented in Table .


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Table 1: GDP at current prices (rand million)

Year Previous SARB fgure Latest SAFB fgure % dierence

003 R 60 693 R 60 693 0,00004 R 398 57 R 395 369 -0,0

005 R 539 53 R 54 067 0,

006 R 74 060

The 004 and 005 models were updated with latest available gures.

Manuacturing

Attention is drawn to the act that the calculation o manuacturing throughput remainsproblematic because the ocial statistics are presented in terms o monetary value (or insome instances in units, such as the number o garments) rather than in tonnage. A complexseries o calculations is thereore required to estimate the throughput o manuacturedproducts in ton-equivalent. In addition, a volumetric adjustment is made or particular itemsto take into account that the transport costs o these components are based on the volumerather than on the tonnage.

Costs

Transport costs updates consist o infationary adjustments or the various modes basedon the latest available inormation, the industry costs associated with vehicles required toperorm the service and the ton-kilometre supplied per commodity.

Storage costs, which include the storage and on-site handling o reight, were updated withthe latest available inormation. This includes the quay-side storage and handling o reightin ports, including imports, exports and coastal shipping.

The opportunity costs o capital locked up in reight during storage and transport (inventorycosts) in 006 were calculated using the prime rate o %.

Impact o data refnements on the historical logistics costsThe eect o aorementioned changes to the logistics costs model on logistics costs issummarised in Table .


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Table 2: Impact o data refnements on model results (2004 data)

Total logistics costs using

inventory carrying costcalculation based on value-adding o primary andsecondary sectors only

% o GDP

Total logistics costs using

inventory carrying costcalculation based on totalvalue o inventory when

fnanced

% o GDP

003: R87 billion 4,8% R0 billion 6,7%


005: R3 billion 4,5% R50 billion 6,%


The combined model update and GDP adjustment on logistics costs as a percentage o GDPamounted to an average upwards annual adjustment o ,6%. A urther impact o the moredetailed inormation on an industry level was an improved view o the split between primaryand secondary sector costs. This is refected in the nal results.

LoGISTICS CoSTSDe Jager D, Havenga JH, Jacobs CG and Pienaar WJ

Logistics costs in South Arica amounted to R73 billion in 006. It is unlikely that thedownward trend in logistics costs since 003 could be ascribed to improvements in thestructural eciency o the logistics system. It is ar more likely that logistics operatorsare better able to utilise available spare capacity in an environment where the GDP hasincreased substantially. Logistics costs will have to be tracked over a much longer period todraw any denite conclusions in this regard. Improvements in the structural eciency o thelogistics system will also show up only over a much longer timerame.


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Figure 2: Stack elements o South Aricas logistics costs

The stack elements o logistics costs are depicted in Figure . Logistics costs increased by9,% between 005 and 006. The contribution o the stack elements to logistics costsremained relatively unchanged. However, the increase in the transport sectors contribution(predicted in earlier surveys) is clear (see Figure 3). The transport sector is more susceptibleto administered prices (costs elements outside the control o logistics managers), and the

poor conguration and management o South Aricas reight network will continue to drivethis trend.

R140,5 bn

56,2%

R155,3 bn56,9%R128,1 bn

55,7%R116,9 bn

55,7%

R36,4 bn

14,6%R34,2 bn

14,9%R31,2 bn

14,9%

R48,3 bn

17,7%R43,8 bn

17,5%R40,0 bn

17,4%R36,4 bn

17,3%

R30,4 bn

11,1%R28,8 bn

11,5%R27,3 bn

11,95%R25,8 bn

12,3%

Randbillion

Transport Storage and ports

Management, administration and profits Inventory carrying costs

Total logistics costs

2003 = R210 bn

16,6% of GDP


2004 = R230 bn

16,4% of GDP


2005 = 250 bn

16,2% of GDP


2006 = 273b n

15,7% of GDP+ 9,5% + 8,7% + 9,2%

+ 9,6%

+ 5,8%

+ 9,9%

+ 5,5%

+9,5%

+ 6,4%

+ 5,6%

+ 10,3%

+ 8,0%

+ 9,6% + 9,7%+ 10,5%

R39,3 bn

14,4%


20/60

8

Figure 3: Growth in the transport costs element

The stack elements o logistics costs or the primary and secondary sectors are depicted inFigure 4. In 006, the primary sector contributed 9% to South Aricas nominal GDP andaccounted or 49% o the logistics costs. The secondary sector contributed 6% to nominalGDP in 006 and accounted or 5% o the logistics costs.

Figure 4: Stack elements o South Aricas logistics costs primary and secondary sectors

7 The primary sector reers to agriculture and mining (extraction o basic materials), while the secondary sector

reers to manuacturing (processing o basic materials).

92

94

96

98

100

102

104

2003 2004 2005 2006

Index

(2003

ba

se

year) Transport costs

Storage costs

Management,

administration and

profits

Inventory carrying costs

Transport costs

57%

Storage costs

14%

Management,

administration

18%

Inventory

carrying costs

11%

and profits

Primary sector Secondary sector

200distribution

Transport

R77,6 bn

58,5%Storage and ports

R21,5 bn

16,2%

Management, administrationand profits

R23,5 bn17,7%

Inventory carrying

costs

R10,1 bn

7,6%

Transport

R77,8 bn

55,2%

Inventory ca rrying

costs

R20,3 bn

14,4%

Management,

and profits

R24,8 bn

17,7%

Storageand ports

R17,8 bn

12,6%

administration


21/60

9

Transport also has an impact on inventory carryingcosts as depicted in Figure 5. Almost 9% o inventorycarrying costs are incurred while materials or goodsare in transit. Transport remains the biggest contributor

to the costs o logistics (and the biggest challenge inSouth Arica) and as such is analysed in more detail inthe ollowing section.

ModeLLING APProACh LANd freIGhT TrANSPorTModeLHavenga JH, Hobbs IE and Van Eeden J

The land reight transport model utilises the South Arican National Roads Agency Limiteds(SANRAL) comprehensive trac observation (CTO) yearbooks as a basis or the developmento a current and historical view o reight trac fows in South Arica. The model accounts

or the dierences between corridor, rural and metropolitan reight, and the various carryingcapacities o the types o truck that are used. These dierences are then collated andcompared with actual rail data to develop views on market shares, corridor densities andoverall investment strategies or South Arica.

The model uses an observed approach, i.e. it indicates to what extent reight appears oncertain typologies o transport (the various typologies are discussed in the results section).This will include double counting where the same reight appears on more than one typology,but is per denition correct as inrastructure requirements or the same reight will also benecessary on more than one typology.

Figure 5: Eect o in-transit time(place utility) on inventory carryingcosts (time utility)

Inventory carrying costs

while transported

R2,6 bn

8,6%

Inventory carrying costs while in storage

R27,7 bn

91,4%


22/60

0

LANd freIGhT TrANSPorT CoSTSHavenga JH, Simpson Z and Van Eeden J

Total land transport in the South Arican economy in 006 amounted to ,5 billion tonsshipped. The split between road and rail, and changes rom 005, are shown in Figure 6.

Figure : Land reight transport in South Arica (percentages denote share ototal tonnage and ton-km, respectively)

Tonnage 2005

1 416 mt (189)

Road

1 210 mt (184)

Rail

206 mt (626)

Corridor

175 mt (620)

12%

Metropolitan

685 mt (77)

48%

Rural

350 mt (177)

25%

Corridor

43 mt (721)

3%

Metropolitan

3 mt (67)

0,2%

Rural

49 mt (469)

4%

Bulk mining

111 mt (676)

8%

Figure in bracketsdenotes average

transport distance

Ton-km 2005

352 bn

Road

223 bn

Rail

129 bn

Corridor

108 bn

31%

Metropolitan

53 bn

15%

Rural

62 bn

17%

Corridor

31 bn

9%

Metropolitan

0,2 bn

0%

Rural

23 bn

7%

Bulk mining

75 bn

21%

Tonnage 2006

1 493 mt (240)

Road

1 291 mt (178)

Rail

202 mt (633)

Corridor

180 mt (600)

12%

Metropolitan

752 mt (77)

50%

Rural

359 mt (178)

24%

Corridor

41 mt (732)

3%

Metropolitan

3 mt (67)

0,2%

Rural

48 mt (479)

3,5%

Bulk mining

110 mt (682)

7,3%

Figure in bracketsdenotes average

transport distance

Ton-km 2006

358 bn

Road

230 bn

Rail

128 bn

Corridor

108 bn

30%

Metropolitan

58 bn

16%

Rural

64 bn

18%

Corridor

30 bn

8%

Metropolitan

0,2 bn

0%

Rural

23 bn

6%

Bulk mining

75 bn

21%

Tonnageincrease

of 5,5%

Tonkmincrease

of 1,7%


23/60

As reported in previous surveys, all growth is still captured by road. The core modal structureo South Arican transport has not changed and the challenges that arise rom this structureare still valid. These identied challenges include the inordinate volume o road reight oncorridors, which requires sustained road inrastructure investment in these corridors, thereby

limiting unds or rural road inrastructure development.

Historical data or reight shipped in South Arica are, or the rst time, refected in thissurvey in Figure 7.

Figure : Historical reight transport data

The data or 957 to 985 are based on sporadic surveys by Verburgh, Smith and Hamiltonand the data rom 993 to 006 on the application o the national reight fow model(NFFM) methodology to data rom these years. The need or modal restructuring is clearlyillustrated. The same methodology was also applied to the our typologies o transport, i.e.corridor, bulk mining, rural and metropolitan trac. The total ton-km distribution or 006between the our typologies is illustrated in Figure 8 and historical trends in Figure 9.

0

200

400

600

800

1 000

1 200

1 400

1 600

1957

Verb

urgh

1971

Smith

1985

Hamilt

on

1993

NFFM

1997

NFFM

2003

NFFM

2004

NFFM

2005

NFFM

2006

NFFM

Year and survey

Milliontons

Road

Rail


24/60

Figure 8: Freight typologies (ton-km and percentage share)

Figure 9: Historical data or the our transport typologies

Corridor traffic

0

50

100

150

200

250

1993 1997 2003 2004 2005 2006

Year

Milliontons

Road

Rail

Bulk mining

0

20

40

60

80

100

120

1993 1997 2003 2004 2005 2006

Year

Milliontons

Rail

Rural traffic

0

100

200

300

400

500

1993 1997 2003 2004 2005 2006

Year

Milliontons

Road

Rail

Metropolitan traffic

0

100

200

300

400

500

600

700

800

1993 1997 2003 2004 2005 2006

Year

Milliontons

Road

Rail

Bulk mining, 7521%

Metropolitan, 58,2

16%

Rural, 8724%

Corridor, 13839%


25/60

3

It is hoped that the implementation o master plans at Transnet and the companys largecapital investment programme, as well as the nalisation o the Department o Transports(DoT) national master plan will, in the medium term, contribute to the required modalrestructuring, leading to more costs-ecient transport in this regard.

SPATIAL PerSPeCTIVeKing DJ

IntroductionThe physical internet is described as the global network connecting rms, suppliers andconsumers. The ability o a country to access this global network depends on the quality oits national inrastructure, as well as on the eectiveness o its policies and institutions. In a

similar ashion, supply chains now orm a global network. These expanded supply chainsput a new premium on moving goods in a predictable, timely and costs-eective way.

Well-connected countries can have access to many more markets and consumers, while orpoorly connected countries, the costs o exclusion are considerable and growing, and therisk o missed opportunities looms large, especially or the poorest landlocked countries,many o which are in Arica. Organisations base their international location decisions onthe perormance o a countrys logistics system. High logistics costs are seen as a barrier totrade and oreign direct investment, and thus to economic growth. The answers lie in better

processes, higher-quality services and the operating environment. Seamless, paperlesssystems should be the goal o each country to optimise logistics processes.8

Inrastructure quality is a big actor in determining logistics perormance, especially ICTsystems. Transport inrastructure is also undamentally important and should be able to satisyrapidly growing demands. The competence o private and public logistics service providersis another key aspect. The perormance o the supply chain depends on the quality o theservice provided by the private sector, in collaboration with the prociency and diligence opublic agencies. Lack o corruption and increased transparency are cardinal in the overall

governance o logistics systems. The last actor is the reliability o the supply chain. Qualityo service, along with reliability, is a key actor in the age o globalisation and customerstend to value the latter even more than the costs o the service provided.

South Arica can be described as spatially challenged in a logistical sense due to theagglomeration o major industries in Gauteng in the centre o the country, which increaseslogistics costs when competing in the global market. In a global benchmarking study doneby the World Bank, which compared the logistics perormance o countries,9 South Aricawas ranked 4th out o 50 countries, which is a remarkable achievement considering that

8 The World Bank. 007. Connecting to Compete: Trade Logistics in the Global Economy. Washington DC.

9 The World Bank. 007. Connecting to Compete: Trade Logistics in the Global Economy. Washington DC.


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4

South Arica was ranked 4th based on domestic logistics costs. The high logistics costsare due to the high transportation costs o goods, which will continue to increase in the shortterm, rstly due to the geographical nature o South Aricas market and secondly, due toglobal actors such as higher oil prices. Thereore, to reduce logistics costs in the supply

chain, eciencies should be realised in other areas o operation.

Major corridor movementThe previous State o Logistics survey0 mapped the costs o transporting goods to the nearestmarket town, port or international logistics hub and showed the costs disadvantage o long-distance transport to these points. It thereore stressed the importance o a streamlined andupgraded reight logistics system along the main corridors that connect South Aricas maineconomic concentrations and ports o entry. Figure 0 shows the major corridor movement

with volumes (tons) per direction or 005 (the rail percentage per corridor is shown inbrackets).

The major corridors or the movement o goods remain GautengDurban and GautengCape Town, as also stated in the National Freight Logistics Strategy (NFLS), with almost40% o all corridor movement taking place on these two corridors. The movement romGauteng constitutes double the movement towards Gauteng on these two corridors, ascan be expected. Rail accounts or only 5% o tonnage moved on the GautengDurbancorridor and or 5% on the GautengCape Town corridor (005 data).

0 CSIR Built Environment. 006. The Third Annual State o Logistics Survey. Pretoria, RSA.

The corridor data do not represent all commodities transported but include only a selection o major

industries. They also do not include specialised routes such as the SishenSaldanha export iron ore route and

the GautengRichards Bay export coal route or other similar smaller routes.


27/60

5

Figure 10: Total tons moved on South Arican corridors or selected industries12

Road vsrail in selected industriesIt is dicult to carry the road vs rail debate across industries, but examining the change inmarket share o selected industries on the major corridors and routes between 003 and005 gives insight into the challenges acing rail transport in uture (see Figure ).

The transportation o bulk mining products (iron ore, manganese and coal) is dominated

by rail due to the suitability o the product or rail transport, but also due to the specialisedinrastructure aorded to these commodities, such as ring-encing and the prioritisation orolling stock allocation. Rail has lost market share in the automotive (5%), cement (7%),coal (%), ertiliser (9%) and grain (8%) industries, but has gained market share in thechemicals (9%), steel (44%) and timber (35%) industries between 003 and 005.

CSIR Built Environment and University o Stellenbosch: Department o Logistics data. 005


28/60

6

Figure 11: Comparison o selected industries road vs. rail market share onmajor corridors and routes or 2003 and 200513

Supply chain challenges and innovationTo bring about a streamlined and upgraded reight logistics system that will drive downdomestic logistics costs will require greater collaboration, especially between governmentand private industry role-players. Government has, since the release o the NFLS in 005,identied strategic nodes and corridors that require special attention, but has struggled toimplement noteworthy logistical changes. A heavy emphasis has been placed on inrastructureinvestment (as is necessary), but more needs to be done in terms o management and

operations. The leadership role that the private sector can play in this regard is crucial andan open communication channel or discussion orum between government and industrycould be the rst step in realising a more streamlined system.

The release o South Aricas National Freight Databank in 007 by the DoT is one o thetools to help stakeholders in the logistics chain plan transport in South Arica and acrossits borders. The databank has a long-term ocus o providing reight data that will helpwith policy ormulation, inrastructure investment plans, enhanced operational eciency,cross-border inormation about inrastructure, and operations and corridor tools, such asmapping, modelling and orecasting.

3 CSIR Built Environment and University o Stellenbosch: Department o Logistics data. 003 and 005.

Marketshare of road and rail per selected industries

80

95

50

57

91

82

59

11

75

84

98 96

81 82

39

67

91 92

100

56

90

55

20

5

50

43

9

18

41

100

89

16

2 4

19 18

61

33

9

100 100 100

8

44

10

45

25

0%

20%

40%

60%

80%

100%

Autom

otive

2003

Autom

otive

2005

Ceme

nt2003

Cem

ent 2

005

Chemica

ls2003

Chemica

ls2005

Chrome

2003*

Chrome

2005

Coal

2003

Coal

2005

Ferti

lizer

2003

Ferti

lizer

2005

FMCG

2003

FMCG

2005

Fuel

&Petro

leum

2003

Fuel

&Petro

leum

2005

Grain

2003

Grain

2005

Granite

2003

Granite

2005

*

Iron O

re2003

Iron O

re2005

Man

ganese

2003

*

Man

gane

se2005

Mine

ral m

ining

2003*

Min

eral

minin

g2005

Steel 2

003

Steel 2

005

Timbe

r 2003

Timbe

r 200

5

Industry / Year

Percentage

Road Rail * No data available


29/60

7

Visibility in the supply chain is another important actor and just as a company requiresvisibility to improve their logistics unction, so government requires visibility to improve thenational reight system. Sharing o inormation is one way to do this, but past experienceshows that companies (especially in the same industry) are reluctant to share inormation.

The automotive industry has in the past ew years bridged this gap with the Motor IndustrySupply Chain Competitiveness Improvement Programme (MISCCIP) and instead o the localbig original equipment manuacturers (OEMs) competing only with one another, they arecompeting more and more with their counterparts abroad. The aerospace industry (undedby the Department o Trade and Industry - the dti) started with its own programme, theAerospace Supply Chain Improvement Programme (ASCIP), in 006 with the goals oenhancing the supply chain eciency and communication process o the industry andacilitating international growth, but has had limited success thus ar.

SouTherN AfrICAN PorTS: A GATewAY INTo AfrICAKing DJ, Maspero E and Van Dyk E

IntroductionSea ports are generally acknowledged to be a country or regions economic lieline in theglobal marketplace and it is estimated that over 90% o physical international trade takesplace via sea transport. Figure shows the worlds major ports.

Figure 12: Major global ports14

4 Source: http://gcaptain.com/maritime/blog/top-0-worlds-busiest-ports. Accessed /04/08.

Major Ports of the World


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8

The United Nations Conerence on Trade and Development (UNCTAD) estimates that in006, world seaborne trade increased by 4,3% rom 005 to 7,4 billion tons loaded. Itis estimated that world seaborne trade has more than doubled in the past 0 years (seeFigure 3).

Figure 13: International seaborne trade or selected years15

The rise o international container shipping

Although bulk and break-bulk shipping remains common, containerisation has accounted byar or the biggest growth in shipping volume. Figure 4 shows the increase in internationalcontainerised cargo rom 985 to 006.

Figure 14: Growth in international containerised trade (1985200)1

5 UNCTAD. Review o Maritime Transport 007. United Nations, New York and Geneva.



31/60

9

The major advantages o containerised cargo are shorter loading and unloading times dueto the homogeneity o containers, and also less product handling and thereore less risk odamage to products. Perhaps the biggest advantage o containerisation is that it enablesstreamlined intermodal transportation with containers arriving at and departing rom the

port by road or rail. The patterns o containerised cargo movement are shown in Figure5. The amount o container trac or the period 003 to 005 is depicted in a novelway in that territory size represents the proportion o all shipping containers being loadedand unloaded there. It can be seen that Eastern Asia and especially China dominate worldcontainerised trac movement, with Arica and South Arica having a negligible amount ocontainerised trac by comparison.

Figure 15: Proportion o world containerised trafc per territory1 (Map areas representproportion o all shipping containers being loaded and unloaded)

With the growth in containerised trac, pressure is placed on port terminals to achievemaximum eciency o operations in the loading and unloading o containers. Increased and

improved coordination o the entire maritime supply chain has become vital, particularly theseamless intermodal transer o containers between road and rail to and rom the ports. Toully realise the benets o containerisation, intermodal interchanges must be as ecient andeective as possible.

Trends in global maritime logistics18The global logistics and reight-orwarding market is in a state o rationalisation andconsolidation. In recent years many orwarders have developed their operations to takeadvantage o the trend towards outsourcing and to meet shippers requirements or more

7 Source: http://www.worldmapper.org/posters/worldmapper_map38_ver5.pd. Accessed /04/08.



32/60

30

sophisticated logistics and supply chain services. Driven by globalisation, the overall reight-orwarding market is expected to continue growing at 9,4% over the next ve years. Thispositive outlook is, however, subject to downward risks, including the cooling United Stateseconomy and its potential impact on transpacic and transatlantic trade. In addition, reight

orwarders are negatively perceived by some customers as being a low value-addingresource providing a range o commoditised, costs-based services.

South Arican portsSouth Arica has eight commercial ports along its coastline, most o which serve airlynatural economic hinterlands producing specic cargo types. The port o Cape Town, orexample, handles cargo bound predominantly rom or or industries o the Western Cape.Richards Bay and Saldanha are highly specialised ports handling primarily bulk products

coal and iron ore, respectively. The new port o Coega in the Eastern Cape will be ableto accept larger vessels and will have acilities to handle containers and bulk liquids. Thisproduct-specic and natural specialisation o the ports has resulted in relatively low levelso inter-port competition in South Arica. The main products handled by the respective portterminals or acilities are summarised in Table 3 below.

Table 3: South Arican port terminals and major products handled19

Port Terminal Major products handled

Saldanha

Oil terminal Oil and petroleum products

Iron ore jetty Iron ore

Multi-purpose terminal

Lead and copper concentrates, pig iron, zircon,

rutile, chloride and sulphate slag, steel coils

Imports: steel pellets, anthracite and coking coal

Cape Town

Dry-bulk terminal Maize, soya and barley

Cape Chemicals Chemicals

Cape tank terminal Molasses, vegetable and sh oilsOil terminal Petroleum products

Cape Town bulk storage Chemicals and bunker uel

Container terminal Containers (including reeers)

Multi-purpose

combi-terminal

General cargo, ruit, timber,

steel and containers

Fresh produce terminal Fresh produce, timber and containers

Mossel Bay

Single-point mooring Mossgas products

Oil industry terminal Export Mossgas products

Submarine pipeline Export Mossgas products

9 Maritime Handbook o Southern Arica 006 and National Ports Authority Yearbook 004.


33/60


34/60

3

Port Terminal Major products handled

Richards Bay

Dry-bulk terminal

Imports: andalusite, chrome ore, ertiliser, rock

phosphate, rutile, titanium slag, vanadium slag,

vermiculite, woodchips and zircon

Exports: alumina, coking coal, ertiliser, petcoke,

potash, rock phosphate, salt, sulphur, urea and

zinc

Coal terminal Coal

Liquid bulk quay Fuel

Multi-purpose terminalFerro-alloys, pig iron, granite, orest products,

aluminium, steel, scrap, containers and pitch coke

Island View storageHAZMAT storage: bulk liquids and liqueed

gases

Richards Bay bunker

serviceBunker uel

Cargo is generally divided into the main categories o bulk (liquid and dry), break-bulk(palletised) and containerised cargo. The rst two are measured in metric tons whilecontainers are measured according the international standard o TEUs (twenty-oot equivalent

units). The volume o cargo handled by South Arican ports during the 006 calendar yearis refected in Table 4.


35/60

33

Table4:

Summaryofcargohandle

datSouthAfricanports20

0

TransnetNationalPortsAuthority.

PortS

tatisticsfor006.

SUMMA

RYOFCARGOHANDLEDAT

PORTSOFSOUTHAFRICA

JANUARYDECEMBER2006

RICHARDS

BA

Y

DURBAN

EAST

LONDO

N

PORT

ELIZABETH

MOSSEL

BAY

CAPE

TOWN

SALDANHA

TOTAL

BULKCARGO(METRICTONS)

BULKLA

NDED

613

7418

28580245

1051466

1121637

472533

2569588

4014437

43947324

BULKSH

IPPED

7524

7420

7410512

87970

2686937

958089

816847

28233075

115170850

TRANSH

IPMENTCARGO

-

156065

-

-

-

131539

4453412

4741016

TOTALB

ULKHANDLED

8138

4838

35876822

1139436

3808574

1430622

3517974

36700924

163859190

BREAKB

ULK(METRICTONS)

BREAKBULKLANDED

130917

4312182

260451

584273

41634

223499

242

5553198

BREAKBULKSHIPPED

480

3308

3532882

106224

477666

46341

336103

1072026

10374550

TRANSH

IPMENTCARGO

137

139355

-

-

-

57164

-

196656

TOTALB

REAKBULKHANDLED

493

4362

7984419

366675

1061939

87975

616766

1072268

16124404

TOTALC

ARGOHANDLED

8631

9200

43861241

1506

111

4870513

1518597

4134740

37773192

179983594

CONTAINERS(TEUs)

CONTAINERSLANDED

1376

1095911

17110

220519

-

380979

-

1715895

TRANSH

IPMENTCONTAINERS

-

237980

2

20963

-

71619

-

330564

TOTALC

ONTAINERSSHIPPED

2815

1102689

21198

172294

-

401889

-

1700885

TRANSH

IPMENTCONTAINERS

-

251776

123

24484

-

75977

-

352360

TOTALC

ONTAINERS

HANDLE

D

4191

2198600

38303

392813

-

782868

-

3416780


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34

These gures represent a general increase in the volumes handled in regard to all cargotypes, except or break-bulk where a 5% reduction occurred (in part attributable to thecontinued growth in containerisation o cargo). Containerised trac grew by 7% in 006and is orecast to grow by a urther 8% in 007. Total bulk export volumes increased by

6% and bulk imports increased by 4%.

South Arica alls on the secondary north/south routes served by smaller vessels and it isunlikely that any o the major container vessels will call at a South Arican or Arican port inthe near uture. However, as the size o the container vessels calling at South Arican portsis still increasing, any port or terminal congestion becomes critical as the risk o delay is thatmuch higher. A major constraining actor is the lack o adequate and modern intermodaltranser points between the ports, road and rail; and this situation needs to be improved to

accommodate the growth in containerised trac.

Regional perspective the uture o southern Arican portsAll southern Arican ports, especially those in the SADC region, ace the challenge oexpanding their acilities to accommodate the growth o international and national trade.In South Arica, signicant capital expenditure has been planned or port expansions anddevelopments as part o Transnets overall reight logistics strategy. Within the next ve yearsTransnet is expected to spend some R80 billion on such developments.

The port o Coega in the Eastern Cape is South Aricas 8th and latest commercial portdevelopment, and is set to start operating in 008. The ports deepwater construction iscapable o serving post-Panamax dry and liquid bulkers, and the new generation o cellularcontainer ships. The port is located within the Coega Industrial Development Zone (IDZ),which will serve as a primary location or new export-driven industries. The construction o alink with the existing Port ElizabethGauteng main railway line has received approval and isunderway. Both the existing railway line and the N reeway pass through the Coega IDZ,which improves connectivity and makes intermodal solutions a possibility.3

The port o Walvis Bay in Namibia has experienced investment o over R600 million overthe past 0 years to und expansion. Another expansion programme o R, billion isplanned, starting in 008, to cater or increased business in the SADC region.

Extensive economic growth in the SADC region has placed heavy pressure on the transportinrastructure to keep pace. Many o the ports lack sucient capital (whether nancial,human or technical) to ensure adequate expansion at the rate demanded and thereore

SAPO Operational Report. Source: http://www.transnet.co.za/AR_006/ops_saposrt.html

NPA Operational Report. Source: http://www.transnet.co.za/AR_006/ops_nationalports.html

3 Ports and Ships, Shipping News online. 006. The port o Ngqura.

Source: http://www.ports.co.za/coega.php. Accessed /04/08.


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35

some have ollowed the international trend o concessioning terminals to major internationalport operators. Dar es Salaam in Tanzania is one such example: in September 000,a 5-year lease was granted to the Tanzania International Container Terminal Services(TICTS), which is backed by the Hong Kong-based port operator Hutchison Whampoa, to

operate container services at the port.4 A more recent example is a 0-year concessioningagreement between the Angolan government and APM Terminals, an international portoperator, and Gestao de Fundos, a locally-based company, to operate the container terminalat Luandas Terminal with the express goal o easing congestion in Angolas busiest port.The port currently handles 00 000 TEUs a year and projections are or double-digit growthin the next ew years due to mining and oil-related expansion.5

Port congestion remains a primary concern to port operators, shipping lines and major

industries. The possible causes o port or terminal congestion are many: inclement weather,bunching o vessel arrivals, inecient transport linkages with road or rail (delaying thetranser o cargo rom or to the port), inecient cargo handling (rom or to the vessel) or,in many Arican countries, the ineciency and delays experienced with inland customsclearance. Port congestion has signicant knock-on eects: i a vessel is delayed in one port,the remainder o the voyage and the planning and operations at all subsequent ports-o-callwill be disrupted unless the vessel can make up time. Shipping lines are so concerned aboutdelays that during the worst phase o the congestion experienced in Durban (rom 003to 005), a congestion surcharge penalty o US$00 were levied on each container in an

attempt to encourage better perormance. Sadly, such surcharges are almost always passedon to cargo owners and in turn to their customers (the nal consumers).6

Port congestion can also orce time-sensitive regional cargo to road or rail or even to anotherport. Regional competition between ports or cargo volume is on the increase and it canonly benet the nations involved through continued economic development stimulated byincreased trade. Some ports are developing either value-adding activities located close to oreven within the port boundaries (such as smelters or cold stores), while others are attemptingto streamline the intermodal transport system to the port. It can be argued that shippers

no longer choose a port per se, but rather a supply chain solution that provides them withecient access to markets.7 The port thereore needs to ensure that it adds value to thesupply chains in which it participates.

4 Mjasiri J, Dar port aces more challenges. Source: http://dailynews.habarileo.co.tz/magazine/?id=55.

Accessed /04/08.

5 Cargo Ino Arica. 6/0/07. Into Arica Buzz. Lines condent o an improvement in Luanda but landslide

problems persist. Source: http://www.cargoino.co.za/. Accessed /04/08.

6 Enslin-Payne S, Ports: Volumes tell a tale o turnaround. Business Report, 0/0/08.

Source: http://www.busrep.co.za/index.php?ArticleId=434. Accessed /04/08.

7 Port Strategy online edition. Supply chain synchronisation. 0/007. Source: http:/www.portstrategy.com/

archive/007/october/in_ocus_port_modelling/port_modelling. Accessed /04/08.


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CASe STudIeS

The Maputo Development Corridor

Figure 1: The Maputo Development Corridor28

The Maputo Development Corridor (Figure 6) is a case in point. Through close cooperationbetween the governments o South Arica and Mozambique, a highly-ecient transportationnetwork has been created. The corridor stretches rom Johannesburg to Maputo throughone o the most highly industrialised areas in the region, serving industries such as steel,petrochemicals, mining and agriculture. The N4 road corridor has been concessioned toTrans Arican Concessioning (TRAC) until 08, thereby ensuring the long-term sustainability

o the corridor.

The long-delayed rehabilitation o the railway line was also completed due to CFM (theMozambican railway operator) and Spoornet (now Transnet Freight Rail) signing anagreement o cooperation in 006, which will lead to greater volumes being transportedbetween Johannesburg and Maputo via rail. Due to the success o the corridor, some cargotrac has already moved rom the port o Durban to the port o Maputo. In 005, 6,4 milliontons o throughput was achieved, a 6% increase over the previous year, which underlinescondence in the ports uture. To enhance the working o this corridor, the Maputo terminalhas to be upgraded, the channel needs to be deepened and the border crossing should bemuch more ecient. Increased growth in trac will require a larger terminal with a numbero new berths and larger cranes capable o handling ships to international standards.

Even more important is a seamless border crossing, as this will directly infuence the rateo growth o the Maputo port.9 In this regard, a one-stop border acility between SouthArica and Mozambique currently in the conceptual development stage and planned orcompletion in 00 could be the answer.

8 Source: http://www.mcli.co.za/mcli-web/images/wpe767.jpg. Accessed /04/08.

9 Cargo Ino Arica. 6/0/07. Into Arica Buzz. Upgraded terminal, deeper channel and aster border post

needed or Maputo corridor. Website: http://www.cargoino.co.za/. Accessed /04/08.


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The Trans-Kalahari Corridor

Figure 1: Trans-Kalahari Corridor30

Another example is o Botswana shippers using the Trans-Kalahari Corridor (TKC), whichlinks the port o Walvis Bay with Gaborone in Botswana and with Gauteng in South Arica,to ship goods through the port o Walvis Bay. The port handled approximately 3,3 milliontons o cargo in 006 and expansion plans aim to increase the ports handling capacity or

containers to 500 000 TEUs per year. A Botswana-unded project is underway to developa dry port at Walvis Bay to increase trac volumes on the TKC and to assist exporters andimporters by reducing total transport costs and turnaround times. The border post betweenNamibia and Botswana has extended border hours and only a single clearance documentis needed, as in the rest o the SADC region, which ensures ast clearance times o less than30 minutes.3 In 007 it was estimated that trac on this corridor increased by 58% witha transit time o 48 hours to and rom Gauteng.3

30 Source: http://www.corridornet.co.za/modules/articles/?Irn=3. Accessed /04/08.

3 Cargo Ino Arica. 6//07. Into Arica Buzz. Renewed marketing campaign punts Transkalahari corridor

benets. Website: http://www.cargoino.co.za/. Accessed /04/08.

3 Lute A, Trans-Kalahari Corridor providing astest trade route.The Botswana Gazette.

Source: http://www.gazettebw.com/business/trans-kalahari-corridor-proving-astest-trade-route-.html.

Accessed /04/08.


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INduSTrY-LeVeL PerSPeCTIVe

uSING 3PLS IN AfrICABean W and Willemse E

IntroductionDuring the past 5 years South Arican companies have been slowly gaining access tomarkets throughout the Arican continent. Although some ventures have ailed dismally, mostcompanies have developed successul Arican business models that allow them to expand intothese new markets and deliver prots to their shareholders. South Arica ranked worldwideamongst the top 0 largest developing country investors in 004. The main business driversor manuacturing companies to expand into Arica are access to new markets, growingthe business, diversication and improving competitiveness. For natural resources andagriculture companies, the reasons are to access more natural resources, control valuechains, increase privatisation opportunities and decrease the costs o production.33 Beingactive on the continent also provides opportunities or expansion beyond Arica, thusallowing companies to become global players. This trend o expansion into Arica, or whatsome reer to as South Aricanisation o the Arican economy, has its advantages anddisadvantages and it has a notable impact on the logistical system o companies.34

Impact on the logistical systemWhen a South Arican company expands into Arica, the location o business andmanuacturing acilities is greatly infuenced by the availability and condition o physicalinrastructure and also by transport costs. Since many Arican countries are underdeveloped,the location o acilities could be a great challenge to the logistical system o a company.Roads in some Arican countries are poorly maintained and this leads to high accident rates,high vehicle maintenance and high operation costs.35 In addition, the uptake o ICT in manyArican countries is very low and this could cause logistics costs to increase drastically.

Cross-border trac also increases the complexity o both the logistical system and the supplychain since logistical activities must be managed between dierent countries with dierent

33 UNCTAD (United Nations Conerence on Trade and Development). 005. Case study on outward oreign

direct investment by South Arican enterprises. Commission on Enterprise, Business Facilitation and

Development: Expert Meeting on Enhancing the Productive Capacity o Developing Country Firms through

Internationalization, Geneva, 7 December 007.

34 Gillingham A, 007. Taking on the continent. Mail & Guardian online, 4 July. Source: http://www.mg.co.za/

articlePage.aspx?articleid=34789&area=%0/suppanarican0707_home/suppanarican0707_content/.

Accessed 3/0/08

35 Pedersen PO, 00. Freight transport under globalisation and its impact on Arica. Journal o Transport

Geography, (9): 8599.


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regulations and rules. As a result, companies are increasingly using third-party logisticsservice providers (3PLs) to manage their logistical activities.36

Benefts o using 3PLs in Arica

Outsourcing is becoming more popular every day and the 3PL industry is growing rapidlyworldwide. As supply chain complexity increases, the appeal o outsourcing logisticsactivities becomes more evident. Outsourcing the logistics activities gives companies theopportunity to ocus on their core competency and to increase their geographical coverage.37As geographical coverage increases, transportation costs also increase. By using a 3PL ordistribution activities, a company can decrease transportation costs considerably. A 3PL caninfuence the load consolidation and backhaul opportunities o dierent companies, whichwill result in lower transportation rates. The th Annual Third-party Logistics Study ound

that outsourcing logistics activities to 3PLs reduced logistics costs on average by 3%.38

Although exporting is a risky business, risks can be reduced by outsourcing logistics activities.By using 3PLs, companies receive supply chain support that allows them to investigateopportunities in new countries. This enables a company to build a multi-location distributionnetwork in less time, with lower risk and without the high capital investment required to buildits own network.39

I a companys business is seasonal in nature or it needs to supply goods only during

certain months o the year, it can scale activities to provide maximum support during peakmonths and minimal support during o-peak months by using 3PLs. In addition, 3PLs canincrease inventory turns, increase company perormance, decrease order cycle times andconsequently increase customer satisaction. The dynamics o being a 3PL in Arica areillustrated in the ollowing case study.

Case study: Imperial LogisticsImperial Logistics is a 3PL logistics provider in sub-Saharan Arica, providing logisticssolutions to clients in the manuacturing, agriculture, mining, retail, hospitality, services

and distribution industries. Imperial Logistics operates around 4 500 vehicles o its own,provides work to another 000 (sub-contractor) vehicles and employs more than 000people. It is a division o the Imperial Group, and has a number o operating companies that

36 Ntuli AN, 004. Is Globalisation Good or Sub-Saharan Arica? Threats and Opportunities. Adam Mickiewicz

University, School o Social Sciences, October 004.

37 About Inc 007. Advantages and disadvantages o 3PL.

Source: http://logistics.about.com/od/outsourcing/a/3pl_adv_disadv.htm. Accessed on 5/0/08

38 Langley CJ, 007. Third-Party Logistics Study: Results and Findings o the th Annual Study. Georgia Institute

o Technology, Cap Gemini, DHL and SAP America.

39 Logistics List 007. 5 Reasons to use a 3PL provider. Website: http://www.logisticslist.com. Accessed on

5/0/08.


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provide logistics services into Arica. The Arican coverage o Imperial Logistics is indicatedin Figure 8.

A survey conducted ocused on the business environment and the challenges experienced

by logistics service providers when exporting into Arica. Four operating companieswithin Imperial Logistics were surveyed: Imperial Cargo Namibia (Pty) Ltd, Cargo AricaOverborder (Pty) Ltd, Truckarica South Arica (Pty) Ltd and Etosha Transport (Pty) Ltd.

Imperial Cargo NamibiaImperial Cargo Namibia, situated in the Western Cape, provides transportation and clearingservices or the ood and beverage industry. The company transports nished goods in bulkmainly to Botswana and Namibia.

Figure 18: Arican presence o Imperial Logistics

Cargo Africa OverborderCargo Arica Overborder is situated in Johannesburg. The company ocuses on servicesto and rom Botswana, Malawi, Mozambique, Namibia, Zambia and Zimbabwe. The


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main products transported by the company are nished goods, aid ood, and mining andindustrial products, which are transported in break-bulk or containerised loads.

Truckafrica South Africa

The main oce o Truckarica South Arica is situated in Germiston. Additional branchesare located in Durban, Komatipoort and Richards Bay, with a sister company in Lusaka,Zambia. The company transports mainly nished and consumer products and providesconsolidation, transportation and express delivery services or the mining industry. Itoperates across Botswana, the Democratic Republic o Congo (DRC), Malawi, Mozambique,Tanzania, Zambia and Zimbabwe. Products are transported in abnormal, bulk, break-bulk,containerised or consolidated loads.

Etosha TransportEtosha Transport specialises in the cross-border transportation and warehousing o urniture,general cargo and rerigerated products, which are transported in bulk, break-bulk,containerised, consolidated or rerigerated loads. The company oers consolidation, reightorwarding and transportation services, mainly within Namibia, but also transports productsto Botswana and Swaziland. The head oce is in Windhoek, Namibia, with warehouses inCape Town and Johannesburg.

Cross-border exporting challenges and remedies

All our companies use road transportation since they eel that it is the most ecient modeand that it provides the best access to customers. Cargo Arica Overborder uses limited railtransportation. Rail is not preerred because it was indicated that it takes longer and theinrastructure is inadequately serviced. Given the predominant use o road transportation,the main exporting challenge aced is border-post delays. The companies indicated thatthis can be attributed to customers not paying duties, racketeering, lack o ully electronicborder systems, border posts not being operational 4 hours a day and seven days a week,lack o inormation on border-post changes and charges, electricity load shedding, lack oresources with regard to the approval and clearing o goods in-bond, and delays in the

completion and approval o documentation.

Challenges experienced that are not related to border posts include excessive road tolls,corruption, lack o qualied technical personnel capable o repairing broken-down vehiclesen routeand competitors that do not comply with good corporate governance and the lawso the land.

Remedies or some o the abovementioned challenges were proposed by the companies,as ollows.


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Standard electronic clearing systemAll southern Arican countries should use a standard paperless electronic clearing system,i.e. ASYCUDA. The existing electronic data interchange (EDI) systems currently used atsome border posts have to be integrated and standardised into a single EDI system. Thiswill speed up the process o clearing goods through the border as it will reduce the delayresulting rom the completion and approval o documentation. An integrated EDI system willalso acilitate inormation exchange between border posts.

Longer border post operating hoursOne o the primary actors contributing to the border-post delays is the limited operatinghours o some o the posts. A simple remedy to this problem is to keep key border postsoperational or 4 hours a day, seven days a week. The increased operating hours will

simpliy the transportation planning process o all companies that provide cross-borderlogistics services. Additional operating hours will also negate time delays resulting romdrivers arriving at the post either too early or too late. Furthermore, additional operatinghours will lessen the unbalanced strain on the limited border-post resources.

Better trained border post personnelBetter trained border-post personnel will result in an increase in productivity, which will inturn decrease waiting time. Additional training will also be required i an integrated EDIsystem is implemented.

Improved communication between key role playersBetter communication between customs, exporters and transporting companies willacilitate the transportation planning process and decrease unnecessary delays dueto misunderstandings. An integrated EDI system will provide an opportunity to improvecommunication between customs and transportation companies.

SouTh AfrICAS PoTeNTIAL AS A reGIoNAL LoGISTICShuB

Botha M

IntroductionTrade relations with other countries are pivotal or the economic development o SouthArica, especially with globalisation o the world economy. South Aricas international tradedecit (imports exceed exports) necessitates export promotion and development, and itis hoped that the implementation o an export strategy developed by the dti in 006will achieve this. The aim o the strategy is to ensure that South Arican exports maintaintheir market share in traditional markets, and substantially increase their market share inprioritised, new high-growth markets through aggressive marketing and a larger exporter


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community.40 The establishment o South Arica as a regional logistics hub can contributesignicantly to this aim.

South Aricas international trade statistics

Table 5 shows the top ve countries that South Arica exports to and imports rom. Thesecountries were the same or both exports and imports in 007, only the order diers. Anelement o concern is that none o the top ve countries is a member o SADC or situatedclose to South Arica. This automatically increases logistical costs, increases supply chaincomplexity and promotes transportation complications.

Table 5: Top fve South Arican export and import countries in 200741

Country ExportR000 000

% o totalexports

ImportR000 000

% o total imports

United States 5 755 0,68% 43 55 7,7%

Japan 50 400 0,0% 36 978 6,6%

Germany 35 357 7,5% 65 6 ,73%

United Kingdom 34 60 7,0% 7 88 4,88%

China 8 05 5,67% 60 98 0,78%

Top 5 Total 201 147 40,71% 233 340 41,72%

The top 0 trading partners in terms o trade balance did include eight SADC countries or007, two o them in the top six as shown in Table 6. The top trading partners are determinedby the positive balance between the exports and imports involving South Arica and anothercountry. Globalisation has clearly beneted South Arica, especially in international trade.South Aricas export market showed an annual growth rate o 4,7% and the import marketincreased by % rom 006 to 007 clear indicators o a growing economy.

40 About SA: Economy. South Arican government.

http://www.ino.gov.za/aboutsa/economy.htm#SA_positioning_integration. Accessed /04/08.

4 Department o Trade and Industry. Trade statistics 007.

http://www.thedti.gov.za/econdb/raportt/rapcoun.html. Accessed /04/08.


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Table 6: Top 20 South Arican trading partners or 200742

Rank Country

Trade

BalanceR000 000 Rank Country

Trade

BalanceR000 000

Japan 3 4 DRC 4 383

The Netherlands 0 863 Israel 85

3 United States 9 599 3 Zimbabwe 465

4 Zambia 7 594 4 Tanzania 37

5 United Kingdom 7 33 5 Ghana 44

6 Mozambique 6 68 6 Hong Kong 84

7 Switzerland 5 707 7 Malawi 5

8 Belgium 5 499 8 Mauritius 484

9 Spain 5 6 9 Morocco 438

0 Kenya 4 395 0 Madagascar 9

South Arica and the SADC regionEven though South Arica is located on the southern tip o Arica, it serves as the continentsleading commercial and economic hub and plays a leading role in the development and

growth o SADC, which was created in 99 and now consists o 4 member states.

Table 7 shows the SADC countries with 006 population and GDP gures.

4 Department o Trade and Industry. Trade statistics 007.

http://www.thedti.gov.za/econdb/raportt/rapcoun.html. Accessed /04/08.


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Table 7: SADC members with population and GDP fgures or 200643

Country Population 000 000 GDP in US$ billion

Angola 6,4 44Botswana ,8 0,3

DRC 59,3 8,5

Lesotho ,8 ,5

Madagascar 9, 5,5

Malawi 3, ,

Mauritius ,3 6,4

Mozambique 0, 7,6

Namibia , 6,4

South Arica 47,4 / 9,% 55 / 67,34%

Swaziland , ,6

Tanzania 39,5 ,8

Zambia ,9 0,9

Zimbabwe 3, 5

SADC 248,1 378,7

The South Arican economy is the largest one in SADC and its GDP comprises 67% o theGDP o the region. South Arica has a population o 47,4 million (second in size only to theDemocratic Republic o Congo DRC), which provides access to more consumers, resultingin more consumer buying power than most countries in southern Arica. The

sol final csir il

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