Pictured: Dr Dinesh Kumar, Associate Director, Head of Supply Chain & Procurement,Management Consulting for KPMG

Supply chains are becoming global and complex. The logistics, especially the transport functions, are equally becoming convoluted. The logistics, being one of the biggest contributors of a nation’s GDP (12.7% percent in South Africa) in developing countries and its management, are vital for a growing economy.

The International Monetary Fund (IMF) recognised the BRICS (Brazil, Russia, India, China and South Africa) nations as the only nations to maintain growth during the financial crisis of 2008. The intra-trade between the BRICS nations has made its mark in global trade. South Africa also enjoys successful trade with the SADC countries. With these potential opportunities for trade, we need to scrutinise the effectiveness and efficiency of the South African logistics and transport sector.

In 2012, the World Bank ranked South Africa 24th out of 150 countries on the international logistics competitiveness index, which is much higher than the other BRICS nations (with China being the closest at 30th place). While this is positive news, when the domestic logistics costs were compared, South Africa was ranked 124th – the lowest among the BRICS nations. Two major causes of such high costs were non-existent multi-modal transport setup and fragmented transport industry in terms of geographic footprint.

The function of the transport sector to tackle such diversified requirements, locally and regionally in Southern Africa, is imperative. The most frequent mode of transport used is road (between 80 and 90% on average in sub-Saharan Africa), thereby creating additional pressure on the economy to invest further in such infrastructure.

Road density is low and is an indicator of connectivity within a country. Typical road density is just 9.9 km/1 000 km² for low-income group countries and more than 52 km/1 000 km² for middle-income countries. This affects the state of the roads, as more vehicles are forced to use the same roads, with no alternative routes available. The deteriorating road quality in South Africa can have a negative effect on logistics activities with an emphasis on vehicle operating costs.

Road density and logistical performance are relatively low in sub-Saharan Africa, contributing to the higher cost of exporting goods from sub-Saharan African countries compared to other countries – US$1 974 (R17 371) per container, compared to a median estimate of US$732 for Asian countries. Lead time in comparison is 30 days for South Africa and 13 days on average for developed nations.

Rail, on the other hand, is not geared to support local and regional economic growth. Rail structures are more than 100 years old and are undermaintained. This is not adequate when competing against the modern road networks that are increasingly being built in major corridors. When compared with other BRICS nations, South Africa stands the lowest in the usage of the rail networks.

The other two modes of transport – ports and airports – are not adding to the success of the economy. African ports are characterised by old equipment, which negatively influences the cargo processing time. Cargo transhipment sometimes adds to increased delivery times because it lengthens transit time and adds to inventory costs.

Countries of sub-Saharan Africa are underendowed with passenger and freight terminals, airports and runways. The airline industry, particularly in Africa, is over-taxed, making it difficult to establish cheaper fares and constraining the development of the low-cost airline phenomena. Most of the airports are not suited to cater to the new generation aircrafts, which creates constraints in global and regional freight.

South Africa has to groom the local and the regional transport industry to deal with these challenges. The technology barriers and the skills shortage will add more to its worries. South Africa has to ascertain  the short and the long term goals and the journey ahead quickly from the dynamics of such industry within BRICS nations and embrace improvement guidelines in a short time frame before losing its marked stand in global trade.