By Jessie Taylor
Transport and Logistics in focus
South Africa has an expansive network of roads, rail, shipping and air transportation – but this industry is responsible for enabling economic activity in the country’s most productive sectors.
South Africa’s transport and logistics industry contributes around R270-billion to the country’s GDP and offers an essential service to other sectors identified as critical drivers of economic growth in the country’s Economic Reconstruction and Recovery Plan (ERRP), especially mining, agriculture and manufacturing.
Mining ventures require safe and reliable transport of equipment and mineral reserves. At the same time, the agriculture industry relies on efficient transportation to move crops from farms to their end destinations locally and internationally. The manufacturing sector’s raw materials and finished products are also transported along South Africa’s networks, making it essential for the sector’s growth.
And on top of being essential for the success of so many economic drivers, the transport and logistics sector is also a significant employer, creating around 375 000 jobs.
Showing strong recovery
South Africa’s transport sector has been affected by the Covid-19 regulations and the economic downturn. Initial restriction on the sale of retail goods had an immediate effect on trucking companies, reducing vehicle movement and necessitating retrenchments at some companies. Various alcohol bans have also played a role in reducing demand for transport. Last year, the overall industry contraction was estimated at around 67.9%.
The rail and shipping sectors have been similarly impacted, especially with initial closures of borders for all but essential goods. During the strictest lockdown level, trade to and from South Africa dropped by 3%. Port operations reduced by around 40%, with rail operations scaling down to a similar level.
But not all enterprises were negatively affected. An increase in online retail saw the need for goods to be transported, and at-home delivery services have seen increased demand since the start of the pandemic.
Despite the economic downturn, the transport and communication industry showed the largest recovery in the second quarter, according to Statistics SA. The sector recorded the highest growth rates of 6.9%, between April and June, and made the largest contribution to GDP growth in the second quarter of 0.5 percentage points.
With South Africa’s agricultural sector showing strong growth over the last few months, despite the economic downturn caused by the pandemic, the logistics and transport industry will play a key role in supporting the sector’s growth. This sector requires road and rail transport, as well as port access to facilitate international shipping.
South Africa’s agricultural exports are worth an estimated R145.5-billion.
The agricultural sector posted positive growth of 6.2% and contributed 0.2 percentage points to GDP growth. With the performance of the agricultural sector, it’s no surprise the transport sector has seen increased traffic.
Enabling economic activity
The agricultural industry requires transport and logistical support from the farm gate to shipping ports. This was highlighted even more during the last 18 months when the pandemic disrupted global shipping lines, container ship shortages, and specific industries’ closures during lockdown regulations.
As the government’s plans to grow the agriculture and agro-processing sectors gain momentum, the increased production is expected to be exported to international markets – and this will require increased capacity across the transport network.
An efficient logistics sector is crucial for export-focused sub sectors such as the fruit, wine and grain industries. Around 80% of agricultural commodities – such as maize, wheat and soybeans – are transported via road, and increased production of these crops will lead to a great demand for road transport. Reducing this reliance on road transport will require additional investment into rail infrastructure. South African ports will need to be equipped to meet the demands of the increased export traffic.
In addition, South Africa’s network of rail lines and roads serve as an essential link to rural areas. Poverty in rural areas is often driven by a lack of access to essential services and goods. Ensuring good transport networks to rural areas can reduce the cost of goods, improve livelihoods, and encourage economic growth.
Investing in transport
The transport and logistics industry comprises several arms – from roads to rail, shipping to air transport. An efficient transport and logistics sector is essential to economic growth and remains a focus for national government policymakers.
This is why infrastructure rollout is at the heart of the ERRP. Ensuring a robust and efficient rail, road, air and shipping network is key to maintaining economic activity.
A critical part of the ERRP is implementing structural reforms to ensure that ports are run efficiently and good rail infrastructure is rolled out. Several vital investments have been made into South African ports recently, including a commitment to a R100 billion infrastructure development project to return Durban port to its former position as the number one port on the African continent.
The investment will go a long way in uplifting the perception of South Africa’s ports. The country recently scored low on the World Bank and IHS Markit’s Comparable Assessment of Container Port Performance Index, with Cape Town, Gqeberha, Durban and Ngqura at the bottom of a list of 351 ports.
The transport industry is essential to the functioning of the economy, but it also bears the brunt of any changes in economic activity. While the pandemic and resulting lockdown restrictions initially saw the logistics and transport sector contracting, it has shown encouraging signs of recovery.
This recovery creates employment, enables economic activity, and speaks to increased activity levels in sectors identified in the government’s ERRP.
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