South Africa’s rising logistics costs: An uncertain future

Abstract

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