South Africa’s logistics systems are broken

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The International Fresh Produce Association (IFPA) recently hosted its Fresh Solutions event in the Western Cape at Cavalli Estate near Somerset West. During this event, distinguished speakers delved into global market trends and their implications for South African enterprises. They offered valuable perspectives and innovative strategies to aid members in their strategic planning and decision-making processes.

At the event, Mike Walwyn, director of the South African Association of Freight Forwarders (SAAFF), said it is common knowledge that South Africa’s logistics systems are broken. It urgently needs fixing.

“Transnet is really what we are talking about, because everything you do in terms of moving cargo in and out of the country, involves Transnet at some point,” he said.

“Transnet is the state-owned enterprise that owns and operates freight rail and ports. The enterprise consists of three companies that have an impact on us. That is the railway, the terminal operating company, and the port authority. “All three companies are underperforming.”

Walwyn indicated that port productivity is at an all-time low, despite fleet improvement. Weather disruptions are insignificant if productivity improves. Downtime due to breakdowns is unacceptable. Port terminals are unable to operate at optimal efficiency due to inadequate maintenance and the failure to replace equipment that has reached the end of its operational lifespan. “This is the problem now, but we don’t have the money to fix it.”

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Logistics: A crisis larger than energy

He said that South Africa is a relatively small country (less than 0,5% of global gross domestic product [GDP]) with an open economy. The country’s freight demand is high, and the country is highly dependent on a functional logistics network. “Our logistics cost is approximately 10,5% of the GDP. It is higher than in many developed countries, but still lower than in many emerging markets.”

Walwyn said the logistics crisis is arguably larger than the energy crisis. “We estimate that we lose around R1 billion a day. The rail underperformance alone constrained economic growth by 5,3% (2023) and the current port inefficiencies are costing the economy around R200 million in direct and indirect costs a day.”

No progress in ten years

The latest Transnet National Ports Authority figures indicate that Transnet handled 4,18 million 20-foot equivalent units (TEUs) in 2023. This figure mirrors the levels observed between 2008 and 2010. In the bulk space, Transnet managed 205 million tons of cargo in 2023, which aligns with the levels seen from 2011 to 2013. “We made no progress in more than ten years”, he said.

South Africa is facing deteriorating logistics competitiveness. The country’s mineral exports suffered losses of approximately R50 billion in 2021 and 2022 due to inadequate infrastructure capacity, resources and capabilities. The suboptimal performance of rail and port operations has driven low-quality service, high logistics costs and lengthy port waiting times. The lack of infrastructure hinders the growth of existing and new industries. Transnet’s budget constraints coupled with significant debt and wage bills, exacerbate this challenge.

These challenges will require targeted action. We talked about key short-term initiatives that can drive meaningful progress and lay the groundwork for long-term initiatives. In the long term, structural reforms will be critical to attract investment and enable competitiveness in the logistics sector.

  • Pieter le Roux from Wauko with Jane Strijdom, the International Fresh Produce Association’s (IFPA) country manager for South Africa, and Jaco Oosthuizen, chairman of the IFPA, RSA Group.
    Pieter le Roux from Wauko with Jane Strijdom, the International Fresh Produce Association’s (IFPA) country manager for South Africa, and Jaco Oosthuizen, chairperson of the IFPA, RSA Group.

Labour elephant in the room

According to Walwyn, the government must drive private sector participation, improve Transnet’s financial viability, and navigate the complex logistics landscape to enable solution implementation. The private sector has a key role to play to mobilise funding, provide expertise, and collaborate with government to reform the industry.

“We don’t need to privatise, but we do need partnerships. The elephant in the room is labour. The buy-in from labour for co-operation will be difficult because anything with the word private in, will be a red flag for labour.

Food waste has a heavy price tag

More than ten million tons of edible surplus food is lost or wasted every year while millions of vulnerable people are food insecure. In total the loss costs the South African economy R64 billion annually, said Andy du Plessis, managing director of FoodForward SA.

The loss and waste occur at all levels in the value chain: at farms/primary producers (8%), post-harvest handling and storage (19%), processing/manufacturing (49%) retail/wholesale (6%) and households/consumption (18%).

Du Plessis said FoodForward SA has connected the world of excess to a world of need by recovering edible surplus food from producers, manufacturers, and retailers for redistribution to communities in need.

Food loss and wastage are the third largest emitters of greenhouse gas (GHG) emissions. “By reducing food loss and waste, we reduce the negative impact on the environment and climate change. Timeously recovering edible surplus food can be used to address food insecurity and malnutrition at scale.”

Du Plessis mentioned that the recovery of surplus food across the food system is key to what they do. “Every single day we do not know what we will get. However, there are phone calls from role-players across the food system every day. They call us to come and fetch surplus food.”

Saving a nation one meal at a time

“In our recent financial year, we distributed 21 750 tons of food. This equates to 87 million meals at a cost of just R0,47 per meal. Nowhere in the world, you will achieve that economy of scale,” Du Plessis commented.

FoodForward SA supports 2 500 registered non-profit organisations. “We don’t just give food to people. Altogether 75% of the organisations that we provide food to focus on education, skills development, youth, women, orphans, and vulnerable children. The 2 500 organisations across the country collectively reach 920 000 vulnerable people daily.”

By recovering the surplus food, FoodForward SA saved 113 152 tons of GHG emissions, Du Plessis said.

Supporting people and the environment

As food insecurity and malnutrition surge at an alarming rate driven by the escalating cost of living, we face critical challenges. Altogether 27% of children under the age of five years suffer from malnutrition in South Africa, a country that produces enough food to sustain every citizen.

With the commitment of the various food value chain representatives, good-quality surplus food can be diverted, recovered, and redistributed to feed all hungry South Africans, and reduce the impact of food loss and waste on the environment.

“Both challenges are solvable if we connect the dots. If we could collect just 50% of the ten million tons of food that is lost or wasted annually, we can give every single citizen a meal to keep them healthy until they can find a job,” Du Plessis said. – Hugo Lochner, Plaas Media

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