Sector Overview - Road Freight

Driving South Africa's Logistics Industry

By Shumirai Chimombe

The road freight sector remains the backbone of national logistics operations and currently accounts for 83.6% of all freight payload in South Africa. Road freight recovered further in May 2024, the third consecutive positive monthly growth rate following a downward trend that lasted almost a year as indicated by the Ctrack Transport and Freight Index

(Ctrack TFI). The sector increased by 2.7% on a monthly basis in May against 4.5% in April and is up a notable 8.6% on a quarterly basis.

The sector continues to benefit from the ongoing underperformance of the rail industry. Stats SA recorded that rail freight payloads decreased in 2022 and picked up in 2023, while that of road freight increased between 2021 and 2023.

The payload transported on rail increased by 2.7% to 160.3 million tons in 2023 from 156.1 million tons in 2022, while that of roads increased by 1.2% to 862.5 million tons in 2023 from 852.6 million tons in 2022. The proportion of payload transported on road stood at about 65%.

The Freight Transport by Road Industry in South Africa 2023 report by Research and Markets gives a comprehensive overview of the road freight sector, highlighting the strengths, weaknesses, opportunities, threats and outlook for the future.

Some Key Points: Strengths

• Well supported by information technology and innovative technologies for logistics management.

• Collaborative and mutually-beneficial industry partnerships streamline the supply chain process.

• Flexible planning of routes or intermediate stops.

• Globally-competitive multinational companies provide total supply chain service

• It benefits other modes of transport via water, air or rail, as they require additional road transport to get the goods from the port, airport or train station to the destination or departure site.

• No other means of transport has access to a comparable infrastructure, and the range and flexibility of road freight offers almost unlimited possibilities for getting goods from one place to another.

• Not dependent on logistical hubs such as ports, airports, or train stations.

• Road freight, despite increasing costs, is still more efficient than rail freight due to existing infrastructure and comparatively low-cost transportation equipment.

• Road vehicles can be used for intermodal transport, where, when loaded, they can travel on ships or be transported by rail on special wagons preventing time-consuming reloading.

• The road freight industry is flexible and able to deliver goods door-to-door, and there is hardly any destination that is not accessible by road.

• The vast majority of goods moved in South Africa are transported by road.

Opportunities

• Challenges currently being faced by rail transport have resulted in increased market share for road freight operators.

• Government’s planned investment in infrastructure projects should strengthen the logistics and road transport corridors and improve access to ports. Government economic stimulus projects will increase mining, manufacturing and agricultural outputs requiring transportation.

• The rise in e-commerce will result in an increase in demand for warehousing and logistics hubs. Infrastructure projects and regional agreements will increase trade in goods requiring transportation, harmonise customs regulations, reduce border post delays and improve road infrastructure.

• Opportunities for owner-driver, franchise schemes or subcontracting and empowerment partnerships as B-BBEE partners with large companies.

• Growing trade, rapid advancements in technology and the rising role of e-commerce are expected to fuel the road freight transport market.

Challenges and Potential Solutions

Despite its dominance of the freight and logistics sector, road freight is faced by some challenges that significantly impact on the transportation companies, their employees and the economy.

1. Challenge: Ever-rising fuel prices

Potential Solution: Investing in fuel-efficient vehicles. This will also reduce emissions of gases that threaten the environment

2. Challenge: Deterioration or lack of proper infrastructure in some parts of the country

Potential Solution: Developing and maintaining roads as well as improving connectivity to other regions can help in overcoming several challenges including

• Reduced cost of vehicle maintenance

• Hijacking of trucks due to bad roads can be resolved

• Accidents caused by bad roads will be reduced

• Reduced time in moving cargo from one destination to another

• Reduced cost of cargo and driver insurance

3. Challenge: Lack of skilled professionals

Potential Solution: Investing in training and development to improve employees’ skill set

4. Challenge: Road safety concerns

Potential solution: Use cost-effective insurance to cover the loss caused accidents

Source: Dovetail Business Solutions

Freight Transportation (Income At Current Prices)

Seasonally Adjusted Payload For The Latest Three Months By Type Of Transport Up To July 2024

Seasonally adjusted payload decreased by 3,5% in the three months ended July 2024 compared with the previous three months. Road freight decreased by 4,8% (contributing -4,0 percentage points) while rail freight increased by 2,8% (contributing 0,5 of a percentage point)

Source: Stats SA statistical release - Land transport - July 2024

Seasonally Adjusted Freight Transportation (Income At Current Prices)

Source: Stats SA statistical release - Land transport - July 2024

Sources: Research and Markets/ Department of Transport / StatsSA /CTrack / Dovetail