6

Who?
PROFILE OF DEPARTMENT OF LOGISTICS, STELLENBOSCH UNIVERSITY

The Department of Logistics was founded in 1960. It is the oldest tertiary

academic department in South Africa to offer education and training in
Transportation and Logistics. The Department is home to the Logistics
Management, Quantitative Management, Operations Research and Transport
Economics focus areas.

These focus areas can be elected in any of the Faculty of Economic and
Management Sciences four undergraduate programs. Operations Research
can also be elected as a stream of the B.Sc. (Mathematical Sciences) degree.

CONTACT DETAILS:
Stellenbosch University, Department of Logistics,
Private Bag X1, Matieland, 7602
Email: annekedb@sun.ac.za Tel: 021 808 9261
www.sun.ac.za/logistics

CONTRIBUTORS:
Professor Jan Havenga, Zane Simpson, David King,
Anneke de Bod and Max Braun

The latest edition of the Logistics Barometer and its accompanying figures
can be downloaded at www.sun.ac.za/logisticsbarometer

This publication should be cited as:

Havenga, J.H.; Simpson, Z.P., King, D. de Bod, A. and Braun, M. 2016. Logistics
Barometer South Africa 2016. Stellenbosch University

ISBN number: 978-0-620-73253-6

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Why?
The second edition of the South African Logistics Barometer continues the
macrologistics research work published in the CSIR State of Logistics SurveyTM
for South Africa (discontinued in 2014) and the first Logistics Barometer
published in 2015. It fits into a growing global body of work to measure
national level logistics costs and links to the World Bank Trade Facilitation
and Logistics Global Knowledge Network.
The Logistics Barometer has, as its backbone, more than 20 years of research
into freight volumes and freight flows in South Africa. The logistics cost
calculations have been refined over the past 13 years to make it one of the
most robust and reliable quantitative reports on logistics costs globally.
The source data for the logistics cost measurements originate from the
Transnet Freight Demand Model (FDM), GAIN Groups National Freight Flow
Model (NFFM), StatsSAs Annual Financial Statistics Survey (AFS) and StatsSAs
Quarterly employment statistics (QES).

The Logistics Barometer provides a numerical analysis of logistics costs trends 13.6% 13.6%
13.5%
in South Africa supported by insights from logistics industry specialists and
academia. The usefulness of calculating annual data lies in the fact that trends 12.7%
12.6%
12.4%
can be identified and applied by both operational and strategic analysts in
the public and private sector for future planning, policy development and 11.8% 11.7% 11.7%
11.8%

investment objectives on a macroeconomic level. The calculations in this 11.4%

11.1%
11.2%

edition are up to 2014, with an estimate for the 2015 year (2015e), and a
11.0%
forecast for the 2016 year (2016f).
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016f

At 11.2% in 2014, South Africas logistics costs as percentage of GDP Figure 2: Long-term view of South Africas logistics costs as percentage of GDP
deteriorated slightly compared to 2013, and this trend is expected to continue
(refer Figure 1). The ratio generally improved up to 2011, but has
been on an upward trend since then (refer Figure 2).
4
South Africa is still one of only three countries who 201
2%
consistently measures and publishes logistics 11. 20
13 11.3 11.4 11.5 11
1
costs on a national level, the other two being % . 2 11.6
1 11 .

5e
20

the U.S.A. and Finland.

.

7%
11

1. 1

20 %
1.
1

11
16f
00

.8
11.
11.

8
11.9
10.9

Figure 1: South Africas logistics costs as percentage of

GDP is rising

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Where?
South Africas gross domestic product (GDP) totalled R4 014 billion in 20151
and although it has claimed back the title of Africas biggest economy from
Nigeria due to exchange rate fluctuations, both economies look to be on the
brink of recession mostly due to the decline in export commodity prices.
Average GDP growth for South Africa equalled 2.1% between 2011 and 2015,
but the International Monetary Fund (IMF) adjusted the growth forecast for
2016 to only 0.1%, recovering to 1.0% in 2017. Nigerias economy is forecasted
to retract by -1.8% in 2016, recovering to 1.1% in 20172. Both countries are
well below the forecasted world output growth of 3.1% in 2016 and 3.4% in
20172 (refer Figure 3).
The Logistics Performance Index (LPI) provides a comprehensive measure of
the efficiency of international supply chains3. South Africa was ranked 20th
out of 160 countries in 2016 and is classified as a logistics over-performer
when compared to its peers. When looking at the performance over the
aggregated LPI (2010-2016) (refer Figure 4), South Africa is only one of two
countries in the top 30 that are not classified as high-income countries, the
other being Malaysia.
9
25
26
42

54
Average GDP Growth (2011-2015)

7.8% 92
98
6.7%
Russia Nigeria Brazil India China South Africa USA

4.7%
Figure 4: LPI rank (over four editions 2010, 2012, 2014, 2016)3
World Average = 3.5%

2.0% 2.1%
1.2%
1.0%

1 StatsSA, 2016. Statistical release P0441: Gross domestic product, first quarter 2016.
Brazil Russia USA South Africa Nigeria India China Pretoria, South Africa.
2 IMF, 2016. World Economic Outlook Update, July 2016. Washington, DC. USA.
3 World Bank, 2016. Connecting to Compete 2016. Washington, DC. USA.
Figure 3: Average GDP growth (2011-2015) http://lpi.worldbank.org/

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When?
60% 600
55.6% 56.0%
52.6% 52.8% 53.6%
52.1% 51.5%
50.4% 50.5%
49.3% 49.1% 48.6%
50% 47.8% 47.9% 500
499
470

40% 429 400

393
379

Rand billion
332
30% 319 313 300
297
South Africas logistics costs totalled 287

R429 billion in 2014 and equated to

232
11.2% of GDP or 51.5% of transportable 20% 200
203
GDP (refer Figure 5). Logistics costs 180 188
increased by 9.2% between 2013 and
2014, after showing modest growth 10% 13.6% 12.7% 13.6% 13.5% 100
11.8%
of only 3.5% in the previous period. 12.4%
12.6%
11.4% 11.0% 11.7% 11.1%
11.2% 11.7%
11.8%
It is estimated to have grown by 9.5%
during 2015 and is forecasted to grow 0% 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016f
by 6.3% in 2016, in line with current
inflation estimates. Logistics costs % of GDP % of transportable GDP

Figure 5: South Africas logistics costs trend

The phenomenon from 2012 to 2013
of logistics costs rising faster than 116 Figure 6: Logistics costs in real 2010 terms
the underlying transport activity
114
(measured in tonne-km) was reversed
in 2014 with a relatively larger growth in 112
tonne-km than real costs (refer Figure
(Index 2010=100)

110
6). The growth of low-value transport
relative to other categories could have 108

contributed to this phenomenon. 106

104

102

100
2010 2011 2012 2013 2014
Logistics costs at 2010 prices Tonne-km

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 How does
South Africa compare to
other countries?
Over the past number of years more countries have attempted to measure
logistics costs, some only as a once-off exercise. It is worthwhile therefore
to provide a comparison between these countries although various ways 20 20
of measuring exist and different economic and structural factors influence
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logistics costs (refer Figure 7).
15 15

Logistics costs as a % of GDP

Developed countries would have lower logistics costs when expressed as a
13
percentage of GDP, the outlier being Finland, which has a low-outsourcing
11.2 11.4
environment and a long cash-to-cash cycle. The developing countries also each
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face their own challenges. India is densely populated with high congestion 8.6 8.6
and inadequate infrastructure, infrastructure also being the biggest challenge 7.7 7.9
7.3
for efficient logistics in all the BRICS countries. Russia has long transport 6.1
5
distances to contend with, Brazil has port operational challenges and China
has one of the highest regulated logistics industries in the world.
0
South Africas infrastructure challenges in a BRICS context are therefore not Denmark Sweden Norway USA Australia Germany South Africa Finland India Brazil China Russia

unique and performance on LPI measurements not poor. But the country is
far away from trading partners, has long inland transport distances, relies Figure 7: Comparing logistics costs for selected countries
heavily on unbeneficiated exports, and has a much smaller economy than the
other BRICS countries, which is also growing slower than most. The country
is therefore vulnerable to external shocks and logistics cost reduction needs
to be a priority.

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Trade supply
chains
The 13 years of measuring South Africas logistics costs included
measurements of international trade logistics costs within South
Africa, i.e. up to the quay wall landside for exports and from the
quay wall landside for imports. Port costs and ocean carrier costs
International trade logistics
to foreign ports were excluded and it was therefore always a costs for South Africa
domestic cost measurement. The work was recently expanded to (Rand billions, 2014)
include these aspects.

The impact of international trade logistics costs (ITLC) on national logistics

costs is depicted in Figure 86. The countrys total ITLC (up to and from foreign
port gates) is R242 billion or 11.7% of trade GDP (i.e. the value of all traded
commodities, amounting to R2 061 billion). Only 9.5% (R23.1bn) of these
ITLC are paid directly to ports (port authority and port terminal charges).

This means that direct port costs are only 1.1% of the value of trade7. As
Port charges 23.1 (10%)
a direct result of South Africas spatial challenges, the highest portion of
these costs is the inland logistics, being 41.8% (R101.1bn). That is because Documentation charges 16.8 (7%)
our centres of production and consumption are far from ports. Given South Ship standing costs 5.2 (2%)
Africas distance from global markets, the contribution of ocean carrier costs Other 0.77 (0%)
is also significant, at 39.2% (R94.9bn). Inland logistics costs 101.1 (42%)
Maritime transport 94.9 (39%)
6 Havenga, J., et al., International trade logistics costs in South Africa: Informing the port
reform agenda, Research in Transportation Business & Management (2016), http://dx.doi.
org/10.1016/j.rtbm.2016.08.006
7 For the purposes of this evaluation maritime transport was included because it is believed Figure 8: International trade logistics costs for South Africa (Rand billions, 2014)
that, on a nation state level, policy and infrastructure could affect this cost component. But
even with this removed, ITLC equal 7.1% of trade GDP, of which 15.7% is paid to the port,
while port charges equal 1.1% of the total value of trade.

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 Total exports of 1 049 691 TEUs in 2014
Total imports of 1 354 358 TEUSs in 2014

North America

Europe While 89% of South Africas

59 300 imports and exports is via bulk
Middle East (liquid, break and dry bulk),
91
Asia 2.4 million TEUs (containerised
Africa
freight) were handled in 2014.
98
463 These containers are mostly
378 for the trade route to Asia,
followed by the trade route
40 to Europe. A diagram showing
South America 70 21
Australia the major container trade
775 routes for South Africa is given
12 13
55 16 in Figure 9.
Thousand TEUs
Values: 2014 calendar year
2.4m
Figure 9: Trade flows of South African containers in 2014 TEU
The costs, up to the point when ships leave port gates or arrive in front of Only 3% is because trucks are delayed before and in the port and just under
port gates, amount to close to R46bn (port charges, documentation charges a quarter (22.8%) because ships are delayed in front of and in the port. A
and ship standing costs) (Other is composed of truck standing costs and very small cost is also incurred for the financing of delayed inventory (ICC).
inventory carrying costs, which is negligible). About half (50.3%, R23.1bn) of Significantly though, these other port-related charges are more or less equal
these costs are paid to the port authority and terminal operators. The rest is to the direct port charges. More significant is the fact that most of these
additional costs caused by documentation and additional transport costs due charges are documentation charges or relates to what the World Bank
to the delay of ships in front of and in the port. Of the R22.8 billion (R16.8bn + perceives as the ease of doing business. (Please note that in this research,
R0.77bn + R5.2bn) remaining additional costs, around three quarters (73.7%) delay also includes normal turnaround time (i.e. it is impossible to turn
are documentation charges. trucks and ships around in no time), but it can always be improved. The data
indicates the baseline number from which it can be improved.)
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 244 Transport costs are the dominant contributor towards Transport costs showed a moderate increase of 3.7% between 2013 and
logistics costs, amounting to 57% of the total in 2014, 2014 (refer Figure 11), still driven by efficiency gains from logistics service
followed by inventory carrying costs (15.2%), providers.
warehousing (14.6%) and management &
administration costs (13.5%) as per figure 8. The trade-off was that inventory carrying costs increased by 21.8% between
2013 and 2014. The increase in the prime interest rate from 9.0% at the start
62 The contribution of transport costs of 2014 to 9.25% at year-end, compared to 8.5% in 2013, contributed to
Total logistics costs of R429bn
to total logistics costs is expected the higher inventory carrying costs, but external factors such as economic
Transport
to decline to 55% in 2016 mainly uncertainty and a volatile currency have led to increased inventory levels and
Warehousing
65 due to lower fuel prices (fuel costs are forecasted to have the same effect in 2016.
Inventory Carrying made up 40% of road transport
Management & Admin costs in 2014). This is the lowest On the back of these higher inventory levels, warehousing costs (which
58 contribution level it has reached include storage and handling costs) increased by 12.1% between 2013 and
since 2010. 2014, following on nominal growth the previous two years, and is estimated
to have grown above inflation in 2015.
Figure 10: 2014 Logistics cost elements
(Rand billions) R66bn
R64bn +3.1% 13%
14%
R55bn +10.2% R86bn
13% R71bn 17%
R49bn +18.5% +20.5%
R47bn +3.6% 15%
12% R65bn +9.5%
12%
+18.4% R48bn R53bn +21.8% 15% R71bn
R40bn R67bn
R39bn +1.7% 12% 13% +10.6% 14% +5.7% 14%
+7.5% 14%
12% R45bn +8.0% R56bn +12.1% R62bn
R55bn
R48bn -7.4% 13% +0.5% 14% 15%
15%
15% R55bn +1.4%
R50bn +10.0% 16%
16%

R176bn R193bn R229bn R235bn R244bn R268bn R277bn

56% +9.9% 58% +18.4% 60% +2.7% 60% +3.7% 57% +9.9% 57% +3.4% 55%

2010 2011 2012 2013 2014 2015eE 2016f

Transport Warehousing Inventory carrying Management and administration

Figure 11: Trends in South Africas logistics costs stack elements

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 Road transport contributed 83% to transport costs in 2014, rail tariffs contributed 15%
and pipeline tariffs contributed 2%.

Fuel
Drivers Wages
Maintenance and repair
Depreciation
Cost of Capital
Insurance
2014
Tyres
2013
Toll Fees
Licences

Pipeline tariffs
Rail tariffs
0 10 20 30 40 50 60 70 80 90
Rand billion

Figure 12: Cost contribution per transport mode (2014)

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What? Figure 14: Agricultural freight flow volume for 2014

Demand for land freight transport reached 848 million tonnes in 2014, an
increase of 8.4% from 2013. It is estimated that freight volumes increased
to 865m tonnes in 2015 and is set to decrease to 856m tonnes by the end of
2016, mainly due to lower bulk mining exports.

The primary economy (agriculture and mining) was responsible for 76% of
total volume but only contributed 44% to the transportable GDP. In contrast,
the secondary (manufacturing) sector made up the remaining 24% of volume,
but added 56% value to the transportable economy (refer Figure 13). Maps
of the freight volume movements for agriculture, mining and manufacturing Figure 15: Mining freight flow volume for 2014
are shown in Figure 14 to Figure 16. Agricultural freight volumes are low
compared to the other sectors (in line with its GDP contribution); mining
dominates, consisting mostly of the dedicated export lines of coal (through
Richards Bay) and iron ore (through Saldanha).

Manufactured commodities are highly densified along the countrys two key
general freight corridors, namely Gauteng-Cape Town and Gauteng-Durban.
on

Vo

Figure 16: Manufacturing freight flow volume for 2014

ble GDP contributi

lum

10% 10%
e contributi on

R83bn 85mt

34%
R286bn

24% 66%
rta

201mt 562mt
sp o n
Tra

56%
R463bn Figure 13: Value and volume
contribution to the transportable
economy in 2014
Agriculture Mining Manufacturing
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The 848 million tons land freight flows in 2014 translated into 379 billion
tonne-km, an increase of 4.9% from 2013 (refer Figure 17).

450 140 130.9bn tonne-km

Road
400 120 Rail
21%
7.9 8.2
350 7.8 8.3
73 70
72 70 100
300
77.8bn tonne-km

Tonne-km (billions)
250 80
1%
Tonne-km (bn)

139 140 63.2bn tonne-km

130 121 Pipeline
200 Road distribution 60 20%
79%
Rail
150
Road line-haul
40
100 99%
158 164
151 165 80%
50 20

0
0
2013 2014 2015e 2016f Corridor
Corridor Metropolitan Rural
Rural
Metropolitan

Figure 17: Tonne-km per mode (South Africa 2014) Figure 18: Typological division of general freight transport (South Africa 2014)

If the dedicated ring-fenced transport systems (i.e. the rail export lines,
pipelines and conveyer belts) that totalled 107.5 billion tonne-km in 2014
are removed, 272 billion tonne-km remain that is classified as general
freight. Road freight comprises 85% and rail freight 15% of this total. The
general freight system can be further classified into three typologies, corridor,
metropolitan and rural transport, as delineated in Figure 18.
Rail increased the export of primary commodities primarily, as this is its natural
market, but a small portion in 2014 was still transported by road. It is expected
that, with the increase of rail capacity and a slump in commodity prices, the
transport of primary commodities on road should decrease markedly. Rail
has also been able to increase corridor market share marginally in 2014.

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How?
What drives South Africas good performance in the logistics and supply This will contribute to South Africas competitiveness and performance in the
chain arena as measured by the LPI, leading to a better cost position than global supply chain, with the added benefit of fuelling economic growth and
BRICS peers? social development in the country.

To function well in supply chain management, as in any other industry,
necessary and suitable skills (soft infrastructure) are required. Theoretical
skills can be obtained through appropriate education, although funding
is often a challenge, while experience and practice cultivate these skills to
contribute to the triple bottom-line in a complex and multidimensional value
chain environment8.
In the past, South African supply chain managers and executives have had
the required experience and know-how that enabled the industry to perform
well in the global arena. Knowledge and understanding of key operational
elements and the ability to adapt to an ever-changing environment has been
a key strength of successful logistics and supply chain companies in South
Africa for decades.
On the hard infrastructure side, South Africa faces challenges, but so do other
countries. The countrys position is however deemed to be more vulnerable
to external shocks and cost impacts, due to its size and distance from markets.
As far as cost reductions in general are concerned, on the demand-side we
need to beneficiate more. This is a central planning fundamental for job
creation and growth, but also for logistics costs as beneficiation reduces
logistics costs relative to GDP. We should also, as a country, spend less on
imported goods, with the same effect. On the supply-side, the modal shift
requirement is now more important than ever, supported by more efficient
logistics, trucks and driving, i.e. a wider adoption of RTMS.

The looming threat is that the future South African supply chain generation
is at risk of losing this advantage due to sub-standard basic education,
underperforming higher education, and lack of practical knowledge- and
skills transfer in the work environment.

Although there are some very commendable initiatives from major logistics
service providers in South Africa relating to training and skills development, a
renewed focus on and drive within these areas are necessary to support the
sustainability of the industry, and to facilitate continued human resources
growth, development and skills transfer.
8 Hunter, D. 2015. Supply chain orchestration people are needed to play the music http://www.logisticsnews.
co.za/Article.aspx?ID=133. [Accessed: September 2016]

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