, LECTURE 1 – INTRO TO OUTBOUND & SA ECONOMIC
GROWTH
Topic Summary
Business Logistics - Business logistics consists of materials management and
physical distribution. It involves the handling of inbound and
outbound flows, as well as reverse logistics and waste disposal.
Physical flow and information flow are two key aspects of
business logistics.
Peculiarities: - Fixed and mobile capital (infrastructure and transport means)
Transport System have limited alternative use and economies of scale. The
Elements transport industry can be characterized by
monopoly/competition and the choice between dedication/own
transport. Transport services have a complex structure, derived
demand, uneven distribution over time, and are non-storable.
Choice: Transport - The best choice of transport modes or combinations should
Modes consider speed, flexibility, reliability, reachability and
connectedness, ease of use, information, and image. Modes of
transport include deep-sea shipping, short-sea shipping, rail,
inland shipping, road, air, and pipeline.
South African - Economic activity in South Africa is skewed, with some inland
Economic Growth centres larger than those near ports. South Africa's
geographical position places it at a disadvantage in terms of
distance from its major trading partners. Most of South Africa's
manufactured goods are produced in Gauteng.
Overview of
South Africa's - Bulk commodities such as coal, iron ore, and manganese ore
Trade make up a significant portion of South Africa's exports. South
African maritime supply chains mainly carry bulk exports.
Containers are primarily transported inland by road, but rail
transport was historically the main carrier.
- Africa has the lowest GDP in the world, and its share of global
GDP in Africa and
merchandise exports is relatively low. Intra-regional trade in
Trade Challenges
Africa is also relatively low compared to other regions. South
Africa is one of the most developed and economically stable
countries in Africa.
, LECTURE 1 – INTRO TO OUTBOUND & SA ECONOMIC
GROWTH
Topic Summary
Strengthen
Relationships - Efficient corridors and infrastructure are required for
with Neighbours international trade in Africa. Landlocked countries face
geographical disadvantages and have limited access to coastal
areas. Strengthening relationships with neighbouring countries
can benefit South Africa's economy.
Benefits of Cross
Border
- Cross border movements bring foreign revenue, increased
Movements
profits, salaries, and access to goods at lower prices.
Governments benefit from increased tax revenue and can invest
in infrastructure. Reducing transport and logistics costs helps
SADC countries compete globally.
Strategies for
Transport and - Land transport demand in South Africa is increasing, with the
Logistics majority of growth captured by the road sector. Long-haul
road/rail relationships need to change to avoid road gridlock.
Establishing South Africa as a regional hub can improve
economic activity and competitiveness.
Road and Rail - Rail transport in South Africa has declined since road transport
Problems deregulation, despite potential advantages. Rail and road
freight costs are similar in South Africa, unlike international
settings. Transport productivity is hindered by congestion, lack
of infrastructure, and poor management.
Cross Border
- South Africa has numerous border posts, and the smooth
Agreements and
movement of freight faces obstacles such as inexperience, lack
Constraints
of equipment, and excessive paperwork. Lack of conformity,
complexity, delays, and insufficient information sharing between
firms are additional challenges.
, LECTURE 1 – INTRO TO OUTBOUND & SA ECONOMIC
GROWTH
Topic Summary
- Southern African states lack uniform transit procedures and
Public Initiatives
standards, which affects customs procedures, transit charges,
and Challenges
training, and documentation. Challenges include reliability,
speed and responsiveness for transport. Core structure issues
have been ignored. There is a need for intermodal corridors.
BUSINESS LOGISTICS
Business logistics = materials management + physical distribution
• Balanced system
• Heavy inbound
• Heavy outbound
• Reverse logistics
• Handling of returned goods:
o Waste disposal
o Distinguish: physical flow / information flow
PECULIARITIES: TRANSPORT SYSTEM ELEMENTS
• Fixed and mobile capital (infrastructure and transport means)
o Limited alternative use
o Economies of scale
o Monopoly/competition
o Dedication/own transport (or not …)
• Complex structure of transport services
• Derived demand
• Unevenly spread over time
• Non-storable
, CHOICE: TRANSPORT MODES
PORT MODES
Decide on the best choice of modes or a combination of these, structuring the
transport system is such a way that good logistics coordination takes place.
Criteria:
• Speed
• Flexibility
• Reliability
• Reachability and connectedness
• Ease of use
• Information
• Image
• Modes include:
o Deep sea shipping
o Short sea shipping
o Rail
o Inland shipping
o Road
o Air
o Pipeline
SOUTH AFRICAN ECONOMIC GROWTH
• South Africa’s economic activity is highly skewed
• Some economic centres found inland are bigger than those located near
ports
o Gauteng
o Mexico City, Mexico
• Contradicts theory
SOUTH AFRICAN ECONOMIC GROWTH (CONT’D)
• SA’s geographical position places it at a disadvantage in terms of
distance from its four largest partners:
o The UK, Europe, North America, and the Far East
,• Many regions against whom SA competes are on average closer to these
markets.
o Southeast Asia, Eastern Europe, South America, and Australia
• Majority of SA’s manufactured goods are produced in Gauteng
• Lack of well-thought-out freight logistics strategy
AN OVERVIEW OF SOUTH AFRICA’S TRADE
• Most bulk commodities exported from SA are made up of raw materials
o Coal, iron ore, manganese ore, and other ores and minerals
• Bulk exports represent the main cargo carried by South African maritime
supply chains in terms of volume
o Coal exports from South Africa's Richards Bay Coal Terminal (RBCT)
hit their lowest level since 1993 in 2022, at 50.35 million tonnes,
reflecting a lack of trains to carry coal from mines to port.
o RBCT, designed to only accept coal via rail, saw an average of 18
trains a day in 2022, against a capacity of 32 a day.
o Rail constraints and a two-week strike at Transnet resulted in low
levels of finished stock at the port of Saldanha, reducing export sales
predictions.
AN OVERVIEW OF SOUTH AFRICA’S TRADE (CONT’D)
• Bulk products from SA are usually sold F.O.B.
• Liner trades – world trend is for shipping companies to integrate port and
overland links into their services – in order for SA to compete
internationally, their container supply chains will need to follow the trend
• SA moved 4.497 M TEU’s, with Global 784 m TEU (in 2018) (0.57%)
• SA’s container trade:
o 38% imports
o 37% exports
o 25% transhipments
,AN OVERVIEW OF SOUTH AFRICA’S TRADE (CONT’D)
• At present, most containers are being transported inland in SA by road
transport
• Up until road transport was deregulated in 1988, rail transport was
protected from competition, and Transnet Freight Rail was the main
domestic carrier of containers
• Since deregulation, the modal split has changed in favor of road
transport
• Up until 1998, Transnet controlled all the containers from the ports, and
no other road transport operators were allowed to transport containers
within a defined radius
• Since 1998, there has been an open gates policy
SOUTH AFRICAN ECONOMY AND AFRICAN TRADE
• GDP in Africa is the lowest in the world
• Sub-Saharan Africa accounts for just 2% of world GDP but hosts 14% of
its population (and the population rate is growing rapidly - forecasted to
exceed 2 billion people by 2050)
• Africa's share of global merchandise exports remained virtually
unchanged between 1998 (1.9 percent) and 2018 (2.5 percent)
• Africa has relatively low intra-regional trade levels (17 percent),
compared to Europe (69 percent), Asia (59 percent), and North America
(31 percent); only the Middle East scores lower
• SA is one of the most developed and economically stable countries on
the African continent
• Trade plays an important role in reversing poverty
STRENGTHEN RELATIONSHIPS WITH NEIGHBOURS
• African railway network was built under different conditions than exist
today
o Historical and political incidents
• Africa contains 15 landlocked countries
• Distance to the sea ranges from
o 220km (Swaziland) to 1,735km (Chad)
,• Efficient corridors required for international trade
• Infrastructure
• High permissible axle loads for road transport
• The transport network outside South Africa operates below its original
design capacity
• Being landlocked leads to geographical disadvantages
• Low density and poor quality of infrastructure
o Landlocked countries
o Coastal countries
BENEFITS OF CROSS BORDER MOVEMENTS
• SA's economy can benefit from cross-border movements
• Brings foreign revenue into the country
o Providers - increased profit
o Workers - increased salary
o Customers - access to goods they would otherwise not be able to get
or goods at lower prices
o Government - benefits indirectly from increased tax revenue
generated by higher levels of economic activity or directly by using
some of the revenue earned to pay for other national objectives or
invest in essential infrastructure
• Striving to reduce transport and logistics costs for both economic and
political reasons
• A reduction in transport and logistics costs will allow SADC countries to
compete globally
STRATEGIES DEVELOPED WITH REGARDS TO
TRANSPORT AND LOGISTICS
• The demand for land transport in the SA economy is increasing
• The majority of growth is being captured by the road sector
• Change in the long-haul road/rail relationship to avoid road gridlock
• The lack of consideration for the infrastructure component of road costs
versus rail costs is highlighted by the exponential rise in SA's truck fleet
, ESTABLISH SA AS A REGIONAL HUB
• The efficient transportation of goods in international trade is vital for
the economic welfare of a country
• Efficient ports are directly proportional to national economic activity
• African ports have some of the highest logistics costs per TEU in the
world
• The situation is worsened by insufficient infrastructure
• With the exception of Mauritius, SA has the lowest costs in Africa and is
the most accessible via most trade routes
• Shipping trends indicate that shipping lines are striving to hub ports
ESTABLISH SA AS A REGIONAL HUB (CONT’D)
• Several countries and terminal operators in Sub-Saharan Africa are
developing hub capacity
o Developing south-south trades
o Changing trade route dynamics
o Growing regional volumes
• SA is relatively isolated from the major East/West trades
• It is an end port that serves the North/South trade route and acts as a
gateway for South Africa and Sub-Saharan Africa
• SA can play a major role in the container trade
• This could generate additional economic activity and employment
opportunities, stimulate growth, and increase national trade
competitiveness through economies of scale, scope, and density
• The Port of Coega (Ngqura) can accommodate ships up to 12,500 TEUs
• Expansions and upgrades at the Ports of Durban and Cape Town will
also help establish SA as a regional hub
ROAD AND RAIL PROBLEMS
• Since the deregulation of road transport, rail transport in SA has
experienced a serious decline in market share
• Rail transport is advantageous for longer distances, where economies
of scale can be realized
, • Rail transport is at a disadvantage compared to the door-to-door
service of road transport
• In international settings, long-haul rail costs are generally 70% of those
of road transport, whereas in South Africa, rail and road freight have
similar costs
• Transnet must overcome the perception that companies have of rail
transport in SA
• Service levels are still not meeting necessary levels of efficiency
• Rail transport for distances over 500km
• Freight is still primarily moving long distances to ports by road
transport
• Lack of modal collaboration
• Transport productivity is another problem facing South Africa's freight
transport system
o Congestion on SA's roads
o Lack of sufficient transport infrastructure
o Lack of vehicle scheduling and route planning
o Lack of driver's skills and poor management and administration
• Overuse of the national and urban road network
• Overloading on South African roads
CROSS BORDER AGREEMENTS
• SA has 52 noteworthy border posts
• 60% of the traffic is handled through the 5 biggest border posts:
o Lebombo, Beitbridge, Oshoek, Nakop, and Maseru Bridge
• Obstacles to the smooth movement of freight at border posts include:
o Inexperience of staff
o Lack of necessary equipment
§ Manual clearing takes twice as long, but the systems required to
assist electronic clearing are not fully operational yet
SPECIFIC CONSTRAINTS ADDRESSED THROUGH
PUBLIC INVESTMETS AND REORGANIZATION
• Lack of conformity between countries
• High degrees of complexity
GROWTH
Topic Summary
Business Logistics - Business logistics consists of materials management and
physical distribution. It involves the handling of inbound and
outbound flows, as well as reverse logistics and waste disposal.
Physical flow and information flow are two key aspects of
business logistics.
Peculiarities: - Fixed and mobile capital (infrastructure and transport means)
Transport System have limited alternative use and economies of scale. The
Elements transport industry can be characterized by
monopoly/competition and the choice between dedication/own
transport. Transport services have a complex structure, derived
demand, uneven distribution over time, and are non-storable.
Choice: Transport - The best choice of transport modes or combinations should
Modes consider speed, flexibility, reliability, reachability and
connectedness, ease of use, information, and image. Modes of
transport include deep-sea shipping, short-sea shipping, rail,
inland shipping, road, air, and pipeline.
South African - Economic activity in South Africa is skewed, with some inland
Economic Growth centres larger than those near ports. South Africa's
geographical position places it at a disadvantage in terms of
distance from its major trading partners. Most of South Africa's
manufactured goods are produced in Gauteng.
Overview of
South Africa's - Bulk commodities such as coal, iron ore, and manganese ore
Trade make up a significant portion of South Africa's exports. South
African maritime supply chains mainly carry bulk exports.
Containers are primarily transported inland by road, but rail
transport was historically the main carrier.
- Africa has the lowest GDP in the world, and its share of global
GDP in Africa and
merchandise exports is relatively low. Intra-regional trade in
Trade Challenges
Africa is also relatively low compared to other regions. South
Africa is one of the most developed and economically stable
countries in Africa.
, LECTURE 1 – INTRO TO OUTBOUND & SA ECONOMIC
GROWTH
Topic Summary
Strengthen
Relationships - Efficient corridors and infrastructure are required for
with Neighbours international trade in Africa. Landlocked countries face
geographical disadvantages and have limited access to coastal
areas. Strengthening relationships with neighbouring countries
can benefit South Africa's economy.
Benefits of Cross
Border
- Cross border movements bring foreign revenue, increased
Movements
profits, salaries, and access to goods at lower prices.
Governments benefit from increased tax revenue and can invest
in infrastructure. Reducing transport and logistics costs helps
SADC countries compete globally.
Strategies for
Transport and - Land transport demand in South Africa is increasing, with the
Logistics majority of growth captured by the road sector. Long-haul
road/rail relationships need to change to avoid road gridlock.
Establishing South Africa as a regional hub can improve
economic activity and competitiveness.
Road and Rail - Rail transport in South Africa has declined since road transport
Problems deregulation, despite potential advantages. Rail and road
freight costs are similar in South Africa, unlike international
settings. Transport productivity is hindered by congestion, lack
of infrastructure, and poor management.
Cross Border
- South Africa has numerous border posts, and the smooth
Agreements and
movement of freight faces obstacles such as inexperience, lack
Constraints
of equipment, and excessive paperwork. Lack of conformity,
complexity, delays, and insufficient information sharing between
firms are additional challenges.
, LECTURE 1 – INTRO TO OUTBOUND & SA ECONOMIC
GROWTH
Topic Summary
- Southern African states lack uniform transit procedures and
Public Initiatives
standards, which affects customs procedures, transit charges,
and Challenges
training, and documentation. Challenges include reliability,
speed and responsiveness for transport. Core structure issues
have been ignored. There is a need for intermodal corridors.
BUSINESS LOGISTICS
Business logistics = materials management + physical distribution
• Balanced system
• Heavy inbound
• Heavy outbound
• Reverse logistics
• Handling of returned goods:
o Waste disposal
o Distinguish: physical flow / information flow
PECULIARITIES: TRANSPORT SYSTEM ELEMENTS
• Fixed and mobile capital (infrastructure and transport means)
o Limited alternative use
o Economies of scale
o Monopoly/competition
o Dedication/own transport (or not …)
• Complex structure of transport services
• Derived demand
• Unevenly spread over time
• Non-storable
, CHOICE: TRANSPORT MODES
PORT MODES
Decide on the best choice of modes or a combination of these, structuring the
transport system is such a way that good logistics coordination takes place.
Criteria:
• Speed
• Flexibility
• Reliability
• Reachability and connectedness
• Ease of use
• Information
• Image
• Modes include:
o Deep sea shipping
o Short sea shipping
o Rail
o Inland shipping
o Road
o Air
o Pipeline
SOUTH AFRICAN ECONOMIC GROWTH
• South Africa’s economic activity is highly skewed
• Some economic centres found inland are bigger than those located near
ports
o Gauteng
o Mexico City, Mexico
• Contradicts theory
SOUTH AFRICAN ECONOMIC GROWTH (CONT’D)
• SA’s geographical position places it at a disadvantage in terms of
distance from its four largest partners:
o The UK, Europe, North America, and the Far East
,• Many regions against whom SA competes are on average closer to these
markets.
o Southeast Asia, Eastern Europe, South America, and Australia
• Majority of SA’s manufactured goods are produced in Gauteng
• Lack of well-thought-out freight logistics strategy
AN OVERVIEW OF SOUTH AFRICA’S TRADE
• Most bulk commodities exported from SA are made up of raw materials
o Coal, iron ore, manganese ore, and other ores and minerals
• Bulk exports represent the main cargo carried by South African maritime
supply chains in terms of volume
o Coal exports from South Africa's Richards Bay Coal Terminal (RBCT)
hit their lowest level since 1993 in 2022, at 50.35 million tonnes,
reflecting a lack of trains to carry coal from mines to port.
o RBCT, designed to only accept coal via rail, saw an average of 18
trains a day in 2022, against a capacity of 32 a day.
o Rail constraints and a two-week strike at Transnet resulted in low
levels of finished stock at the port of Saldanha, reducing export sales
predictions.
AN OVERVIEW OF SOUTH AFRICA’S TRADE (CONT’D)
• Bulk products from SA are usually sold F.O.B.
• Liner trades – world trend is for shipping companies to integrate port and
overland links into their services – in order for SA to compete
internationally, their container supply chains will need to follow the trend
• SA moved 4.497 M TEU’s, with Global 784 m TEU (in 2018) (0.57%)
• SA’s container trade:
o 38% imports
o 37% exports
o 25% transhipments
,AN OVERVIEW OF SOUTH AFRICA’S TRADE (CONT’D)
• At present, most containers are being transported inland in SA by road
transport
• Up until road transport was deregulated in 1988, rail transport was
protected from competition, and Transnet Freight Rail was the main
domestic carrier of containers
• Since deregulation, the modal split has changed in favor of road
transport
• Up until 1998, Transnet controlled all the containers from the ports, and
no other road transport operators were allowed to transport containers
within a defined radius
• Since 1998, there has been an open gates policy
SOUTH AFRICAN ECONOMY AND AFRICAN TRADE
• GDP in Africa is the lowest in the world
• Sub-Saharan Africa accounts for just 2% of world GDP but hosts 14% of
its population (and the population rate is growing rapidly - forecasted to
exceed 2 billion people by 2050)
• Africa's share of global merchandise exports remained virtually
unchanged between 1998 (1.9 percent) and 2018 (2.5 percent)
• Africa has relatively low intra-regional trade levels (17 percent),
compared to Europe (69 percent), Asia (59 percent), and North America
(31 percent); only the Middle East scores lower
• SA is one of the most developed and economically stable countries on
the African continent
• Trade plays an important role in reversing poverty
STRENGTHEN RELATIONSHIPS WITH NEIGHBOURS
• African railway network was built under different conditions than exist
today
o Historical and political incidents
• Africa contains 15 landlocked countries
• Distance to the sea ranges from
o 220km (Swaziland) to 1,735km (Chad)
,• Efficient corridors required for international trade
• Infrastructure
• High permissible axle loads for road transport
• The transport network outside South Africa operates below its original
design capacity
• Being landlocked leads to geographical disadvantages
• Low density and poor quality of infrastructure
o Landlocked countries
o Coastal countries
BENEFITS OF CROSS BORDER MOVEMENTS
• SA's economy can benefit from cross-border movements
• Brings foreign revenue into the country
o Providers - increased profit
o Workers - increased salary
o Customers - access to goods they would otherwise not be able to get
or goods at lower prices
o Government - benefits indirectly from increased tax revenue
generated by higher levels of economic activity or directly by using
some of the revenue earned to pay for other national objectives or
invest in essential infrastructure
• Striving to reduce transport and logistics costs for both economic and
political reasons
• A reduction in transport and logistics costs will allow SADC countries to
compete globally
STRATEGIES DEVELOPED WITH REGARDS TO
TRANSPORT AND LOGISTICS
• The demand for land transport in the SA economy is increasing
• The majority of growth is being captured by the road sector
• Change in the long-haul road/rail relationship to avoid road gridlock
• The lack of consideration for the infrastructure component of road costs
versus rail costs is highlighted by the exponential rise in SA's truck fleet
, ESTABLISH SA AS A REGIONAL HUB
• The efficient transportation of goods in international trade is vital for
the economic welfare of a country
• Efficient ports are directly proportional to national economic activity
• African ports have some of the highest logistics costs per TEU in the
world
• The situation is worsened by insufficient infrastructure
• With the exception of Mauritius, SA has the lowest costs in Africa and is
the most accessible via most trade routes
• Shipping trends indicate that shipping lines are striving to hub ports
ESTABLISH SA AS A REGIONAL HUB (CONT’D)
• Several countries and terminal operators in Sub-Saharan Africa are
developing hub capacity
o Developing south-south trades
o Changing trade route dynamics
o Growing regional volumes
• SA is relatively isolated from the major East/West trades
• It is an end port that serves the North/South trade route and acts as a
gateway for South Africa and Sub-Saharan Africa
• SA can play a major role in the container trade
• This could generate additional economic activity and employment
opportunities, stimulate growth, and increase national trade
competitiveness through economies of scale, scope, and density
• The Port of Coega (Ngqura) can accommodate ships up to 12,500 TEUs
• Expansions and upgrades at the Ports of Durban and Cape Town will
also help establish SA as a regional hub
ROAD AND RAIL PROBLEMS
• Since the deregulation of road transport, rail transport in SA has
experienced a serious decline in market share
• Rail transport is advantageous for longer distances, where economies
of scale can be realized
, • Rail transport is at a disadvantage compared to the door-to-door
service of road transport
• In international settings, long-haul rail costs are generally 70% of those
of road transport, whereas in South Africa, rail and road freight have
similar costs
• Transnet must overcome the perception that companies have of rail
transport in SA
• Service levels are still not meeting necessary levels of efficiency
• Rail transport for distances over 500km
• Freight is still primarily moving long distances to ports by road
transport
• Lack of modal collaboration
• Transport productivity is another problem facing South Africa's freight
transport system
o Congestion on SA's roads
o Lack of sufficient transport infrastructure
o Lack of vehicle scheduling and route planning
o Lack of driver's skills and poor management and administration
• Overuse of the national and urban road network
• Overloading on South African roads
CROSS BORDER AGREEMENTS
• SA has 52 noteworthy border posts
• 60% of the traffic is handled through the 5 biggest border posts:
o Lebombo, Beitbridge, Oshoek, Nakop, and Maseru Bridge
• Obstacles to the smooth movement of freight at border posts include:
o Inexperience of staff
o Lack of necessary equipment
§ Manual clearing takes twice as long, but the systems required to
assist electronic clearing are not fully operational yet
SPECIFIC CONSTRAINTS ADDRESSED THROUGH
PUBLIC INVESTMETS AND REORGANIZATION
• Lack of conformity between countries
• High degrees of complexity
