Transport dynamics in Sub-Saharan Africa
As supply chains are becoming more global and complex, logistics, especially the transport functions are equally becoming convoluted. In developing countries logistics is one of the biggest contributors to a nation’s GDP (in South Africa – 12.7%). Accordingly its management is vital for a growing economy.
The International Monetary Fund (IMF) recognised the BRICS nations as the only one to maintain growth in the midst of the uncertainty of the financial crisis of 2008! The intra-trade between the BRICS nations (with South Africa being the smallest contributor) has made its mark on global trade. SA also enjoys successful trade with its neighbouring (mostly with SADC) countries. With these potential opportunities for trade, we need to scrutinize the SA logistics/transport sector to determine whether it can deliver effectively and efficiently.
The World Bank in 2012 ranked SA 24th out of the 150 countries measured on international logistics competitiveness index. This is much higher than BRICS nations (with China being the closest at 30th place). Whilst this is great news when one compares domestic logistics costs SA was ranked 124th out of 150 – the worst amongst the BRICS nations. The two major causes of these high costs were the lack of a multi-modal transport set up and the fragmentation of the transport industry.
Tackling diversified requirements
It is imperative for the region that a transportation function to tackle the diversified requirements both locally and regionally in Southern Africa is established. Road is the most popular mode of transport (between 80 – 90% on average in sub-Saharan Africa). There is pressure on the economy to continually invest in the road infrastructure to keep the transportation cogs rolling.
Road density is low and is an indicator of connectivity within a country. Typical road density is just 9.9 km/1,000 km2 for the low-income group countries but more than 52 km/1,000 km2 for the middle-income countries. This low density affects the state of the roads as more vehicles are forced to use the same roads with no alternative routes available. The deteriorating road quality in South Africa can have a negative effect on logistics activities with a resultant increase in vehicle operating costs.
Road density and logistical performance are relatively low in sub-Saharan Africa, contributing to the higher cost of exporting goods from sub- Saharan African countries compared to other countries: US$1,974 per container, compared to a median estimate of US$732 for the Asian countries. Lead times are also poor – 30 days for SA and 13 days on average for developed nations.
Rail on the other hand is not geared up to support the local and regional economic growth. Rail structures are more than 100 years old and affected by under maintenance although there has been some recent improvement in South Africa. The regional rail network is however inadequate to compete against the modern road and rail networks that are increasingly being built in major corridors. In comparison to other BRICS nations South Africa has the lowest utilisation of its rail network.
Ports and Airports
The other two modes of transport, ports and airports, are not adding to the success of the economy. African ports are characterised by old equipment which affects the cargo processing time. Cargo transhipment invariably lengthens delivery times with the resultant increase in inventory costs.
Countries of sub-Saharan Africa are under endowed with airports, runways, and passenger and freight terminals. The airline industry particularly in Africa is over-taxed, making it difficult to establish cheaper fares and constraining the development of the low cost airline phenomena.
Most of the airports are not suited to cater to the new generation of aircrafts – creating constraints in global and regional freight.
SA to lead the region
SA has to groom the local and the regional transport industry to deal with these challenges. The technology barriers and the skills shortage will add more to its worries. SA has to learn from the lessons of the other BRICS nations. It needs to lead the region in transforming the cross border transport and logistics industry. If we are to keep our place in the global economy this needs to be done rapidly!
About David Okwara
Africa opportunities, Airports, BRICS, cargo transhipment, developing countries, diversified requirements, economic growth, financial crisis, freight terminals, GDP, global economy, IMF, intra-trade, logistics, ports, rail, road density, road infrastructure, SADC, South Africa, sub-Saharan Africa, supply chains, technology, technology barriers, trade, transport, transport sector, transportation, World Bank