The CSIR’s 10th Annual State of Logistics Survey for South Africa¹, released in May 2014, highlights progress made – and areas for improvement - in South African logistics.
The Survey’s results mirror Tech-Pro’s experiences in this increasingly specialised area of supply chain management, Tech-Pro tells SmartProcurement.
Subtitled ‘Bold Steps Forward’, the Survey emphasises the growing importance of the South African logistics industry, particularly as modest economic growth continues.
As international trade increases and competition intensifies, logistics performance is set to be the ‘creator of competitive advantage’ and play a ‘pivotal role in making South Africa globally and regionally competitive’.
Managing logistics costs will be a priority.¹
Is South African Logistics Competitive?
According to the ‘State of Logistics’ Survey, ‘the logistics industry, in the broadest sense, is functioning well in South Africa’.¹
However, the results of the recent World Bank Logistics Performance Index – or LPI – show that South Africa cannot be complacent.²
In 2014, South Africa’s LPI ranking dropped to 34th out of 160 countries – our first time out of the Top 30 since the LPI started.
Of the six factors considered, South Africa lost ground in ‘Infrastructure’ – dropping to 38th place from 19th in 2012; ‘Customs’ – down 16 places to 42nd – and ‘Tracking and Tracing’ – down from 16th to 41st place.
‘Competence and Quality of Logistics Services’ remained unchanged in 24th place.
A key factor in competitiveness is cost.¹
Logistics industry performance – specifically costs – impacts competitiveness.
However, South Africa’s logistics costs are high, rising from R393 billion in 2012 to R423 billion in 2013. Estimates for 2014 set spend at R456 billion.
This increase in cost is ‘not so much the result of deteriorating efficiency in the industry, but the disproportionate growth in cost drivers – especially fuel’.
What Are We Doing to Improve Logistics Performance?¹
South African supply chains ‘have moved beyond survival mode to optimised mode…’
Recent improvements include:
• Infrastructure Upgrades:
In 2012, Transnet introduced the Market Demand Strategy (MDS) - an infrastructure upgrade, expansion and modernisation project for South Africa’s ports, rail and pipelines. Much of the project funding – estimated at R300 billion – will need to come from PPP (Public-Private Partnerships).
And, over the past 5 years, SANRAL has invested in expanding and maintaining the national road network – 19 704km of road – with the result that more than 84% of this network is in ‘fair’ to ‘very good’ condition.
Defined as ‘the use of two or more transport modes to move a shipment from origin to destination’³, intermodalism can significantly reduce logistics costs.
With the MDS and its Intermodal Strategy, Transnet is actively pursuing private sector engagement and is seeking to regain lost market share by shifting freight transport from road to rail. This strategy is slowly paying off, with rail tonnage growing from 11.4% to 12.1% in 2013.
The CSIR’s PBS (Performance-Based Standards) or Smart Truck project highlights vehicle regulation.
Challenges: The Talent Gap¹
Recent research conducted by UJ shows that the South African supply chain skills shortage ‘has not been significantly alleviated over the past few years’, primarily due to a lack of new industry entrants, misalignment between educational offerings and industry needs and talent retention issues.
The UJ research found a disconnection between how experienced supply chain practitioners and new entrants view the industry, which is evident in:
• Educational Qualifications: Practitioners believe that a Bachelors degree is necessary at entry level, while students consider a certificate or diploma sufficient.
• Work Experience: Is more important to practitioners.
• Students’ reasons for choosing a supply chain career focus more on ‘enhancing skills (32.1%) and ‘being more employable’ (23.7%) than being ‘passionate about the industry’ (17.3%) – making it easier for them to be tempted away to other professions.
What are your views on the state of logistics in South Africa? How is your company meeting the challenge of improving competitiveness? Do you feel the talent gap?
1: ‘Bold Steps Forward – The 10th Annual State of Logistics Survey for South Africa’,
2: ‘Connecting to Compete: Trade Logistics in the Global Economy: The Logistics
Performance Index and its Indicators, The World Bank, 2014.
3: ‘Intermodal Freight Transportation’, TRB
'This article was written by Tech-Pro and first appeared on the SmartProcurement website'