National Treasury estimated that the rail and port inefficiencies have cost the economy R411 billion in 2022, almost 6% of gross domestic product (GDP). Photo: Bongani Mbatha/Independent Newspapers.
The newly formed Multi-modal Inland Port Association (Mipa), set up by businesses in the logistics sector to fast-track rail reforms and efficiency, is pushing the establishment of freight villages in strategic areas of the rail network in efforts to win back the 85% market share that road logistics has over the rail sector.
Mipa is envisaging different models of product-specific freight villages to act as a midpoint between the point of origin of goods and ports.
It said yesterday that these freight villages would have the capacity to process a variety of products, including a range of fruit, range of containers, range of dry bulk, range for processed foods, and range for fuel.
This comes on the back of South Africa’s rail volumes plummeting to 15-year lows.
The SA Reserve Bank has recently estimated that transporting coal to Richards Bay via rail costs around $11 per ton while trucking costs companies roughly $70 per ton.
“The reality of coal transport is that road freight in SA has nearly doubled in the past decade while rail freight declined by 35%. This is in the face of the collapse of Transnet last year costing the economy R553 billion in 2023,” Mipa noted.
National Treasury estimated that the rail and port inefficiencies have cost the economy R411 billion in 2022, almost 6% of gross domestic product (GDP).
A large portion of SA's GDP equal to 27% or R1.24 trillion within primary and secondary industries relies on efficient logistics for its sustainability.
Dependence on high-value imported consumer goods as the country's economy is also exposed to suboptimal transport modes, increasing direct and externalised costs.
The location of productive industries has made it difficult for a transport-intensive economy, with economic hubs and mining areas far from ports, particularly with dispersed distribution of agriculture and manufactured goods in an environment of uncoordinated spatial planning.
Transport is 55% of business logistical costs, and optimisation of this element will impact the cost of inbound and outbound logistics improving competitiveness of industrial sectors.
Equipment shortage, maintenance backlogs and a massive decrease in rail volumes resulting in the shift to road transport, bringing congestion, emissions and road-wear costs.
Investors have long expressed concerns about 54% debt levels, where debt service costs consume a significant part of the budget at the expense of other priorities such as basic education, social protection and healthcare
“Freight villages can significantly enhance the logistics landscape in South Africa by addressing several critical challenges and leveraging unique opportunities within the logistics sector,” said Juanita Maree, the CEO of SA Association of Freight Fowarders.
“It will help in enhancing efficiency and reducing costs, improving infrastructure utilisation, promoting sustainability and improving reliability and enhancing global competitiveness.”
Mipa’s initiating members are the Cato Ridge Inland Port, Tambo Springs Development Company, Cape Winelands Inland Port, the Musina Intermodal Terminal, RailRunner South Africa, and RailRunner Services formed the new logistics sector association, which is dedicated to improving Southern Africa's supply chain.
Mipa has identified business models as well as ground-breaking innovations to facilitate the transfer of freight from road to rail and will collaborate with Transnet to de-clutter and unblock the existing logistics system.
“Post a collaboration agreement with Transnet, Mipa as well as its members will be able to introduce much-needed capital into the movement of freight from road to rail,” Mipa chairperson, Warwick Lord, said.
The association is to promote, support and advocate for the movement of cargo from road to rail via inland ports and its members will collaborate on best practices for public-private partnerships for trade facilitation solutions.
According to the founders, Mipa aims to optimise efficiency and cost-effectiveness by advocating for and supporting increased cargo movement via rail through the use of more inland ports.
“We are excited to introduce Mipa and its vision for a more sustainable and efficient logistics system,” Lord said.
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