After experiencing stress for two months, the South African logistics industry made some progress in the month of June.
The Ctrack Transport and Freight Index (Ctrack TFI) increased by 1.3 percent in June compared to May, which was an increase from May’s 4.7 percent year-on-year improvement and represented a 5.0 percent improvement.
There hasn’t been any real growth since the index’s pre-flooding level in March, and the sector as a whole has spent the last two months catching up.
“Many challenges remain and continue to put pressure on the different industries that make up the Ctrack Transport and Freight Index as well as the economy as a whole, from eroding productivity due to regular load shedding that increased to Stage 6 and significant fuel price increases in recent months.”
Ctrack Africa’s Chief Executive Officer Hein Jordt
When examining each of the different sub sectors separately, as has been the case for the previous two months, drastically different trends become clear.
Pipeline Transport was the top performer in June, followed by Road and Air Freight, and three of the six sub sectors of the Ctrack Transport and Freight Index reported growth.
Troubled logistics industries in South Africa
The biggest contractions were seen in Storage and Handling (Warehousing) and Sea Freight, while the heavily weighted Rail Freight sector continued to be under pressure.
On the other hand, three of the subsectors reported a decline.
In addition to a number of ongoing difficulties, the floods that hit the Durban area in April particularly hard on both Sea Freight and Rail, and both industries are still working to recover.
Transnet Pipelines (TPL) has seen a significant uptick in the previous two months in the amount of liquid fuels it transports, with the Pipeline sub-sector of the Ctrack Transport and Freight Index expanding by 21.0 percent in June 2022 compared to the same month last year.
The fact that local fuel production has been declining and that four local refineries are currently inactive both play a significant role in this rise. Less than a third of South Africa’s refined fuel was formerly imported, but the situation has significantly altered.
The ambiguity around who would pay for the essential improvements and modernization needed to make South Africa’s refineries compliant with the new clean-fuel rules, which take into effect in September 2023, is the main cause of the closure of local refineries.
The former Caltex (now Astron) refinery in Cape Town and Engen’s Durban refinery are both temporarily closed, as is SA’s largest oil refinery, Sapref, a joint venture between BP and Shell. The gas needed to fuel PetroSA at Mossel Bay has essentially run out, forcing it to shut down.
Thus, Sasol’s synthetic fuel factory at Secunda and Natref in Sasolburg is the sole source of domestic production (joint venture between Total and Sasol).
Natref abruptly announced force majeure in July 2022, warning that due to a temporary shortfall of crude oil feedstock, it might not be able to fulfil all of its obligations to deliver gasoline, diesel, and jet fuel to its customers.
Fortunately, the issue was remedied in the weeks that followed. Due to the shutdown, South Africa had to rely on imports for a brief period for up to 80% of its overall gasoline needs, up from the usual 60 percent in recent years.
This has led to a greater reliance on petroleum imports into South Africa, which must be delivered by pipelines to the interior market, which accounts for the current increase in pipeline transit.
Road Freight continued to expand substantially in June despite the brief N3 blockade, rising by a significant 16.9 percent from a year earlier.
When compared to a year ago, there are also noticeably heavier vehicles on the N3 and N4 toll roads, and the country’s overall road freight payload continued to expand in June.
The ongoing underperformance of the rail industry in recent years has also clearly been filled by road freight, and this trend is expected to continue for some time.
Is there any expansion?
Air Transport is still expanding steadily as global supply systems continually improve.
When compared to June of last year, the Air Freight portion of the Ctrack TFI climbed by 10.1%. Compared to May, total consolidated airport aircraft movements (passengers and cargo) climbed by 31.1 percent year over year in June, but this growth was supported by a low base of comparison because COVID-19 restrictions in June of last year’s figures still restricted economic activity.
However, the early June suspension of Kulula aircraft had a significant negative effect on local flights, which fell by 17.5% compared to May.
As the international travel business continues to rebound, growth in air freight—which increased by 7.4% year over year—will likely continue to cushion the sector.
However, a positive improvement in container handling was noticed not just in the port of Durban but also in the ports of Gqeberha, East London, and Ngqura during June.
The sea freight sector fell by a significant 10.6 percent in June compared to a year earlier.
With the help of Transnet Freight Rail (TFR), which reopened a single line on the container corridor between Durban and Cato Ridge on June 13, the port of Durban’s container handling increased in June by 5.3 percent compared to March’s (pre-flooding) figures.
The line had been closed since April 11.
The recovery is positive news, and more expansion could be anticipated as more train capacity on the mainline becomes available in September when work on the second line is due to be finished and traffic resumed.
A persistent problem is the lack of proper infrastructure and criminal activity on rail lines. Last but not least, the subsector of Storage and Handling continued to experience pressure in June, falling by 15.1% on an annual basis.
Track TFI and GDP expansion
It is common knowledge that a country’s Gross Domestic Product and the performance of its transportation sector are closely related. In the post-COVID-19 recovery phase in South Africa, the logistics industry performed better than the overall economy.
“While real GDP growth in the first quarter of 2022 was greater than anticipated, the economy slowed down in the second quarter as a result of the flooding in KZN, frequent load shedding, higher inflation, and rising interest rates.
The June 2022 Ctrack Transport and Freight Index shows that activity in the transport and freight sector was unchanged from the March index level in the second quarter, confirming expectations and suggesting that there won’t be any quarter-over-quarter GDP growth in the second quarter of 2022, said Jordt.