SA’s logistics sector ended 2023 on better note despite port crises

South Africa’s logistics sector ended 2023 on a better note despite the crises at the country’s ports, with the air freight sector recording an increase in December thanks to the inability of the ports to handle cargo in time.

The Ctrack Transport and Freight Index increased somewhat in December to end a volatile year for the logistics sector on a better note, with an index level of 121.1 in December, 8.4% higher than a year ago and 1.9% above the September level, signalling that the transport sector likely contributed positively to gross domestic product (GDP) growth in the fourth quarter of 2023.

“While the improvement is indeed welcome, the index is still 2.1% below its recent high reached in May 2023 and the sector still faces many challenges at the beginning of 2024,” Hein Jordt, chief executive officer of Ctrack, says.

In December, five of the six sub-sectors increased compared to a year earlier, while on a monthly basis, the sub-sectors for rail freight, road freight, and pipeline transport contracted. Jordt says the interdependence and intertwined nature of the logistics sector remain relevant, as recently witnessed with the implosion of Transnet’s port operations.

“Given the underperformance of South African ports, notably Durban but others as well, the whole logistics supply chain in South Africa had been severely disrupted, with some sectors, such as air freight, an unexpected beneficiary.”

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Air Freight did well thanks to ports crises

The air freight sub-sector increased by 5.3% on a monthly basis in December, with indications that this sub-sector could have been a beneficiary of the sea freight troubles in the past few months. The number of unscheduled flights that are typically chartered for cargo purposes increased by a notable 11.2% in December compared to November.

Consolidated airport flight movements increased by 10.3% on a yearly basis, but cargo loads on planes subsided somewhat in December.

After sea freight tumbled in October and November, reflecting the inability of ports to handle cargo due to a multiplicity of contributing factors, the sea freight sub-component increased by 5.3% in December, compared to November, although still lagging on September’s pre-crisis level.

Jordt says many retailers were anxious about stock for Christmas being stuck somewhere in a container in the port or at sea, with Transnet Port Operations (TPT) indicating at the end of November that the backlog created would only be cleared by February or March 2024.

“However, the Durban Container Terminal Pier 2 has largely reduced its vessel backlog at anchor by the end of December, with employees working through long weekends in December and through the New Year across all the terminals. The full employee resourcing at the terminal and demonstrated employee commitment were a direct and major contributor to the desired outcome.

“Original equipment manufacturers were also on-site at each terminal supporting the teams around the clock following recent confinement agreements that reduced waiting times for critical spares of handling equipment across Transnet Port Terminals. The improved port throughput numbers are indeed encouraging, spurring optimism that Transnet’s recovery plans may start to bear some fruit,” Jordt says.

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Road Freight also suffered due to port crises

The road freight sector, the biggest sub-sector, experienced multiple headwinds in the last few months of 2023, partly due to the operational troubles at the ports, he says. The road freight sub-component declined by 1.0% in December, compared to November, but remains 3.9% higher than in December 2022.

Heavy vehicle traffic on the N3 route (large and extra-large trucks) was flat in December compared to a year earlier, while heavy vehicle traffic on the N4 route continues to increase notably, with annual growth of almost 20% recorded in December.

For the whole of 2023, heavy vehicle traffic on the N3 route increased by only 0.6% compared to heavy vehicle traffic on the N4 route increasing notably by around 25% compared to 2022. Jordt says there is clear evidence that the ongoing operational troubles at South African ports and other challenges resulted in loads being redirected towards the Port of Maputo, clearly to the detriment of the South African economy.

He expects this trend is likely to continue in 2024, as South Africa’s logistical problems will unfortunately not change overnight.

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Rail Freight faces many challenges

A notable increase in the rail freight sub-sector of 37.5% in October turned out to be short-lived, as it sagged back by 27.5% to its mediocre levels in November and by 0.8% in December. However, Jordt says, for 2023 as a whole and after declining for five consecutive years, rail freight payload is forecast to have increased by a marginal 1.5% in 2023.

However, this increase was off an extremely low base and rail freight will clearly continue to underperform compared to other transport sub-sectors given the ongoing challenges plaguing the sector, Jordt says, adding that the improvement should be celebrated in any way.

He says large-scale theft of copper cables, insufficient maintenance, lack of locomotives, corruption, derailments and vandalism on freight trains are hampering the sector’s performance. “Companies in many sectors of the economy have been reporting that inadequate rail capacity and lack of service delivery have hamstrung production, trade and growth in the South African economy.”

Transnet Freight Rail’s woes have been a major hurdle for the mining industry in particular, costing the sector tens of billions a year in lost exports, which also impact negatively on the fiscus given reduced tax receipts.

“While government approved the Freight Logistics Roadmap at the end of 2023, with proposals to resolve the immediate operational challenges while developing interventions to fundamentally restructure the logistics sector to support inclusive economic growth, implementation still needs to be fast-tracked before a notable difference would be evident,” Jordt says.

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2024 logistics outlook

For 2024, Jordt says, on the assumption of mediocre economic growth in 2024, another year of fairly subdued growth is forecast for the transport sector, with real transport sector growth forecast at 3.7% in 2024 compared to an estimate of 3.4% in 2023.

“An acceleration in structural reform remains critical to lift South Africa’s potential growth rate, as the current growth levels remain woefully inadequate to address South Africa’s socioeconomic challenges, particularly South Africa’s high unemployment rate. To facilitate higher economic growth, a well-functioning logistics sector is a prerequisite and as such, deserves urgent attention at the highest level of government.”