SA truck sector benefits from rail woes

The road freight subsector of the Ctrack Transport and Freight Index increased by 16.2% year on year in December, the 21st straight month of double-digit annual growth rates recorded.

The number of heavy trucks on both the N3 and N4 toll routes increased compared to a year before and road freight accounts for about 84% of total freight transportation in SA. The sector’s growth was spurred by a decline in payload for rail freight transportation which reached its lowest level since 2008, when data was first reported.

Rail freight was the worst performing sector, declining 22.4% year on year. While the impact of the Transnet strike was a dominant factor in quarter four, the further implosion of rail freight during 2022 has been a long time coming, says Ctrack. Rail Freight now accounts for only 11.2% of total freight moved around the country, according to Ctrack, which says the sector has been declining for five years with little hope of a turnaround soon.

The SA logistics sector took severe strain during December, clearly still reeling from the aftermath of the crippling Transnet strike in October, said Hein Jordt, CEO of Ctrack Africa.

“With all the commercial ports affected at the time, extensive backlogs were created, while the economic damage subsequently spread to other subsectors such as road and rail freight as well as storage and handling, all of which declined notably in the last three months of 2022,” he said.

“The sea freight, rail freight and pipeline subsectors of the Index were hardest hit with double-digit declines, while air freight turned out to be a beneficiary of the other subsectors’ demise. Overall, the Ctrack Transport and Freight Index declined by 7.5% during the fourth quarter, the worst quarterly decline since June 2020, when the economy was still in the midst of the Covid-19 pandemic,” he said.

“The SA logistics sector was showing great promise and on track for a record year but, unfortunately, a continuous barrage of unforeseen external factors stopped that from happening,” says Jordt.

On an annual basis, the Ctrack Transport and Freight Index ended 2022 only 2.9% higher than a year earlier, which was a long way from the 13.7% yearly growth rate recorded as recently as August 2022.

The ongoing underperformance of the rail industry, due to large-scale theft of copper cables, insufficient maintenance, lack of locomotives, corruption, derailments and vandalism on freight trains, is perhaps the most concerning development of the year, given the ongoing negative impact on the economy at large, said Jordt.

The sea freight subsector of the Ctrack Transport and Freight Index declined by 13.3% during December compared to a year ago and declined on a monthly (-4.0%) and quarterly basis (-18.2%), reflecting the negative impact of the Transnet strike on ports’ activities. Overall, container handling in the country recovered somewhat after declining by a significant 58.7% on a monthly basis during October; however, by the end of 2022, it remained 28% below the September 2022 pre-strike level. In addition to container handling, general cargo handling was also negatively affected by the strike and has only partially recovered, confirming fears that it will take the industry months to recover from the crippling strike.

The negative impact of the prolonged Transnet strike will put a damper not only on the transport sector’s contribution but also the broader economy’s performance in Q4, given linkages to other sectors. In addition to the strike’s impact, the ongoing challenges of harsh load-shedding, the high cost of living, high production costs due to high fuel prices and rising wage demands and elevated interest rates, the list of challenges for the South African economy remains extensive.

“The SA economy needs a functioning logistics network amid all of the economic woes now plaguing our country, and all stakeholders should unite to address the obstacles in the industry,” concludes Jordt.