FROM MAGAZINE: South Africa optimistic of growth in trade

One of Africa’s biggest economies –South Africa is among the countries that fell most sharply in the 2017 Agility Emerging Markets Logistics Index. The country’s logistics sector has been impacted by decreasing FDI across manufacturing and mining, social issues and stalling infrastructure development.

Twinkle Sahita

One of the strongest emerging economies of the world and also the one that has a lion’s share of the world’s economic trade, South Africa, surprised the world with its low level of growth indicated in the recently released Agility Emerging Markets Logistics Index. The Index, in its eighth year, ranks emerging markets countries by factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors.

South Africa witnessed the sharpest drops: it fell four positions to Number 21, impacted by decreasing FDI across manufacturing and mining, stalling infrastructure development, and social issues that weighed down growth. As a result, no sub-Saharan African country ranks among the top 20 in the Index, although five other markets from the region – Ethiopia (37th), Tanzania (38th), Ghana (39th), Uganda (41st) and Kenya (43rd) – saw their ranking scores improve.

On the other hand, in the Logistics Performance Index 2016 (LPI 2016) published by the World Bank, amongst other African countries, South Africa was the best performer when it comes to trade facilitation logistics and among the best in terms of transport infrastructure. It showed incredible improvement –moved 14 places up and ranked 20th in LPI 2016.

The busiest emerging markets air freight lanes originating in the EU or US tend to connect to larger markets in the Index: China, UAE, India, Mexico, Turkey, Saudi Arabia, Brazil and South Africa.

Airports Company South Africa operates nine of South Africa airports. Out of nine, the three main international gateways are OR Tambo in Johannesburg, Cape Town International Airport and King Shaka International Airport in Durban.

A lot of airlines find potential in the South African air cargo market. Air Seychelles will start its new direct route to Durban from March 30, 2017. This is airline’s second route in South Africa after Johannesburg, where the carrier flies five times per week. The new route will be operated twice-per-week on an Airbus A320 aircraft in a two-cabin configuration. Lying on South Africa’s eastern coast, Durban has a population of more than three million people and is a major centre of trade and commerce, with the largest and busiest port in sub-Saharan Africa.

Another major airline LATAM Cargo also has recently launched service to South Africa, becoming the only Latin American airline group to connect the region with Africa.

Sihle Zikalala, MEC for Economic Development, Tourism and Environmental Affairs, said, “With strong ties already established between South Africa and the Seychelles, there is great potential for further tourism and trade growth; while the A320 Airbus aircraft they will be using to service the Durban route brings the potential to increase the cargo capacity being freighted out of Durban. In addition, the onward connectivity that Air Seychelles will provide to India and Germany will enable Durban travellers to seamlessly reach new borders, opening and amplifying new business opportunities for the province of KwaZulu-Natal.”

In December last year, Addis Ababa based Ethiopian Airlines has increased frequency to Cape Town to 10 times weekly. Ethiopian currently flies to three cities in South Africa namely: Durban, Johannesburg and Cape Town.

South Africa has eight main commercial ports. Some focus almost exclusively on bulk commodities, while others serve one major industry only, such as the offshore oil industry in the case of Mossel Bay. Richards Bay has the world’s largest bulk coal terminal.

Durban is Africa’s busiest port. Port of Durban has a market share of 29 percent of South African cargo. As many as 4500 vessels call at the Port of Durban annually. It handles containers, automotive cargo, breakbulk (including abnormal cargo, steel commodities and project cargo, neo-bulk, timber, steel coils and other steel profiles), and agricultural bulk (such as wheat, maize, soya bean meal, animal feed, woodchips). The Port of Durban will see investments to the tune of 27 billion for projects over the next 10 years aimed at creating capacity ahead of demand.

Ngqura, which opened in 2009 near Port Elizabeth in the Eastern Cape, is the deepest container terminal in Africa.

Last year, RailRunner, global rail transport technology company, announced that it is introducing hybrid trucks in South Africa. The implementation of the Bimodal Transport Systems on the CapeCor (Johannesburg – Cape Town – Johannesburg corridor) will be undertaken through a joint venture company being established between South Africa’s Transnet and RailRunner SA. It will reduce terminal throughput, and is more efficient than any other intermodal solutions currently offered in South Africa. The vans or trailers are very similar to those currently used by road, except that they are built slightly stronger to withstand in-train forces.

The continent needs more infrastructure developments to support the growth in trade. Depsite challenges which has lead to its lacklustre performance in the Index, South Africa’s status as the most promising logistics market in sub-Saharan Africa was undiminished (See Figure 1). The size and wealth of South Africa, however, remain significant on a continental level and survey respondents clearly see its ability to create opportunities as more enduring than recent setbacks.

Spending by African consumers and businesses today totals $4 trillion. Household consumption is expected to grow at an average 3.8 percent a year to reach $2.1 trillion in 2025, fuelled both by population growth and rising incomes, according to McKinsey. The continent has huge potential due to the population growth and rising incomes. This in turn will result in an increase in consumer spending and e-commerce opportunities.