By Quinton de Villiers
I am encouraged by the findings of the 2018 World Bank Logistics Performance Index (LPI), which ranked South Africa very favourably in terms of its logistics performance.
Logistics performance relates to the cost, time and complexity involved in importing and exporting and is, therefore, an important measure of any country’s economic growth potential.
According to the LPI, South Africa is the third most competitive market after Thailand and China among upper-middle-income economies, while the bank also ranked the country as 33rd out of 160 countries assessed, albeit a retreat from 20th place it held in the 2016 study.
This is some optimism following two consecutive quarters of decline in gross-domestic product, which have plunged the country into a technical economic recession, and this news certainly supports my view that a strong foundation is in place to drive an accelerated recovery.
Bear in mind that the index is based on a measurement of efficiency of customs and border clearance; quality of trade; ease of arranging competitively-priced shipments; as well as competence and quality; in addition to the frequency with which shipments reach consignees within scheduled or expected delivery times.
Just as importantly, it also considers the efficiencies of the country’s transport logistics infrastructure, including road, rail and ports which, according to the World Bank, climbed to 36 from 38 in 2014.
This is on the back of an improvement in scoring for investment made into related infrastructure from both the private and public sectors by both the 2017 and 2018 World Economic Forum’s Competitiveness Index.
In the more recent surveys, South Africa improved by three positions at 61 out of 137 countries, as opposed to 64 in the 2016/2017 index.
In an earlier survey undertaken by PwC, the country was also ranked the highest in sub-Saharan Africa in terms of its trade infrastructure and, noticeably, was considered on par with some developed countries of the world.
Moreover, it graded the country as the best performer on the entire continent, in terms of its trade-facilitation logistics.
However, this comes after a protracted period of decline in infrastructure spending in the country by both state and a beleaguered private sector, as is evidenced by the critical state of all of South Africa’s large civil-engineering contractors.
Road construction projects – their “bread and butter” – have been scant, and it is only recently that the South African National Roads Agency Limited (SANRAL) started rolling out stalled contracts.
They were halted in 2017 due to disagreements with the National Treasury over processes to follow in awarding consulting service tenders, compounding the already significant backlogs in road-construction projects.
Both the national and provincial road networks are the lifeblood of the economy, and facilitate the swift and efficient movement of well over 80% of South Africa’s freight.
It has also supported the growth of a vibrant local third-party logistics (3PL) industry as more businesses seek to harness the benefits offered by state-of-the-art outsourced transport solutions, including a reduction in total cost of delivery per unit and basic economies of scale.
It is, therefore, essential that investment be made into developing our road infrastructure.
I suspect that this will be major focus of government’s economic stimulus plan, which intends resuscitating a previous focus on developing infrastructure.
Administered by a dedicated team in the presidency, it will be funded through a new about R400-billion infrastructure fund over the medium-term expenditure framework.
Certainly, the challenge over the longer term will be replacing 78% of the existing network, which is older than its original 20-year design life.
The estimated backlog in road infrastructure currently stands at about R200-billion, with demands of both maintaining and upgrading this infrastructure in previously neglected and underdeveloped communities exacerbating the situation and placing an enormous budgetary burden on government.
While SANRAL recently announced that it would increase its spending by up to R20-billion by 2020/2021, the significant backlog in provincial road maintenance remains a serious concern and should be on top of the agenda of this renewed focus on infrastructure development.
Maintenance of these critical routes is currently funded from inadequate provincial budget allocations, known as the Provincial Roads Maintenance Grant.
The estimated budget allocation over the current Medium-Term Expenditure Framework is R35-billion for routine and periodic maintenance requirements and, even with financial support from national government through national transfers and subsidies, it is unlikely that this will be sufficient to cover the extent of the backlog in maintenance.
If South Africa intends retaining or even improving on its high standing in terms of transport and logistics performance, it will have to continue prioritising investment into infrastructure, including its vast road network!
Quinton de Villiers is the founder and managing director of Bridgewater Logistics with a long and impressive track-record in African logistics and security. Follow Quinton at #InTheFastLane for more insights and expert commentary on African transport and logistics.