“We are all still getting our minds around the collapse of the world economy. Capital projects are dying fast, and while expansion has been the driving force for the past 15 years, it is now changing to consolidation,” says Martin Bailey, vice president of the Chartered Institute of Logistics and Transport (Ciltsa). This means that companies will, for instance, not invest in new warehouses or trucks but will rather make the old ones work better. Bailey notes that “a lean and mean supply chain is what it is all about” and that cost will be paramount. He even predicts a return to rail rather than road in spite of the service problems associated with it. “The fuel crunch has had a big effect and companies realise they must save on costs as well as on carbon emissions. The green culture is prominent in Europe but in South Africa we are just paying it lip service. It will however hit us in the next seven to eight years and we need to be prepared,” he says. This is largely due to the fact that “the world is becoming flat. If you phone a service number for any electronic equipment, you are inevitably being put through to someone at a call centre in India. In the supply chain people are thinking internationally and not just locally anymore.” The problems Bailey considers South Africa’s situation to be somewhat unique. “Logistics in South Africa is very complex. Our major centre is far from any seaport which is very unusual and our rail infrastructure has basically collapsed. Every container transported to and from Johannesburg costs an extra R10 000 just to cover the transport. “On top of that the education system is a mess and the quality and quantity of graduates are decreasing, especially in logistics. Bright young engineers do not exist in South Africa and you can see its effect directly on business. You cannot get projects executed as you cannot get good tradesmen anymore. The entire training process has collapsed,” he notes. The problems are further compounded by the fact that South Africa has the highest interest rates in the world. “This means that the costs of warehouse space rental, trucks and other equipment are the highest in the world – it is more expensive than in Europe. It creates a vicious cycle where companies need to charge more to cover costs. “Its greatest effect is felt in the manufacturing industry. We cannot compete on a one-to-one basis with Europe. But, South Africa is innovative and we make decisions much more quickly than in Europe – on average it takes three years compared to five in Europe and this can give us a competitive advantage,” Bailey says. The potential “There is huge potential if Transnet wakes up and gets its management to do a major reengineering of the rail infrastructure. A highspeed, reliable, flat-bed cargo train between Johannesburg and Durban is essential to our economy. Ideally this should be a public/private partnership. Unfortunately governments don’t make decisions based on logic or else they would have invested in such a cargo train which would have benefited the country much more than the Gautrain,” notes Bailey. “If Zimbabwe settles then there is huge potential there. It is a landlocked country and if it opens up and attracts new investment it can only benefit our logistics industry as it is currently an empty shell. While trade into the rest of Africa is very small there is a market for medicine and weapons. Mining is also becoming more sophisticated and is moving into the supply chain arena. There is huge potential to improve the productivity in the mining sector but the creeping nationalisation of mines can stop capital investment and expenditure. “There are also great prospects for South African companies in the Middle East. They prefer us to the US and Europe as we are culturally closer. As developing regions we both understand the necessity to manage projects on a micro level. And since we work in rands the price structure is also good and for consultants the fact that we are in the same time zone is great. We do however need the government to resolve the passport and visa situation as it is difficult to get in on a South African passport,” says Bailey. “Our single biggest asset at present is that we have no banking crisis. The government should be taking out front page advertisements in the overseas press to encourage investment in South Africa,” Bailey concludes.
