Consolidation platform could slash Africa's high logistics costs

To address the high
cost of logistics –
largely driven by
empty loads out of
SA’s neighbouring countries
– southern African transport
suppliers should work
together to consolidate loads.
This was one of the “big
ideas” that emerged from
a series of roundtable
discussions around logistics
challenges facing landlocked
countries at the Africa
Cargo 2016 show held in
Johannesburg recently.
Hennie Harmse,
operations procurement
manager from cement
manufacturing company
Afrisam, pointed out that in
developed countries like the
United States logistics costs
made up 7-8% of the total
price of goods, according to
recent World Bank data.
“On average, a developing
country spends between
16% and 20%. In southern
Africa, it increases to an
average of 70%,” he said.
This because full truck loads
may be sent out of South
Africa into neighbouring
countries, but those trucks
often return empty or with
very little cargo.
The managing director
of an SA-based transport
company that does regular
cross-border trade told FTW
that he earned an average of
R75 000 on a trip from the
port of Durban to Ndola in
Zambia. “I’m lucky if I make
R17 000 on the return trip.”
According to Harmse, this
is because there is little or no
industrialisation from SA’s
neighbours. But, he added,
the high logistics costs also
curbed demand for products
from neighbouring countries.
“It’s a catch-22 situation.
You need to get the products
out there to stimulate
demand but if a product from
Zambia costs twice as much
as one from China – even if
the quality is slightly lower
on the Chinese one – you can
bet the Chinese one is going
to generate higher demand,”
he said. And this is one of
the biggest barriers to intra-
Africa trade, in his view.
The transporter agreed,
noting that seasonal surges
in agricultural produce, for
example, did sometimes
balance the outbound and
inbound trips better. “But
there are many months
when we struggle to fill
our trucks.”
One of the main challenges
would be establishing that
consolidation platform
between industry members,
as logistics professionals
tend to be very competitive
and thus loathe to share too
much with each other lest
they lose business to their
competitors.
But, Harmse said, the
consolidation platform
could be independently
managed through a
designated trade body
that could be mandated to
co-ordinate the loadings.
“A transporter could simply
say he has a half empty
container travelling back
from Harare to South Africa
and the client needn’t even
know who was involved in
the consolidated load.”
And, if harmonised,
benchmarked transport
industry standards were
developed for all those
participating, there need not
be any fear of competition
because the same levels of
service would be offered.
“It is to the benefit of
everyone to be able to offer
their clients a better service
at a reduced cost. What is
there to lose?” he said.