‘Kickbacks’ squeeze groupage industry

AS THE groupage market becomes increasingly competitive, the question raised by several operators is whether customers are interested in service or merely in low rates. According to CFR Freight MD Martin Keck – and it’s a view supported by several other industry sources – rates have dropped on almost every trade as the regrouping of partnerships has seen newcomers buying market share to establish a presence. It’s a familiar trend, destabilising the market and often leading to an industry shakeout, particularly as smaller players battle to keep afloat. But it’s not the only challenge facing the groupage market. Industry sources complain of a growing tendency towards the payment of incentives or kickbacks, particularly on the trade lanes from East Asia and China. For every cubic metre imported, NVOCCs are having to pay kickbacks to suppliers in India and China, says Keck, and these are sometimes in the region of US$30-40 per freight ton (FRT). “Effectively it means that the importer in South Africa – and ultimately the consumer – is footing the bill for these so called incentives,” says Keck, who believes that it’s an issue that needs to be addressed at the highest level. “It all started years ago on the China-Europe trade where there is a huge profit margin. But in South Africa we don’t have those margins which means the importer and consumer ultimately ‘subsidise’ these incentives.” However, despite the challenges CFR is more than satisfied with growth in both its sea and airfreight divisions, says Keck. “Exports are picking up again thanks to the weaker currency – and we could see growth in groupage business as a result of the economic slowdown. “We saw it many years ago when interest rates were high that shippers tended to stay away from full loads and bring in smaller volumes more frequently – which obviously benefits the consolidator.” Looking ahead, Keck says the company is always looking at opportunities for new, direct services. “The East continues to be an area of strong potential, but Europe remains our major market in terms of volumes.” In a move that further strengthens its global agency muscle, CFR has been at the forefront of the establishment of a global NVOCC grouping – The Worldwide Alliance – which brings together key NVOCCs from around the world, providing a vehicle for the sharing of resources while maintaining individual identities.