Logistics costs a roadblock to recovery

Things are starting to look up for shipping and logistics companies servicing the South African auto market – but logistics costs remain a major roadblock. “Exports have improved despite the overseas market – particularly Europe – still recovering,” says Clint Carmichael of NYK Line in Durban. But, adds Lawrie Bateman, director of MSC Logistics, “SA auto manufacturers are under pressure from worldwide manufacturers to produce vehicles at a cost that is competitive.” “It's encouraging to see new contracts being secured for new models which will assist with the overall export volumes increasing for 2010. It is also encouraging to see the recent announcement through Naamsa (National Association of Automobile Manufacturers of South Africa) that the motor manufacturers will double their investment to R4.62 bn for 2010, he told FTW. “The first two months of 2010 have shown that new vehicle sales are very positive – actually February sales are the highest since October 2008,” says Bateman. Asked how the logistics industry could help reduce the logistics costs that make South Africa less competitive due to the distance to market and major areas of supply, Carmichael has two suggestions. “First is the actual port costs – the fact is that the cost of port calls into South Africa have increased substantially, not only on shipping lines’ port costs but shipping and landing costs which are paid by the motor manufacturer. “This prevents lines from making additional port calls which in turn places pressure on the landside logistics. “Which brings me to the second point – inland transportation costs on both rail and road deliveries are relatively expensive if you measure it in the total logistics chain. Both of these aspects go hand in hand – if the port call costs were reduced, lines could look at multiple ports which would take the pressure off road/rail, creating additional capacity that would more than likely create further competition resulting in cheaper rail/road tariffs. “Both of these factors have contributed to shipping lines and motor manufacturers looking at alternative ‘cheaper’ options like Maputo. “Whilst Maputo has created an aspect of competition, we believe more needs to be done in terms of creating competition within South Africa's own port system,” he said. MSC has been looking for solutions within the current status quo: “We are way ahead as we have strategic depot facilities within a five kilometre radius of two of the major SA auto manufacturers,” says Bateman. NYK also adapts to the needs: “During the course of last year several NYK services reduced their call frequency to South Africa. However with positive signs in this sector we have increased frequency which will already be effective from March 2010.