Poor rural roads push up agricultural logistics costs

The transport infrastructure in rural SA is so poor that the price of commodities moved in and out of these areas is hammered by road haulage costs and no rail alternatives. Information from the recent SA Transport Conference indicated that this logistics cost was about 40%-60% – pushing up the transport price for agricultural products distributed around the country or to export gateways well above the average rate, measured at 16% of the gross domestic product (GDP). Research by economist Jan Havenga published in the SA Journal of Economics showed that SA’s logistics costs were much higher than the global average. The majority of these costs were attributable to road transport, he said, of which the biggest cost driver was fuel, which in turn was determined by volatile oil prices – which have remained in the US$112- 120-per-barrel range despite it being the lower demand period of the northern hemisphere summer. “This poses a significant exogenous risk to logistics cost management in SA,” added Havenga. “The risk can be mitigated through a structural adjustment in long-distance freight transport from road dominated to rail dominated.” But, the transport conference was told, the railways infrastructure needs to be vastly improved because it is hindering the cost-efficient movement of products – particularly bulk products like commodities. High logistics costs are continuing to hurt South Africa’s competitiveness, according to the State of Logistics survey, conducted by CSIR and Imperial Logistics. It said that logistics costs made SA products more expensive in the global market place, which, added Imperial’s Abrie de Swardt, made the country uncompetitive with regard to exports. But there may be a partial answer to the excessive road transport costs in rural farming areas, which could benefit agricultural products by improving the dilapidated condition of the road network. Deputy transport minister, Jeremy Cronin, said that R6-billion had been ringfenced to upgrade rural roads.