THE FIERCELY competitive road freight industry is being squeezed as never before. Narrower margins and increased competition coupled with an escalating security risk is forcing operators to work smarter.
FTW's Theresa Coles takes a closer look.
Industry squeezed from all sides Challenges force innovation Mike Alistoun, head of member services at the Road Freight Association (RFA), paints a rather grim picture of the challenges and cost pressures facing the road freight industry. Alistoun says the major challenge is increasing costs, which are putting many operators out of business. A major cost factor is the time taken to reach a settlement during the industry's annual wage negotiations, which often deadlock, causing delays and sporadic work stoppages. Alistoun says the RFA would prefer to see wage negotiations become a bi-annual event, to cut down on the associated delays and work stoppages. Competition from Spoornet, which is able to claim the VAT on its electricity expenditure as an input cost, and which benefits from cross-subsidisation, is also seen as unfair to the road freight industry, which uses diesel. Competition from other parastatal transport modes, eg involving Portnet, as well as cheaper fuel sold in neighbouring states, are also threats. Alistoun says monthly fuel price hikes play havoc with contracts as increases cannot be passed on to the client once contracts have been concluded. The costs associated with the increased incidence of vehicle hijackings have also squeezed margins. One of Alistoun's biggest concerns is the fact that a dedicated road fund no longer exists and that the fuel levy collected from road users is being put into Government's general coffers, and used for general socio-economic upliftment. The resultant poor road conditions have substantially increased vehicle maintenance costs. A shortage of weigh-bridges (mass measuring meters) and law enforcement officers to police overloading is also threatening the industry. The road freight industry has responded to these challenges with innovations to maintain its competitiveness and contain costs, says Alistoun. The use of intermodal transport is an example of such an innovation. He cites the example of Australia where road and rail are able to co-operate for the transportation of containers and bulk produce over long distances. Alistoun says the industry is extremely concerned that the National Road Traffic Act (Act 93 of 1996), which makes provision for changes to the industry since 1986, has not yet been passed by Government, nor the associated regulations published. Alistoun considers this to be a delaying tactic by Government, whom he says has lost several key staff, dramatically depleting the Department of Transport's skills base and its ability to respond proactively.
