High logistics costs make local shippers uncompetitive
There is “huge potential”
for South African
manufacturers to export
to the rest of Africa –
but they’re
competing
on an uneven
playing field.
In the likes
of China,
for example,
production
is heavily
subsidised
and they
don’t have to
contend, to the
same extent,
with the high
logistics costs into Africa.
A shipper told FTW on
condition of anonymity
recently: “We manufacture
our bulk products in Gauteng
and then have to transport
them down to the port of
Durban where they would, for
example, be transported by sea
to Angola. Road costs are high
due to delays and congestion
and the Durban port costs are
commonly known to be far
higher than the global average.”
He told FTW that the
company paid an average of
R450 per tonne of bulk cargo to
get it to Durban from Gauteng.
“We pay about US$68 per
tonne to get it from the Durban
port to Angola while it costs a
Chinese producer of the same
product about US$28 per tonne
to get it from a port in China
directly to Angola – and their
production is subsidised by their
respective governments, so they
can offer their products at a
cheaper rate anyway, without
factoring in the logistics savings
they enjoy,” he
said.
All these
factors make
it that much
harder for local
manufacturers
and suppliers
to compete.
“We do have a
small market
share on the
continent,
from
customers who
want the kind of quality we can
provide – and are prepared to
pay for it. But we have to work
that much harder to grow our
market share,” he commented,
adding that a “decent rail
system” could make a difference
in optimising efficiency and
saving on logistics costs.
Africa knowledge
leader at consultancy
Ernst and Young,
Graham Thompson,
agreed that a lack
of infrastructure
development in Africa
added to logistics
costs and that it was thus
prohibitive in terms of crossborder
trade growth.
“There has however been
widespread acknowledgement
of this among high-level
government and business
leaders – including state-owned
enterprises (SOEs) – and there
has been some commitment
to addressing this,” said
Thompson.
He pointed out that
infrastructure was set to be the
next big driver of growth on the
continent as it was “critical
to diversifying the economy”.
Global companies wanting
to expand their businesses
in Africa are also investing
heavily in infrastructure on the
continent, he said.
Andrew Robinson, CEO of
the Kit Group – the largest
manufacturer and supplier of
security company uniforms in
Africa (amongst other corporate
work wear) – agreed that
logistics costs into Africa were
high. “The infrastructure is
simply not on the same level in
many parts of Africa as it is in
South Africa and that does drive
up logistics costs,” he said.
He told FTW that those
manufacturers/distributors
who owned their own f leets
of vehicles and or/storage
and distribution facilities
would have a strategic
advantage in keeping
logistics costs down. “But,
fully understanding the
processes and regulations
along the full supply
chain – and ensuring
compliance with these –
can also help a company
manage costs.”
The Kit Group, which also
imports certain materials
and ready-made specialised
uniform accessories, has
a large in-house bonded
warehouse at its Gauteng
premises. “This protects us
from having to pay additional
import duties on certain items
we would then re-export to
Africa,” he pointed out.
INSERT & CAPTION
Fully understanding the
processes and regulations
along the full supply
chain can help a company
manage costs.
– Andrew Robinson
