Despite the current economic downturn, and the changing of South Africa’s freight transportation policy, which hopes to once again transport the majority of bulk materials by rail, the future of South Africa’s commercial vehicles industry is still bright, reports the Road Freight Association (RFA).

RFA operations manager Gavin Kelly reports that the current slow progress of the implementation of the National Freight Logistics Strategy will prolong this positive outlook for the industry.

Previously, the majority of South Africa’s freight transportation was done by rail. However, owing to a number of factors, freight transportation moved from rail to road.

These included the aging rail infrastructure and transportation routes, and the quicker turnaround time achievable by road.

Government acknowledges that bulk transportation movement needs to be shifted back to rail, and is in the process of implementing a number of initiatives to improve the rail network.

A significant portion of these initiatives are centered around the improvement of freight corridors from seaports to the business focused interior of the country.

The main corridor is the Durban-Johannesburg corridor that runs from Durban, KwaZulu-Natal to Johannesburg, Gauteng.

In addition, Transnet is also in the process of rolling out its multi-million capital expenditure programme in an effort to improve its rail network and assets. In October, Engineering News reported that the company is going to be rolling out a R21-billion capital expansion project, the majority of which will be spent in the 2008/9 financial year.

However, financial market analysis company Econometrix consultant Frank Beeton notes that, if there is to be a significant change in the country’s freight transportation policy, it is not likely to go ahead before 2010.

“Government is unlikely to implement a transportation policy that will put the 2010 FIFA World Cup in jeopardy. This argues against a wholesale move of bulk materials handling back to rail within the next two to three years,” he says.

Nevertheless, while the movement of freight transport back to rail is likely to be a slow process, road freight companies will eventually start feeling the effects of the change.

Mixed Effects
Kelly reports that the movement of bulk transportation from road to rail will affect some companies, but adds that, the effect will be minimal. He comments that the effects of increased rail transportation on road freight companies will fluctuate depending on the size of the company.

While smaller transportation companies may have to close down, and medium-sized companies may lose a significant portion of their profits as a result of the move, larger companies are unlikely to be affected.

“Obviously, this will impact on the operations of current transport companies, and in order to reduce this effect, the RFA has on a number of occasions, requested details regarding exactly what commodities have been identified to be transferred from road to rail, what routes this will be implemented on and what the timeframes would be,” says Kelly.

Common Ground
Although the commercial vehicles industry will be affected by the move in some way, Kelly reports that there are a number of ways to reduce the effect that this move will have.

“The first way to reduce the effect of this move is to be in constant dialogue with Transnet over the company’s plans to move certain commodities to rail and the expected timeframe of this move,” says Kelly. He adds that this nessesary dialogue needs to take place between Transnet and the RFA.

The second way of overcoming this is to find common ground between rail transport and road transport.

Kelly comments that there may still be an opportunity for trucking companies to increase profit margins through the transportation of the commodities that are being transported by rail. This could be achieved through the transportation of commodities from the point of manufacture to rail, and from rail to the commodity’s final destination.

“Finally, the industry needs to have a clear understanding of the role that freight transportation plays in the economy in relation to the demands of the customer. This is an area where road transportation will always play a role and rail needs to discuss a true multi-model freight strategy with road operators,” says Kelly.

Tough Industry
Kelly reports that that although the commercial vehicles industry gives the appearance of profitability, this profit is seldom seen in the first two years of a company’s operations.

He attributes this to the stiff competition that exists between operators and routes.

“Smaller companies in the industry cannot compete against the bigger companies with larger fleets and more resources. Smaller companies usually close down on account of not having a large enough support mechanism to maintain trucks when they break down. Because of the size of smaller companies, fuel cannot be purchased at cheaper prices. As a result, the price to transport goods using a smaller carrier is higher then using a larger carrier,” says Kelly.

He adds that even though the commercial vehicles industry is a difficult industry to establish a high year on year growth. About 80% of all bulk transport in South Africa is transported by roads.

“The growth of the country’s economy and population over the past few years has necessitated greater flows of freight. Because these flows cannot be accessed by rail, the commercial vehicles industry has grown,” says Kelly.

Current Trends
Kelly says that the growth in the economy over the past few years has resulted in an average growth of about 15% in the total tonnage of goods being delivered throughout the country.

There has also been an increase in the amount of cross-border freight movement. This is set to increase over the coming months as the political situation in neighboring Zimbabwe improves. Cross-border freight movement into Zambia will be driven by the mining boom in the country.

He adds that towards the end of last year and the early part of this year, there was an increase in the amount of smaller delivery vehicles, vehicles below 3 500 kg, as well as vehicles up to 16 000 kg, on the road. This can be attributed to the growth in deliveries over shorter distances.

Skills Crisis
Kelly reports that there is a significant skills shortage within the commercial vehicles industry. This includes a shortage of drivers, supervisors, loaders and packers. He adds that the RFA has conducted a number of workshops to overcome this issue.

“The Transport Education and Training Authority (Teta) has been approached to assist with the creation of learnership and training programmes to overcome the skills shortage. Teta’s role would be to identify service providers to assist with the training in the professional categories that are in short supply. This will be rolled out in conjunction with the driver training academy, which the RFA is in the process of establishing,” concludes Kelly.