Agriculture needs rural connectivity and efficient corridors

After nearly imploding in 2023, there are minor improvements in South Africa’s freight system, thanks to government intervention and private-sector support. By Engela Duvenage.

The transport sector is crucial to a country of South Africa’s size, said macro-logistics researcher and consultant Prof. Jan Havenga.

Havenga teaches at Stellenbosch University and is a director of the GAIN Group, a logistics and transport consultancy. He consults to the World Bank and the National Logistics Crisis Committee, established in 2023 to tackle critical issues in the transport sector.

South Africa is about the size of Germany and France combined, but its GDP is nearly 18 times smaller. “We are a spatially challenged country and have to move freight over huge distances for the same returns as other countries that require much less transport,” he said.

According to GAIN’s freight demand model, South Africa needs 1.4% of world maritime and 1.1% of surface freight to keep its economy going. Yet our GDP is less than 0.4% of the world’s total. Coal, manganese, fresh produce, and surplus maize exports, as well as wheat and finished goods imports, must be moved over vast distances.

“We need so much more transport,” said Havenga. “However, despite it being a strategic commodity, transport has never in the history of South Africa been seen as such. Our Department of Transport, since the formation of the Union, has never received enough attention.”

Since 2007, the number of light and heavy trucks and trailers on the roads has increased dramatically, while the number of new Transnet locomotives commissioned has dropped sharply.

The mining, manufacturing and agricultural sectors have gradually reduced their use of the local railway system in favour of the road network since the 1930s — often unnecessarily, said Havenga.

The decline of rail

“In 2023, we had the lowest throughput of general freight along our railway system since the Second World War,” said Havenga.

“Putting freight on the road that should be on trains makes the system expensive and congested. Everything takes longer. Our railways must carry 15 million tonnes monthly or more to be sustainable. Less than that will just mean a continuous downward spiral.”

In 2011, some 60 000 standard-sized containers were handled by rail. By 2022, this had dropped to an alarming all-time low of 8 000 containers. In April 2024, the figure improved to 15 000 containers.

The expected growth in the fruit sector requires a much stronger transport network by 2052, said Havenga. Agriculture needs rural connectivity and efficient corridors such as main roads and ports.

The logistics cost of the agricultural sector (51%), and even more in the case of the fruit sector, is proportionally much higher than that of the mining (40%) or manufacturing (31%) sectors. The agricultural sector contributes R159 billion to South Africa’s GDP and moves 85 million tonnes. Its logistics bill is R81 billion.

“Transport is not getting the support from government that it should,” said Havenga. “The government’s role is not only to make rules but to support the value chain through integrated freight, road, and rail planning, providing the necessary infrastructure, spatial planning, zoning, and policy that integrates all of this.

“Instead, our railway system is collapsing. There are gaps in our transport system. According to our calculations, South Africa is losing 5% of its GDP, or R1 billion per day, because of Transnet. We cannot afford that.”

Best and worst year

Havenga said 2023 was South Africa’s best and worst year in terms of logistics, with its port system nearly collapsing. “In September, October, and November last year, we came very close to a logistics blackout, where everything just freezes.”

A positive sign was the President’s announcement during the 2023 State of the Nation Address of a Roadmap to Change for the freight sector. It was subsequently compiled by Operation Vulindlela and approved by the cabinet in December 2023.

The Roadmap sets out how the treasury will fund a much-needed renewal process, change in the sector will be liberalised, and opportunities opened for private-sector involvement. Havenga was heartened by the appointment of the new Transnet board in July 2023 and what he describes as a highly skilled and professional new Transnet management team led by Michelle Phillips in March 2024.

“There is a general feeling of openness and engagement between business, Transnet, treasury, and other government departments,” he noted. However, the turnaround plan is still too short-term and operational to his liking, with the slow implementation of long-term restructuring in recent months.

The road ahead

“The restructuring of Transnet is now required,” he said. “The core network infrastructure must be rehabilitated, and Transnet’s debt burden addressed. On the regulatory side, the President has just signed the transport economic regulation bill requiring an efficient and immediate set up of the regulator.”

Regulatory capacity must improve, while a proper implementation plan is needed to help government departments transition to a model in which the private sector provides services such as operations, maintenance, and security.

Havenga is not overly optimistic about the draft network statement that Transnet published for public consultation in early June 2024. It explains how the private sector can hire Transnet’s network, but he thinks the proposed tariffs are three times higher than they should be because they incorporate Transnet’s debts and problems.

In conclusion, Havenga feels South Africa’s freight sector needs overall spatial planning. It requires super-terminals linked to ports, dry ports, border ports, and fuel terminals with the same management platform.

Through the provincial Land Transport Framework, the Western Cape is working toward a regional super-terminal, probably situated around Kraaifontein, that can handle fruit, containers, dry bulk, and fuel.

“The future of rail has a direct link to mankind’s survival,” cautioned Havenga. “A failed railway will be a nail in the coffin of a failed state.”

Watch Havenga’s presentation on the Hortgro YouTube channel.