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Logistical Cities in Peripheral Areas

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LOGISTICAL CITIES IN PERIPHERAL AREAS Marius Pieter Pretorius April 2013 LOGISTICAL CITIES IN PERIPHERAL AREAS by Marius Pieter Pretorius Thesis submitted in accordance with the requirements for the Philosophiae Doctor degree in the Faculty of Economic and Management Sciences (Centre for Development Support) University of the Free State Bloemfontein April 2013 Promoter: Prof. JGL Marais Co-promoter: Dr H Joynt DECLARATION I declare that this thesis submitted for the Philosophiae Doctor degree at the University of the Free State is my own, independent work and has not been submitted by me to any other university/faculty. I furthermore cede copyright of the thesis in favour of the University of the Free State. MP Pretorius Bloemfontein April 2013 i Acknowledgements This study was made possible by the generous assistance, guidance and support of certain individuals. Without the support of these persons, I would have not managed to successfully complete this study: • Particular thanks to my promoter, Prof. Lochner Marais, whose sacrifices, expert advice, insights and guidance were of great value and helped me to maintain my excitement and focus over this study. • Thanks to Dr Hubert Joynt, co-promoter, who introduced me to the field of freight transport and logistics. • Mr Marius L Pretorius, for language editing. • Prof Pieter Nagel, the then Head of the Institute for Supply Chain Management at the Victoria University at Melbourne for arranging a very stimulating itinerary for my visit in September 2011 and ensuring that I meet both with academics and practitioners of the logistics city concept in the city. • Mr Gerd von Mansberg, Chairperson of the Cargo Connection who spent many hours enlightening me about the workings and intricacies of the air-freight industry and also facilitated the appointments with the senior management of the freight forwarders and cargo airlines that enabled me to perform the semi-structured interviews. • IHS Global Insight, specifically Mr Gerhard Bijker, who graciously made their Regional Explorer modelling data available to me at no cost. • My wife, Anna-Marie who never stopped prompting me to embark on this journey. • The study would not have been possible without the generous funding made available to me by the National Research Foundation as well as the Centre for Development Support at the University of the Free State. The efforts of Professors Lochner Marais and Doreen Atkinson in this regard are gratefully acknowledged. ii TABLE OF CONTENTS LIST OF TABLES viii LIST OF FIGURES ix LIST OF ACRONYMS x 1 SETTING THE SCENE 1 1.1 Background and problem statement 1 1.2 Aim and objectives of the study 4 1.3 Core concepts 5 1.3.1 Peripheral areas 7 1.3.2 Globalisation 7 1.3.3 Logistics and logistics costs 8 1.3.4 Logistics hubs 9 1.3.5 Logistics cities 10 1.3.6 Regional airports and local economic development 10 1.4 Justification for the study 12 1.5 Methodology 14 1.5.1 Literature review 15 1.5.2 Policy analysis 15 1.5.3 Questionnaires and semi-structured interviews 16 1.5.4 Study visit 19 1.5.5 Qualitative assessment of Upington International Airport 20 1.6 Theoretical assumptions 20 1.7 Study outline 22 2 THEORETICAL PERSPECTIVES ON THE LOCATION OF ECONOMIC ACTIVITY IN SPACE 24 2.1 Introduction 24 2.2 Traditional approaches to location theory 25 2.2.1 The classical approach to location theory 26 2.2.2 Neoclassical approaches to location theory 27 2.2.3 The behavioural approach to location theory 28 2.2.4 Synthesis: early location theory 29 2.3 The new economic geography 31 2.3.1 Origins of the new economic geography 32 2.3.2 The basic premise of new economic geography 32 2.3.3 Substantive contribution of the new economic geography 34 2.3.4 Synthesis: the new economic geography 35 2.4 The modern economy and globalisation 36 2.4.1 The modern economy 37 2.4.2 Defining Globalisation 38 2.4.3 Globalisation and spatial inequality 38 iii 2.4.4 Implications of globalisation for peripheral areas 41 2.4.5 Globalisation, transport and air transport 42 2.5 Clustering of economic activity 43 2.5.1 Definition of the term cluster 44 2.5.2 Main elements of a cluster 46 2.5.3 Clusters and transportation 48 2.5.4 Cluster development in peripheral areas 49 3 CLUSTERS, LOGISTICS CENTRES AND LOGISTICS CITIES 53 3.1 Introduction 53 3.2 Logistics management and regional connectivity 53 3.3 Conceptual framework of international logistics centres 56 3.3.1 Variety of terminologies regarding logistics centres 57 3.3.2 Basic attributes of logistics centres 59 3.4 The logistics city concept 61 3.5 Typology of logistics centres 64 3.5.1 Base typology of logistics centres 64 3.5.2 Level 1: Freight village 65 3.5.3 Level 2: Inland port 66 3.5.4 Level 3: Freight hub 68 3.5.5 Level 4: Logistics city 70 3.5.6 Further development of the base typology 74 3.5.7 Conclusions on the logistics centre typology 76 3.6 Critical logistics cities enablers 79 3.6.1 Base enabler 80 3.6.2 Functional enablers 82 3.6.3 Integrating enabler 89 3.6.4 Concluding remarks on the logistics city enablers 90 3.7 The logistics city concept and peripheral areas 91 3.8 Conclusion 93 4 THE TRANSPORT AND LOGISTICS ENVIRONMENT 95 4.1 Introduction 95 4.2 Transport, trade and the economy 95 4.3 Transport investment 96 4.3.1 Generative effects of transport infrastructure investment 96 4.3.2 Economic impact of transport investment 97 4.3.3 Economic impact of airports 99 4.3.4 Role of transport in the development of peripheral areas 100 4.4 Transport modality 102 4.4.1 Modal Characterictics 102 4.4.2 Modal contribution to economic development 103 iv 4.5 Transport logistics 105 4.5.1 Importance of logistics 105 4.5.2 Evolution of logistics 105 4.5.3 Logistics, trade and freight flows 107 4.6 International trends in logistics 109 4.6.1 General trends 109 4.6.2 The cost of logistics 112 4.7 The air-freight operating environment 115 4.7.1 General background to air freight 115 4.7.2 Air-freight categories 116 4.7.3 Goods suitable for air freight 117 4.7.4 Main industry role players 120 4.8 Air freight and the economy 121 4.8.1 Air freight as engine of economic growth 121 4.8.2 The global air-freight industry 124 4.8.3 Future air-freight growth projections 125 4.9 Conclusion 127 5 LOGISTICS AND LOCAL ECONOMIC DEVELOPMENT IN SOUTH AFRICA 130 5.1 Introduction 130 5.2 Overview of the air-freight market in Africa and in South Africa 130 5.2.1 Air freight in Africa 131 5.2.2 Air-freight transport in South Africa 134 5.2.3 Logistics costs and performance indicators 140 5.3 The logistics policy context in South Africa 145 5.3.1 The National Freight Logistics Strategy 146 5.4 The LED and policy environments 156 5.4.1 LED: an international perspective 156 5.4.2 LED in South Africa 160 5.5 Conclusion 169 6 LOGISTICS, AIR FREIGHT AND LOCAL ECONOMIC DEVELOPMENT IN UPINGTON 173 6.1 Introduction 173 6.2 History and development of Upington 173 6.2.1 The first settlement 174 6.2.2 Olyvenhoutsdrift settlement becomes Upington 175 6.2.3 From mission station to present-day regional centre 176 6.2.4 Upington’s economic base 178 6.2.5 Provincial perspective 178 6.3 Upington and its airport 185 6.3.1 Historical development of the Upington International Airport 186 6.3.2 Technical specifications of and facilities at the Upington International Airport 188 v 6.3.3 Current air-freight volumes 191 6.3.4 Recent infrastructural developments at Upington International Airport 192 6.4 Assessing strategies to support airport development 193 6.4.1 Attempts by //Khara Hais Local Municipality to support the airport development 194 6.4.2 Northern Cape Provincial Growth and Development Strategy 198 6.4.3 The Northern Cape Freight Transport Strategy 200 6.4.4 Airport Company of South Africa’s strategies and policies 201 6.5 Conclusion 202 7 ASSESSING THE POTENTIAL OF THE UPINGTON INTERNATIONAL AIRPORT AS A FREIGHT HUB 205 7.1 Introduction 205 7.2 Evaluation of the Upington Internation Airport within the logistics city framework 207 7.2.1 Base enabler: Market 208 7.2.2 Functional enabler 1: Infrastructure 209 7.2.3 Functional enabler 2: Services 210 7.2.4 Functional enabler 3: Workforce 211 7.2.5 Functional enabler 4: Knowledge 211 7.2.6 Functional enabler 5: Capital 211 7.2.7 Functional enabler 6: Competition 212 7.2.8 Integrating enabler: Governance 212 7.2.9 Synthesis 213 7.3 Critical reflections on the concept of an air-freight hub at Upington 214 7.3.1 Lack of an integrated planning approach 214 7.3.2 Ownership of airports by the Airport Company of South Africa 216 7.3.3 Lack of institutional capacity 216 7.3.4 Insufficient understanding of modern location theory perspectives 217 7.3.5 Lack of a systems perspective 218 7.4 Towards a framework for the development of the Upington International Airport 219 7.4.1 Proposed framework 219 7.5 Conclusion 222 8 MAIN FINDINGS 224 8.1 Introduction 224 8.2 Main findings 224 8.2.1 Market conditions 224 8.2.2 Assimilation of logistics and air-freight industry into LED 226 8.2.3 Information availability 227 8.2.4 Logistics and country competitiveness 228 8.3 Proposals for the way forward 230 8.4 Proposals for future research 234 vi 8.5 Value of study 235 8.5.1 First study on logistics city concept in South Africa 235 8.5.2 First study in South Africa to focus on the relationship between air freight and local economic development in a peripheral area 236 8.5.3 Establishment of infrastructure alone is insufficient for development of a hub 236 References 237 SUMMARY 263 ANNEXURES 267 vii LIST OF TABLES Table 1: Summary of main characteristics of early location theory .......................................
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