THE STATE OF LOGISTICS IN SOUTH AFRICA: THE EFFECT OF ROAD CONDITIONS ON LOGISTICS
D.J. King1, W. Bean2, W.J. vdM. Steyn3, J. Havenga4
1 CSIR Built Environment Pretoria, Gauteng, South Africa; email: [email protected]
2 CSIR Built Environment Pretoria, Gauteng, South Africa; email: [email protected]
3 Faculty of Engineering, Built Environment & IT, University of Pretoria Pretoria, Gauteng, South Africa; email: [email protected]
4 CSCM, Department of Logistics, Stellenbosch University Stellenbosch, Western Cape, South Africa; email: [email protected]
Abstract
To prosper, a country’s economy depends, inter alia, on an efficient logistical system to ensure that goods can be transported between producers and users at the lowest cost. The costs associated with logistics include transport, storage, inventory, and management costs. In South Africa transport costs represents more than 50% of total logistics cost and this figure is probably even higher for other African countries. The condition of transport infrastructure of a country directly influences the transport cost and therefore the logistics cost of that country. In this paper the effects of road conditions on the costs of logistics are evaluated. This is done through analysis of data obtained from a Logistics Service Provider on actual truck costs (maintenance and repair) as well as road condition data for the routes used by the company. Analysis of the data indicates that the logistics costs increases significantly with decreasing road conditions.
1. THE STATE OF LOGISTICS IN SOUTH AFRICA
The ability to measure logistics costs on a regular basis creates a continuous macro understanding of the state of logistics in a country or region, and also makes it possible to gauge the impact of various public and private sector initiatives to reduce such logistics costs. The CSIR, Stellenbosch University and IMPERIAL Logistics released the 6th Annual State of Logistics survey for South Africa in March 2010. The annual publication of the survey now makes it possible to view and analyse quantitative logistics trends in South Africa for the past six years and aims to inform and assist public and private sector role- players and decision makers operating in the logistics and supply chain management environment.
The cost of logistics
Logistics cost for 2008 totalled R339 billion, or represented as a percentage of Gross Domestic Product (GDP) stood at 14,7%. This is the lowest it has been since 2003 when it was measured for the first time. Figure 1 shows the logistics costs from 2004 to 2008.
It can be seen from the figure that transport costs consistently represent more than 50% of total logistics cost. South Africa has a transport intensive economy not only due to the distance from international markets, but also because of the geographic location of industry and population in the centre of the country. There is thus an extra distance that needs to be travelled to reach the coast and in most cases this is done via road. Almost R155 bn of the total domestic transport cost of R171 bn (or around 90%) can be attributed to road (Havenga et al, 2010). This means that road transport has a significant impact on the
4th SARF / IRF Regional Conference for Africa 11 - 13 October 2010 "Preserving Africa's Road Network" ISBN: 978-1-920017-50-7 Somerset West, Cape Town, South Africa 314 total logistics cost of the country and remains one of the biggest challenges to lowering logistics costs in South Africa.
Figure 1: Logistics costs for South Africa from 2004 to 2008 (Havenga et al, 2010)
Road freight volumes
Just over 1,4bn tons were transported by road over an average transport distance of 185km, delivering 260bn ton-km during 2008. Table 1 shows the road freight volumes transported for three typologies in South Africa (adapted from Havenga et al, 2010).
Table 1: Road freight volumes in South Africa for 2008 Transport Average distance Tonnage Ton Ton-km Ton-km typology (km) (mt) percentage (bn) percentage Metropolitan 78 798 57% 62 24% Rural 174 395 28% 69 26% Corridor 604 213 15% 129 50%
There is a heavy reliance on road transport in South Africa as can be seen from the table and this places a burden on infrastructure maintenance and –delivery, especially on the long distance corridors between major cities and ports. As will be discussed in more detail in the next section South Africa’s national roads (mainly corridors and freeways) are in a reasonable condition, but provincial, metropolitan and municipal roads are deteriorating at a fast rate. The backlog in and lack of proper and regular maintenance is negatively affecting the economy as well as the ability of the country to compete globally. The case study that follows in section three highlights the potential effect of bad roads on total logistics costs.
4th SARF / IRF Regional Conference for Africa 11 - 13 October 2010 "Preserving Africa's Road Network" ISBN: 978-1-920017-50-7 Somerset West, Cape Town, South Africa 315 2. ROAD CONDITIONS IN SOUTH AFRICA
Roads in South Africa are managed on four levels. These are national roads (managed by the South African National Roads Agency Ltd (SANRAL)), provincial roads (managed by the provincial roads departments), metropolitan roads (managed by the nine large metros in South Africa) and municipal roads and streets (managed by the local authorities). Each of these entities has the responsibility to plan, construct, manage and maintain the roads under their jurisdiction. In Table 2 the lengths of roads under jurisdiction of each of these three levels of authority is shown (Kannemeyer, 2009). The unproclaimed roads are roads that are known of, but with no specific jurisdiction and not formally maintained by any authority.
Table 2: South African road network (Kannemeyer, 2009) Authority Paved (km) Gravel (km) Total (km) SANRAL 16 170 0 16 170 Provinces (9) 48 176 136 640 184 816 Metros (9) 51 682 14 461 66 143 Municipalities 37 691 302 158 339 849 TOTAL 153 719 453 259 606 978 Unproclaimed (estimate) 0 140 000 140 000 Estimated total 153 719 593 259 746 978
These roads range in ages from new roads (less than 5 years old) up to roads that are more than 25 years old. The majority of these roads (78 per cent) is older than their original design life of 20 years. In order to evaluate the condition of these roads, it is important to conduct regular surveys of their functional and structural conditions. This is currently not the norm in South Africa (excluding the SANRAL roads where regular surveys are done and reported on (SANRAL, 2009)). Current condition data for 75 per cent of the paved roads and 24 per cent of the gravel roads are available, and some of the data are more than 5 years old.
The condition of roads can be expressed using various parameters. One method is pavement roughness, which is measured in terms of the International Roughness Index (IRI) (Sayers et al, 1986). The IRI is a scale indicative of the unevenness of the road profile, ranging from 0 mm/m as a perfect even road to 16 mm/m as an impassable road. Typical good road profiles will have an IRI of around 2 mm/m. At least 95 per cent of travel undertaken on national roads in South Africa between 2004 and 2009 occurred on roads with roughness levels of better than 4.2 mm/m (SANRAL, 2009). Road condition can also be expressed using the Visual Condition Index (VCI) which is reported on a 5-point scale from very good to very poor. Deteriorating road quality can potentially have negative effects on vehicle maintenance costs of a company, which translates into increased logistics costs, as will be discussed in the next section of this paper.
Viewing the overall network in South Africa, it can be seen that up to 84% of the national and provincial roads in the country (viewed per province) is in a very poor, poor and fair condition (Figure 2). Only SANRAL, Gauteng and Mpumalanga show less than 10% of their roads in a very poor and poor condition. However, only the SANRAL data are recent with the condition data from most of the provinces being out of date and deterioration in road condition over the last number of years will most probably negatively influence these percentages, as anecdotal evidence on the road indicates.
4th SARF / IRF Regional Conference for Africa 11 - 13 October 2010 "Preserving Africa's Road Network" ISBN: 978-1-920017-50-7 Somerset West, Cape Town, South Africa 316
Figure 2: Road conditions in terms of Visual Condition Index (VCI) for national and provincial roads (Kannemeyer, 2009)
In the metros and municipalities, between 18% and 21% of the paved roads are in a very poor to fair condition (shown in Figure 3). This indicates probably better management of roads in these areas, however, the length of road managed by each metro and municipal authority is also much less than that managed by the provincial authorities and it is distributed over a smaller area that may partly influence these better conditions.
Figure 3: Road conditions in terms of VCI for national, provincial, metro and municipal roads (Kannemeyer, 2009)
Recent proposed changes in the management of funding for road infrastructure in provinces, metros and municipalities may lead to ring-fenced funding that can only be applied to road infrastructure maintenance and management (Ndebele, 2010). This may go a long way in improving the conditions of
4th SARF / IRF Regional Conference for Africa 11 - 13 October 2010 "Preserving Africa's Road Network" ISBN: 978-1-920017-50-7 Somerset West, Cape Town, South Africa 317 road infrastructure in South Africa on all levels, however, the necessary skills to implement management programs in the various authorities is also vitally important.
3. POTENTIAL EFFECTS OF BAD ROADS ON LOGISTICS COST
Deteriorating road quality can potentially have many negative effects on vehicle operating and design costs that can eventually translate into negative effects on logistics cost and the broader economy of a country. This idea was introduced by Steyn et al. (2009) where they identified potential consequences of bad road quality on the broader economy and performed an initial study to investigate the potential severity of these effects. Even though their initial study focused exclusively on the increases in the total repair cost of suspension and trailer components of trucks travelling on roads with deteriorating road quality, significant effects were evident. This was substantiated recently in a more comprehensive study on the potential effect of bad roads to a company’s logistics cost (Steyn and Bean, 2010).
Some of the potential effects that deteriorating road quality could have on the broader economy of a country are depicted in Figure 4, adapted from Steyn et al. (2009).
Figure 4: Potential effects of poor road conditions on the economy
Travelling on a road with a poor riding surface will increase the vibrations experienced by the vehicle, people and cargo transported. Increased vibrations can result in increased vehicle damages, eventually leading to increased vehicle maintenance cost. In addition, the increased vibrations can also result in unnecessary damages to transported cargo, potentially causing the cost of the transported cargo to increase without adding additional value to the transported items.
The load of a vehicle travelling on an uneven or bad road results in increased loads on that road, leading to increased road damages and maintenance cost. This is explained by Steyn et al. (2009), where they comment that increased vibrations result in increases in the dynamic component of a vehicle’s load on the road, leading to faster road deterioration rates.
In addition to increased vehicle operating and maintenance cost and road maintenance costs, bad roads can also have various potential effects on the environment and associated environmental costs through increased fuel consumption and use of natural resources to reconstruct roads.
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Steyn and Bean (2010) comment that these problems can be addressed by improving the vehicle design or the packaging of the transported cargo, however the additional cost associated with such improvements will eventually be translated into increased cost to the end-user or consumer. Since these measures will have to be implemented by every company transporting cargo on road, the cost associated with improving vehicle design and cargo packaging can potentially become massive. An alternative measure is to improve and maintain the condition of the road network, thereby addressing the root problem and not only the symptoms. The cost of improving and maintaining roads can be very high, therefore the cost and benefits associated with this alternative should be investigated to ascertain whether this alternative will be economically feasible.
A case study focusing on the cost of bad roads, hence the potential benefit that can be realised if roads are maintained properly, is presented in the following section (Steyn and Bean, 2010). The cost of maintaining roads does not form part of the case study presented in this paper, however it should be investigated in future research studies to enable a proper cost-benefit analysis on the maintenance of bad condition roads.
Case study
A case study was conducted at two operating companies within a large logistics service provider in South Africa to investigate the potential impact of road condition on vehicle maintenance and repair cost as well as logistics costs (Steyn and Bean, 2010). The first company, A, transports cargo on the primary road network whereas the second company, B, transports cargo on both the primary and secondary road networks of South Africa.
During the study the International Roughness Index (IRI), a standardised measurement of the roughness qualities of roads that impacts vehicle response, was used to grade the condition of road segments travelled on by the two companies. The condition of a road segment with an IRI of 2.7 or less was graded as good, whereas road segments with an IRI value between 2.7 and 4.0 were graded as fair condition roads. Finally, the condition of a road segment with an IRI of more than 4.0 was regarded as bad. The average maintenance and repair cost per kilometre was calculated for each of the segments and these values are presented in Table 3.
Table 3: Maintenance and repair cost for different IRI's (Steyn and Bean, 2010) Average Road Average IRI maintenance Company Route Information condition (mm/m) and repair cost rating (ZAR/km) Gauteng to Durban (N3) 2,7 Good 1,01 A Gauteng to Cape Town (N1) 3,6 Fair 1,30 Gauteng to Durban (N3) 2,7 Good 0,90 Gauteng to Nelspruit (N4) 2,9 Fair 0,82 Gauteng to Witbank (N12) 3,4 Fair 1,27 Gauteng to Rustenburg (N4) 3,3 Fair 1,04 Gauteng to Richardsbay (N17 and N2) 3,6 Fair 1,31 B Johannesburg to Vereeniging (R82) 3,6 Fair 1,57 Gauteng to Cape Town (N12 and N1) 3,6 Fair 1,29 Gauteng to Botswana (N4) 3,9 Fair 1,35 Newcastle to Gauteng (N11 and N17) 4,2 Poor 2,09 Gauteng to construction sites 4,3 Poor 2,13
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These values clearly indicate that the average vehicle maintenance and repair cost per kilometre increases as the road roughness increases. In addition, Steyn and Bean (2010) performed a correlation analysis between the average IRI and the average vehicle maintenance and repair cost and concluded that there is a strong linear relationship between road roughness and repair and maintenance costs of trucks.
The increased maintenance and repair cost has a direct influence on the total logistics cost of a company. This statement is substantiated by the second part of the case study presented by Steyn and Bean (2010), focusing on Company A. They use additional data from Company A, for two time periods between January and June 2008 and 2009, to derive the effects of increased maintenance and repair costs on the company’s logistics cost. The results, depicted in Table 4, indicate that the vehicle maintenance and repair cost can potentially increase with 121% when moving from a good road to a bad road. This in turn could result in a potential increase of 9,97% in the total logistic cost of Company A.
If the effects of bad roads on the logistics cost of one company could result in an increase of almost 10% it could have substantial effects on other companies in South African as well, which can eventually translate into increased logistics cost of the whole country.
Table 4: Potential increases for worsening roads Average percentage increase Average Average percentage Road in the truck maintenance maintenance and increase in company condition and repair cost repair cost (R/km) logistics cost [%] [%] Good R 0,96 - - Fair R 1,24 30,2 2,49% Poor R 2,11 121,0 9,97%
The case study, even though limited, confirmed that there is more to the effects of bad roads than merely being a nuisance to road users. It can potentially have tremendous effects on a country’s logistics cost, which can have various negative consequences to the national economy of a country.
4. CONCLUSION
The total logistics cost for South Africa in 2008 amounted to 14,7% of GDP of which 50,4% can be attributed to transport costs. Road transport accounts for around 90% of total transport costs and thus has a significant impact on logistics cost in South Africa. The heavy reliance on road transport places a burden on infrastructure maintenance and delivery. The condition of roads (especially provincial roads) in South Africa has deteriorated significantly over the past few years and unfortunately the backlog in maintenance is negatively affecting the economy and the ability of the country to compete internationally. A case study that was conducted indicate that the potential effect of deteriorating road quality on vehicle maintenance and repair costs and on the total logistics costs of a company are significant. It is advocated that a proper cost-benefit analysis is done on the maintenance of bad roads.
5. REFERENCES
Havenga, JH., Van Eeden, J., and Simpson, Z. (2010). “The State of Logistics in South Africa – Sustainable improvements or continued exposure to risk.” The 6th annual State of Logistics Survey for South Africa: Logistics value and cost driving macro and micro-economic change towards global competitiveness and sustainability 2009, King, D. (ed), CSIR.
4th SARF / IRF Regional Conference for Africa 11 - 13 October 2010 "Preserving Africa's Road Network" ISBN: 978-1-920017-50-7 Somerset West, Cape Town, South Africa 320 Kannemeyer, L. 2009. “RSA road condition”. Presentation made at the 18th Roads Pavement Forum, November 2009, http://www.csir.co.za/Built_environment/Infrastructure_engineering/rpf/18RPF/ 4%20L%20Kannemeyer.pdf, accessed on 19 April 2010, Pretoria, South Africa
Ndebele, J.S. (2010) “Budget vote address at the National Assembly by Mr Sibusiso Ndebele, MP, Minister of Transport, Cape Town”, http://www.info.gov.za/speeches/2010/10041409451002.htm, accessed on 19 April 2010.
SANRAL, (2009) “Annual Report 09”. South African National Roads Agency Limited (SANRAL). Pretoria, South Africa.
Sayers, M.W., Gillespie, T.D. and Queiroz, C.A.V. (1986) “The international road roughness experiment. Establishing correlation and a calibration standard for measurements.” Washington, D.C., USA: World Bank. (World Bank Technical Paper Number 45).
Steyn, W.J.v.d.M., Bean, W.L., and Monismith, C.L. (2009) “The potential cost of bad roads in South Africa.” The 5th annual State of Logistics Survey for South Africa: Value and cost drivers from a macro and micro-economic perspective 2008, King, D. (ed), CSIR.
Steyn, W.J.v.d.M., and Bean, W.L. (2010) “Cost of bad roads to the economy.” The 6th annual State of Logistics Survey for South Africa: Logistics value and cost driving macro and micro-economic change towards global competitiveness and sustainability 2009, King, D. (ed), CSIR.
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