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The State of Logistics in South Africa: the Effect of Road Conditions on Logistics

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The State of Logistics in South Africa: the Effect of Road Conditions on Logistics 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.
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