The looting and violent attacks on road freight logistics vehicles and the destruction of trucks and goods have begun to undo both the status of South Africa as a safe haven for investment and as an efficient logistics hub for foreign traders, says chief executive officer of the Road Freight Association, Gavin Kelly.
He pointed out that 80% of the country’s goods are carried over roads.
Kelly said that what started out as sporadic incidents on a few routes has become the norm on any and all routes of the total supply chain and is now affecting destinations and originations. “With the total supply chain now being impacted, the economic effects are far-reaching.”
According to the Road Freight Association, while the short-term losses run into millions of rands, the long-term impact is incalculable and will be felt long after the burning has stopped and when it is far too late.
Depending on the category of vehicle, the type and value of cargo, and the specialised equipment required for the cargo, Kelly said that the financial impact could be anywhere between R3 million to R10 million.
And, the cost of loss of income through businesses closing is far greater.
There are instances where small businesses have lost their only truck, or trucks, said Kelly. This means loss of earnings/revenue for the business, loss of salaries paid to staff who would no longer have jobs due to business shutdown, and loss of revenue through the services and support the business uses – namely fuel, storage, maintenance, tolls, staff requirements, and licencing.
The potential closure of businesses means fewer transporters available to perform work. Some companies might feel the industry is not a safe/secure environment, and so their owners could decide to simply close their business, said Kelly.
The Road Freight Association warned that freight travelling through South African ports would choose to move cargo through neighbouring countries. “This has already been happening as South African ports become inefficient, and the surrounding ports develop, improve and drive efficiencies up,” said Kelly.
“South Africa’s ‘Gateway to Africa’ status has been lost, and these attacks will further cement the move of transit freight from South Africa to neighbouring countries,” he said. Port revenues will drop, as will income through all support and related freight logistics users.
The Road Freight Association warned that costs relating to insurance would increase, as the risk to insurers has increased over the last four years, partly as a result of the constant attacks on freight. “The evidence is clear that road freight is attacked as it is an easy target and the looting prospects are huge in terms of the quantity and the variety of goods that can be looted.”
Kelly said that security costs would increase as logistics companies are forced to employ guarding services.
“The consumer will foot the bill for what has happened – through both indirect charges relating to the cost of logistics and as risk appetite softens and insurances demand more for premiums. Supply and demand will dictate the cost.”
What cost are we looking at?
The RFA said that the cost to operational assets is just the tip of the iceberg.
The cost to the South African economy will run into billions of rands lost as business confidence from foreign investors plummets and those who use the country as a transit hub move to other safer countries.
“The level of opportunistic crime is far too high – it needs to be dealt with. Now. Time and again, the association has called for the rule of law to be shown to be firmly in place and that the safety and security of South Africa and its people be ensured.
“The government needs to act swiftly and decisively to bring an end to this senseless destruction of the road freight sector,” said Kelly.
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