Counting the ever-increasing cost: Impact of the ongoing attacks and looting on road freight

Road carries 80% of South Africa’s goods. Simply put: when trucks stop, South Africa stops. The looting and violent attacks on road freight logistics vehicles – which occurs whenever someone is upset – and the wanton destruction of trucks and goods has begun to undo both the status of South Africa as a safe haven for investment, and as an efficient logistics hub for foreign traders. What started out as sporadic incidents on one or two routes, has become the norm on any and all routes of the total supply chain, and is affecting destinations and originations. With the total supply chain now being impacted, the economic effects are far reaching. Whilst 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, the specialised equipment required for the cargo: the financial impact can be anywhere between R3 to R10-million;
• 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. 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), loss of revenue through the services and support the business uses (eg. fuel, storage, maintenance, tolls, staff requirements, licencing, etc);
• Potential closure of businesses means less 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;
• Freight travelling through South African ports (especially the Port of Natal and along the corridors that have been targeted): cargo owners / customers will 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. 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. Port revenues will drop, as will income through all support and related freight logistics users;
• Costs relating to insurance will 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;
• Security costs will increase as logistics companies are forced to employ guarding services. Routing will change to safer (but perhaps far longer) routes, where control is easier.

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 cost.

What cost are we looking at? The cost to operational assets is just the tip of the iceberg – and as reports come in, this may very well grow, HOWEVER, the cost to the South African economy will run into billions of Rand lost, as business confidence from foreign investors plummets, and those who use South Africa as a transit hub, turn away from us and move to other countries that are SAFER and more efficient.

The Association re-iterates its call to the President to ensure that common violence is dealt with. 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 is ensured. Government needs to act swiftly and decisively to bring an end to this senseless destruction of the road freight sector.

By Gavin Kelly – Chief Executive Officer: The Road Freight Association

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Original article from truckandfeight.co.za