Modal shift needed to reduce transport costs

Modal shift needs to happen sooner rather than later, says Professor

Fast-moving consumer goods (FMCG) comprises 50% of South Africa’s total transport costs. These goods are primarily moved on the country’s corridors, where two-thirds of the costs are spent.

While rail’s corridor market share has actually grown in recent years, the improvement is too slow. “That’s the space where we need work,” says Jan Havenga, Logistics Professor at the University of Stellenbosch.

Rail’s tonne-kilometre market share is not looking so good at the moment, with the drop in commodity prices meaning Transnet has far fewer mining commodities to move around than it otherwise would.

“We should look at the market spaces in which rail should compete,” continues Havenga. For the Natal Corridor (Natcor), rail’s market share should be around 42%, depending on how the calculation is done.

“If two-thirds of our transport costs are in the corridors, and rail’s market share in the corridors is 30% too low, imagine the savings we could achieve by shifting from road to rail? We could cut out about 40% of our transport costs,” he argues.

Also read: How to reduce SA’s land transport costs

“If we target the right goods on the right transport modes, we could probably reduce road costs by around R14 billion and replace it with R7 billion of total intermodal cost,” he added.

If you go to the lowest point on the Natcor today you’d likely count around 2 000 trucks passing by every day.

So what will happen in 30 years’ time? “In my first scenario, which I call aggressive rail, based on the assumption we can get the rail corridor market share up to 50%, you’d count 4 500 trucks every day,” he states.

What will happen if rail’s market share only grows naturally and doesn’t increase? “Then we are talking about 6 500 trucks passing every day.” If the railways stay at the current level of 10 million tonnes on the Natcor, in 30 years time there will be 8 000 trucks on that road, every day.

“So, there are lots of reasons to say we need the modal shift. We don’t really have a choice,” he believes.

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2 Comments

  1. If I wanted to get someone to move a container from Durban to Johannesburg, I’d have to pay three times as much, at least, by road as I would if I asked Transnet Freight Rail (TFR) to move it.

    Does that mean TFR is three times less efficient than road? The fact is, most people are prepared to pay three times as much, with 80% of all freight on the corridor moved by road.

    We need to establish what people are buying when they pay three times as much.

    While there may be some inefficiencies in Transnet, I conclude that even if rail was free they would not get 50% of the market. The reason is, people are buying something totally different when they use road transport.

  2. Coming from a logistics company which has a big interest in road transport, please don’t speak about the road as one thing.

    The spectrum of road transport in our country is probably part of the challenge. Part of the problem is not that rail is too expensive, part of the problem is that road is too cheap.

    This is not new; the reality is the total cost of road transport in terms of other externalities like safety and compliance are not regarded and, as a responsible road transporter, we have lost substantial market share by design.

    We are not willing to compete with people that are not compliant with safety and labour regulations. We have big structural issues in the road vs rail debate.

    Ensuring compliance in the road transport industry in South Africa is probably one of the biggest challenges we face.

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