THE Ctrack Transport and Freight Index retreated further during August 2023 to an index level of 118.8, the lowest since February (116.7). This represents a decrease of 1.5% during August, the third consecutive monthly contraction and confirmation of the ongoing strain in the logistics sector.
This retraction is evident across the industry, with four of the six sub-sectors measured by the Index declining on both a monthly and a quarterly basis. Overall, the Index also dipped into negative territory on an annual basis for the first time since February 2021, and it is clear that many challenges remain for the sector.
“While government has started to come to terms with the negative impact that the underperformance of the sector has on the broader economy, implementation of reforms is too slow and urgency is required in order to reverse this negative trend,” says chief executive officer of Ctrack, Hein Jordt.
Fragmented growth has characterised the Ctrack Transport and Freight Index sub-sectors over the past few months, and with five of the six sub-sectors now tracking lower than a year earlier, the hope of a notable recovery has faded. Only two of the six sub-sectors of the Ctrack Transport and Freight Index increased on a quarterly basis during August 2023, with Road, Rail and Air Freight the laggards. On an annual basis, only the Road Freight sub-sector recorded positive growth, albeit at a muted pace. Road Freight has always been the most resilient of the sub-sectors, but annual growth has subsided notably to only 1.7% year-on-year during August 2023, a far cry from annual growth of 28.2% experienced in August 2022 and the lowest since December 2020.
The Road Freight sector, the biggest of the sub-sectors, has experienced multiple challenges in the past few months and is still playing catch-up, as reflected by a notable contraction on a quarterly basis.
A closer look at August’s figures suggests that a tentative recovery is underway, with road freight payload in the country rising by 1.6% and heavy vehicle traffic on the N3 increasing by 5.5% on a monthly basis. The road freight industry continues to benefit from the ongoing rail freight woes, as reflected in data published in StatsSA’s latest monthly Land Transport Survey.
This sector remains a critically important contributor to the South African economy as trucks transport 80% of goods in the country. However, the over-dependence on Road Freight, which has become more pronounced in the past few years, costs the South African economy dearly as road freight transport is more expensive than rail and also raises the cost of road maintenance. The recent surge of the international oil price, in combination with renewed rand exchange rate depreciation, has resulted in notable diesel price increases, which will no doubt push headline consumer inflation back into a range of between 5,5% and 5,9% for the next few months (latest print for Aug 23: 4,8%).
With a forecasted diesel price increase of around R1.50/litre in early October, the cumulative increases over the three months from August to October could total just more than R5/litre. The direct and indirect impact of these increases is sure to harm the fragile state of the South African economy.
The Sea Freight component, one of the sub-sectors hardest hit by the Transnet strike in October 2022, is still in a gradual recovery mode and increased by 3,1% on a monthly basis but remained in negative territory compared to levels of a year ago (-2,0% year on year). Comparing the number of containers handled during August 2023 to the pre-strike level of September 2022 revealed that the total is still 11,1% lower. Container handling, however, increased by 1.9% during August, whereas other cargo handling declined by 0.6% on a monthly basis.