As South Africa’s freight system sits at a critical crossroads, with logistics costs estimated at between 11% and 12%, inefficiencies no longer just pose operational challenges, but create a direct constraint on economic growth.

Additionally, these logistical challenges also place a significant burden on exports, manufacturing and overall economic competitiveness.

In light of these challenges, progress is being made through various initiatives set out by government, including reforms under Operation Vulindlela and the publication this week of the Draft National Rail Master Plan (NRMP) for public comment.

Unpacking this theme, panellists participating in the ‘From cost burden to competitive advantage: A business-led blueprint for South Africa's freight system reform’ webinar, hosted by Creamer Media on behalf of dmg events, on April 23, discussed how business and industry can actively contribute to building a more efficient, resilient and growth-enabling freight system for South Africa.

Facilitated by Turner & Townsend director Marc Chunnett, industry experts unpacked how freight reform can shift from being a cost burden to a powerful competitive advantage for the country.

“Reform is no longer theoretical, we are seeing practical elements of the reform landscape taking place right now,” he said.

During the discussion, panellists explained that the purpose of structural reform is to enable internationally competitive South African supply chains, noting that, while a functional crisis in the freight rail logistics chain has driven current reform action, structure and long-term vision must remain the “North Star”.

“This is not about an operational performance improvement programme; it's not about a financial rescue exercise . . . The structural reform is all about changing the architecture of the national freight system as a whole,” said Tigaline Professional and Advisory Services director and founder Marc Descoins.

He described third-party access as a “very good start” to these reforms.

He noted, however, that broader structural reforms need to take into consideration aspects such as the stewardship of infrastructure – who manages it, who provides access to it and who should be running operations in terms of rail and ports.

He argued that there were fundamental issues that had to be addressed in order for real structural reform to take place, and for third-party access to proceed beyond where it is, which he described as being "slightly stuck” at the moment.

Given that South Africa’s economy is heavily reliant on exports of, for example, bulk minerals, Descoins explained that a lack of structural reform in rail subsequently leads to increased logistics cost, thereby contributing to a loss of competitiveness on the global market.

“The blunt reality here is . . .  critical supply chains that are required to actually reindustrialise this country or support industry and manufacturing, that's where the real loss is happening currently,” said Descoins.

Business for South Africa (B4SA) senior executive Ian Bird, meanwhile, highlighted the role of the NRMP in addressing these issues and bringing in the private sector to deal with these complex supply chains.

As previously reported in Engineering News, the draft NRMP outlines an ambitious R2-trillion vision for repositioning South Africa’s underperforming rail sector as the “backbone” of the country’s logistics and transport system by 2050. 

“It’s been a long time coming,” said Bird, explaining that the masterplan was aimed at turning rail into a competitive advantage, driving down the costs of transport, rebalancing the road and rail mix and addressing general issues.

“It's a repository of information and I think people will be pleasantly surprised at the quality of the document and the quality of the work that's been put in,” he said.

In a similar vein, Descoins explained that the NRMP provides strategic direction for rail that now requires tangible plans, adding that the masterplan and the National Rail Bill need to work closely together.

“Here we have a plan that's basically defining how the logistics system should ideally work and the Rail Bill is going to be the real manifestation of who's going to play what role in that system,” he said.

Descoins suggested that a hybrid model that includes collaboration between the public and private sectors needed to be adopted, emphasising the importance of functional separation of roles and of having a regulatory body in the sector.
Additionally, he said that to drive investment, “building blocks” needed to be put in place in terms of governance structures.

“Private capital follows governance reform, it doesn’t precede it,” he said.

The speakers emphasised that a reformed logistics sector provides certainty and market confidence.

“I think we are at the brink of a new dawn for logistics and I think everybody is keen to get stuck in and to get moving . . . I think the hard yards have been done and let's all push forward and keep the shoulder to the wheel. We need to look at that 3% [GDP] growth and even more,” said Bird.