Abrie de Swardt, marketing director of IMPERIAL Logistics, gives his views on transport and logistics

There is no doubt that logistics has become a true enabler of the economy. Not only does it drive gross domestic product growth, but it is also something that constrains the economy.

A study conducted over the past seven years by the Council for Scientific and Industrial Research, Stellenbosch University and IMPERIAL Logistics has tracked the logistics costs in South Africa. The challenge that we face is that very few countries actually track their logistics costs.

There are two key cost drivers: the one is fuel and the other is the interest rate.

We believe that with the carbon taxes there is going to be a significant increase to our logistics bill in this country; we believe it is going to be in the region of about R4 500 000 000 that is going to be added to our logistics bill for South Africa. As per future risks, certainly we believe the cost of fuel is a significant risk; it is a large portion of logistics costs in any road transport operation – you are probably looking at about 35% of your logistics costs coming from fuel, with peak oil production.

The reality is that while there are still large reserves of fuel, it is becoming much more difficult to get the fuel out of the ground and out of this earth, at the pace at which we once did. So peak oil production is certainly going to play a role.

The condition of our infrastructure and our ability to invest – not only to maintain our current infrastructure, but to create the infrastructure required to grow the economy – places a significant burden on the government and parastatals, and therefore it is essential that private sector play a role and be allowed to participate.

Already in 2007, global demand exceeded global supply; and it is forecast that by 2100, we will need three more Earths to actually satisfy demand on the continent.

On the demand side, we have spatial challenges. Take South Africa, for example: Much of our distribution takes place in Gauteng. We are far from the ports, from an import and export perspective. And when you have a rail system that is not operating at the level it can, you incur more costs.

Any operation that causes significant havoc is certainly an issue. Piracy has become a real challenge, and is something that we need to consider.

Things that had a medium probability were loss of electricity; software system failures; a spike in raw material costs in a volatile economy as we have experienced in the last few years; energy costs; and currency devaluations.

Consider the impact that Japan’s tsunami had on the automotive sector. Fires and explosions, civil unrest and terrorism, disease and infestation are things that have impacted us to a lesser extent than the rest of the world.

The risk factor can be linked to more than one risk type; so if you take product quality, there is a direct correlation with loose supply of raw materials, but also internal operation disruptions.

The top South African risks versus the world average: one that stands out is the raw material supplier failure – that is a significant risk from past experience or perception, however you want to look at it.

There are a few things that stand out in terms of the risk profile in South Africa compared to the rest of the world. The risk of disease and infestation is 2.3 times higher in South Africa compared to the global average, and we link that typically to HIV/Aids, which is a risk from a people-availability point of view.

What has now come to the fore is globalisation and public–private participation. How do we finance the transport infrastructure that needs to be created to enable our economy? How do we look at sustainability? It is not about global warming – it is about doing the right thing.

How do we eliminate waste in our supply chain so that we do not generate unnecessary carbon emissions? Very importantly, as our supply chains become much more complex, how do we use information technology in a more effective manner?

In eight years, there will be differences in global trade. Two things stand out: on the one hand, there are new trade corridors being developed, typically between South America and Africa. Not surprisingly, from Asia there will be a significant growth in flow of traffic to Africa, to the Middle East, into Russia; and in Europe, from traditional western Europe to eastern Europe.

Abrie de Swardt

Marketing director

IMPERIAL Logistics

Partial speech delivered at the Opportunity Africa Convention that took place from 27 to 28 July at the Gallagher Estate Conference Centre