South Africa

Blow to South African economy 

Recently, heavy snowfall closed the N3 highway, resulting in significant disruptions and losses estimated to reach billions of rands. 

France Nhlapo, Provincial Secretary of the National African Federation Chamber of Commerce, explained this in an interview on eNCA.

Over the weekend, a number of motorists and commuters were stranded on the N3 highway after heavy snowfall blocked it, leaving a large number of trucks stuck on the road as well.

This road connects two of the county’s largest cities, Johannesburg and Durban, and as a result, it plays a critical role in the country’s economy. 

The blockage severely impacted logistics, as cargo shipments were delayed. This prevented goods from reaching their destinations on time and caused widespread economic repercussions.

Nhlapo explained that the ”N3 sees thousands of trucks daily transporting goods worth billions”. 

This blockage resulted in logistics companies facing direct costs like increased fuel usage, driver overtime, and late delivery penalties. 

These factors alone can lead to significant revenue losses, estimated at millions of rands. 

However, when combined with the indirect impact of the delay—which includes reduced business operations, missed sales opportunities, and a ripple effect across industries—the total losses will be pushed into the billions. 

Businesses dealing with perishable goods like food and pharmaceuticals are hit the hardest, as their losses are immediate and severe.

“One can never prepare enough because you never know when it’s going to hit you and how it’s to hit you,” Nhlapo said. 

“So the only thing that one can say is that when you learn from such a devastating situation, the response is that you have to be prepared.”

South Africa is no stranger to the high costs of logistics delays, with Business Day reporting that delays at ports cost the industry over R600 million last year.  

According to the South African Association of Freight Forwarders, congestion and delays at South African ports cost R98 million a day when congestion surcharges are added.

A report by the Department of Economic Development and Tourism in the Western Cape looked into the cost of congestion at the Port of Cape Town.

It found that the port, which moved R210 billion worth of imports and exports in 2021, lost logistics firms R330,000 per day. 

This was due to two main reasons, inclement weather which caused 30% of the delays, and terminal capacity challenges, which caused 57% of the delays. 

Shift changes, stack congestion, and IT failures were other causes of the congestion, the report explained. 

Apart from South Africa’s ports, the logistics industry has also been heavily affected by issues with the country’s railways. 

Inefficiencies at the state-owned enterprise (SOE) Transnet have proved to be extremely expensive for the country. 

According to a study by the GAIN Group, Transnet’s failures cost the country an estimated R1 billion a day in economic output, equivalent to 4.9% of annual GDP or R353 billion.

The National Treasury also estimated that Transnet’s poor performance is one of the main reasons behind the lack of investment in South Africa. 

“Reduced investment’s effect on growth has been heightened by the fact that some components of investment spending, particularly in the state-owned companies, became increasingly inefficient over the past 15 years, as governance challenges beset them,” National Treasury said. 

“By one estimate, over a third of the decline in South Africa’s growth after 2010 is explained by the direct effects of reduced productivity from public utilities.” 

“This means that South Africa missed out on an aggregate of around R2 trillion in economic activity between 2011 and 2019 solely because of the weakening performance of Eskom and Transnet, a figure that will have increased significantly since then.”

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