Department of

Transport

IMPLEMENTATION OF THE NATIONAL

FREIGHT LOGISTICS STRATEGY

STAKEHOLDER MEETING

09 FEBRUARY 2010

CONTENT

• CONTEXT– MINISTERIAL PRIORITIES– THE STRATEGY– GLOBAL – SOUTH AFRICAN

• IMPLEMENTATION PLAN– Regulatory Framework

• Ports• Rail• Road

• CHALLENGES• WAYFORWARD• TRANSPORT LEKGOTLA RECOMMENDATIONS

MINISTERIAL PRIORITIES

• TRANSPORT SAFETY & SECURITY

• RURAL ACCESS & MOBILITY INTERVENTIONS

• PUBLIC TRANSPORT

• FREIGHT & LOGISTICS

• 2010 WORLD CUP

• LABOUR INTENSIVE PROGRAMMES

THE STRATEGY

THE STRATEGY

August 2005, Cabinet approvalObjectives of Strategy:

To lower the cost of doing business in the RepublicTo promote integrated planning across spheres and stakeholdersTo deal with cross border freight operations & infrastructure in S.A., SADC and the ContinentTo facilitate seamless movement of cargo between first & second economyTo promote public-private-partnershipDevelop corridor strategies

Department of

Transport

The Problem Statement

The freight system in South Africa is fraught with:

• Inefficiencies at system and firm level

• Structural infrastructure shortfalls and mismatches

• The institutional structure of the freight sector is inappropriate

• A lack of integrated planning

• Information gaps and asymmetries abound

• The skills base is deficient; and,

• The regulatory frameworks are incapable of resolving the problems in the industry.

STRATEGIC INITIATIVES

• Institutional Reform• Sub sectoral Strategies

– Airfreight– Branch Lines– Road Freight; and– Port Reform

• National Freight Information System– Databank– Monitoring Framework

• FIFA Confed & 2010 World Cup Freight Plans• Freight and Logistics Forum

– Provincial forums• Cross Border Optimisation Plans• Intermodal Facilities

The Current Situation

• Most modes not responsive to demand side– Capacity– Price– Level of service– Quality of service

• Freight logistics system not aligned to National development strategies

• Lack of regulatory framework to shift system in desired directions• Institutional framework inappropriate

GLOBAL

10

Connectivity is required for success in the global economy

Africa is being left out of economic globalization: share of global trade has been declining for decades from nearly 4% in 1960s to under 2% today.

RSA position relative to markets and trade routes

Source: CSIR

1 - Singapore

5 – Hong Kong

4 - Shanghai

2 - Rotterdam

3 – South Louisiana

World’s largest markets

Five busiest ports by volume

12

Low volumes and inefficient shipping markets lead to high ocean freight rates for SA and the region

0

1000

2000

3000

4000

5000

6000

7000

8000

0 2000 4000 6000 8000 10000 12000 14000

Distance from North-European hub (in nautical miles)

To

tal

pri

ce

(b

as

e r

ate

+ B

AF

/CA

F+

co

ng

es

tio

n s

urc

ha

rge

) f

or

FE

U (

in U

S$

) -

wit

ho

ut

TH

C

South African ports

Cape Verde

Bissau -Guinea

Lobito - AngolaLuanda - Angola

Mauretania

Reunion/Mauritius and Madagascar

Antofagasta - Chile

Tanga - Tanzania

Dar Es Salaam - Tanzania

Iquique - Chile

Costa Rica

Honduras

Colombia

FAR EAST

AUSTRALIA - NEW ZEALAND

EXPORT RATES - FROM A NORTH-EUROPEAN HUB

Mombasa

Douala

= Africa

= Far East

= India/Pakistan

= Middle East

= Australia - New Zealand

= Mediterranean

= Baltic/Iberian peninsula

= South and Latin America

Comparison of sea freight rates from a North European hubComparison of sea freight rates from a North European hub

13

A regional approach is required to build economies of scale and drive transport system efficiencies

Monrovia (Liberia)

Lome (Togo)

Port Louis (Mauritius)

Toamasina (Madagascar)

Takoradi (Ghana)

Onne (Nigeria) San Pedro

(Côte d'Ivoire)

Lagos (Nigeria)Cotonou

(Benin)

Walvis Bay (Namibia)

Tema (Ghana) Abidjan

(Côte d'Ivoire)

Cape Town (SA)

Dar es Salaam (Tanzania)

Tanga(Tanzania)

Mombasa (Kenya)

Nacala (Mozambique)

Beira (Mozambique)

Maputo (Mozambique)

Richards Bay (SA)

Durban (SA)

East London (SA)

Port Elizabeth (SA)

Libreville (Gabon)

Pointe Noire (Congo)

Douala (Cameroon)

Volumes are critical to increasing connectivity.SA’s market too small to compete successfully.Regional growth prospects are stronger than ever.Regional freight systems need to consolidate to drive down costs and increase connectivity.Feeder system opportunities for BEE.

14

Ocean freight cost is the largest determinant of South African supply chain competitiveness

IMPORTS EXPORTS

Note: Based on case studies

Sources: Industry interviews, Moving South Africa Analysis

13%

68%

12%

7%Cross Haulage & Cartage

Ocean Transport

13%

60%

17%

10%

Ocean Transport

Cross Haulage & Cartage

13%

68%

12%

7%Cross Haulage & Cartage

Ocean Transport

13%

60%

17%

10%

Ocean Transport

Cross Haulage & Cartage

SOUTH AFRICAN

Department of

Transport

8

The structure of the surface freight transport market -South Africa’s surface freight transport market (million tons)

Total surface transport900mt (310) = 280bn tonkm

Road720 (250) = 180bn tonkm

Rail180 (550) = 100bn tonkm

Current rough estimates based on 1999 base caseNote: Figure in bracket denotes average transport distance

In-house560 (225) = 126bn tonkm

For reward160 (340) = 54bn tonkm

High value commodities40 (400) =

16bn tonkm

Export machines90 (650) =

60bn tonkm

Bulk commodities50 (500) =

25bn tonkm

Rest30 (520)

Gauteng-Durban16 (600)

Gauteng-Cape Town14 (1400)

Long distance,high volume,

next to rail60 (750) =

45bn tonkm

Shorter distances,lower volumes,

Shortage of rail infra100 (90) = 9bn tonkm

Coal65 (600)

Iron ore25 (800)

Freight Transport 2003

Tonnage1105mt (270)

Road920mt (200)

Rail185mt (600)

Corridor140mt (680)

Metropolitan580mt (75)

Rural200mt (200)

Corridor45mt (680)

Metropolitan10mt (150)

Rural30mt (475)

Sishen & Rbay100mt (670)

Figure in brackets denotes average transport distance

Tonkm300bn

Road190bn

Rail110bn

Corridor95bn

Metropolitan45bn

Rural40bn

Corridor30bn

Metropolitan1bn

Rural15bn

Sishen & Rbay65bn

IncomeR120bn

RoadR105bn

RailR15bn

CorridorR50bn

MetropolitanR30bn

RuralR25bn

CorridorR6bn

MetropolitanR1bn

RuralR2bn

Sishen & RbayR5bn

Freight Transport 2004

CSIR 2005

Tonnage1533mt (233)

Road1337mt (177)

Rail196mt (617)

Corridor180mt (600)

11,5%

Metropolitan777mt (77)

50,5%

Rural380mt (179)

25%

Corridor41mt (683)

3%

Metropolitan8mt (250)

0,5%

Rural47,5mt (505)

3%

Sishen & Rbay99,5mt (673)

6,5%

Figure in brackets denotes average transport distance

Tonkm357bn

Road236bn

Rail121bn

Corridor108bn30%

Metropolitan60bn

16,5%

Rural68bn19%

Corridor28bn8%

Metropolitan2bn

0,5%

Rural24bn7%

Sishen & Rbay67bn19%

Freight Transport 2006

CSIR/USB 2006

Tonnage1578mt (237)

Road1373mt (178) Rail

205mt (629)

Corridor196mt (591)

12,5%

Metropolitan793mt (77)

50%

Rural384mt (177)

24%

Corridor46mt (685)

3%

Metropolitan9mt (278)

0.5%

Rural51mt (529)

3%

Sishen & Rbay99mt (687)

6%

Figure in brackets denotes average transport distance

Tonkm374bn

Road245bn

Rail129bn

Corridor116bn31%

Metropolitan61bn16%

Rural68bn18%

Corridor31,5bn8,5%

Metropolitan2,5bn0,5%

Rural27bn7%

Sishen & Rbay68bn18%

Freight Transport 2007

CSIR/USB 2007

IMPLEMENTATION OF NFLSIssues Progress to date Milestones

Institutional Reform •Ports. Established Ports Regulator•Rail. Rail Economic Regulator Framework

•Done•Done

Sub Sectoral Strategies •Airfreight Strategy•Road Freight•Branch Lines•Port Reform

•Reviewal process•In progress•Draft Strategy•Reviewal process

National Freight Information System •National freight Monitoring Framework•Freight Data Bank

•Done, external consultations completed•Provincial Updates

FIFA Confed & 2010 World Cup •Stadia Precinct Freight Plans •Ongoing

Freight and Logistics Forums •All Provincial Forums established (except Gauteng)

•Done

Cross Border •Assessment of the top 6 freight posts•Border Optimisation Plans

•6 done•Process to be reviewed

Intermodal Facilities •Inland depots and facilities draft assessment report•Harrismith Logistics Hub

•Draft assessment report

•Phase 1 done

CHALLENGES

BRANCH LINE STRATEGY• TRANSNET WILLINGNESS TO MANAGE NETWORK OVER 5

YEARS• FUNDING MECHANISM FOR NETWORK• TRANSNET HR/LABOUR ISSUES• ABSENCE OF COMPREHENSIVE RAIL POLICYROAD FREIGHT STRATEGY• REDUCTION OF AXLE MASS LIMIT ON SECONDARY

NETWORK VS RAIL TRANSPORT READINESS• LAW ENFORCEMENT CAPACITYAIRFREIGHT STRATEGY• ABSENCE OF AIRFREIGHT STATISTICSINSTITUTIONAL ARRANGEMENT• DOT VS DPE INSTITUTIONAL RESPONSIBILITIES

WAYFORWARD

RAILWAY BRANCH LINES• AGREE ON BRANCH LINE CONCESSIONING MODEL WITH NATIONAL

TREASURY• PRESENTATION ON BRANCH LINE STRATEGY TO NEDLAC• TRANSNET STATE OF READINESS ON ROLLING STOCK PROGRAMME FOR

LEASING PURPOSES• FAST-TRACK RAIL ECONOMIC REGULATION & POLICY PROCESSES• PRESENTATION OF BRANCHLINE STRATEGY TO INFRASTRUCTURE

DEVELOPMENT CLUSTER OF DGs • PRESENTATION OF STRATEGY TO CABINET• CONCESSIONING PROCESS START 2014ROAD FREIGHT STRATEGY• ARRANGE CONSULTATIVE WORKSHOP WITH STAKEHOLDERS • ENGAGE TRANSNET ON STATE OF READINESS• FINALISE INCEPTION REPORT FOR DG & MINISTER APPROVAL• FINALISE GAZETTING PROCESS ON AXLE MASS LIMITS

LEKGOTLA RECOMMENDATIONS

• APPROVAL OF DRAFT RAIL BRANCH LINE STRATEGY FOR EXTERNAL CONSULTATION (e.g. NEDLAC) & CABINET APPROVAL

– POLITICAL ENGAGEMENT WITH NATIONAL TREASURY ON FUNDING/SUSBIDISING CONCESSIONING PROCESS

– TRANSNET RING-FENCE NETWORK & MANAGE OVER NEXT 5 YEAR PERIOD (2010-14) & POSSIBLY BEYOND?

• APPROVAL OF DEVELOPMENT OF ROAD FREIGHT STRATEGY FOR EXTERNAL CONSULTATION & CABINET APPROVAL

– REVIEWAL/REDUCTION OF ROAD AXLE MASS LIMITS BY ONE TON/AXLE ON SECONDARY ROAD NETWORK & FUTURE ROLL-OUT PENDING ON RAIL CAPACITY READINESS

• 9000 KG TO 8000 KG• 18000 KG TO 16000 KG• 24000 KG TO 21000 KG

– OPTIMUM SPLIT OF CARGO BETWEEN ROAD & RAIL• SUPPORT IMPLEMETATION OF AU MARITIME CHARTER & PLAN OF ACTION

– PROMOTION OF TRANS-AFRICAN CABOTAGE– STRENGTHEN MARITIME TRANSPORT SECURITY & SAFETY– HUMAN CAPACITY BUILDING

• ROADSHOW ON IMPLEMENTATION OF STRATEGY TO PROVINCES & MUNICIPALITIES– IMPORTANCE OF STRATEGIC PROVINCIAL INTERVENTIONS/FACILITIES

• APPROVAL OF GENERAL IMPLEMENTATION PLAN OF THE FREIGHT LOGISTICS STRATEGY

Department of

Transport

THANK YOU