Rail Expected to Have Increasing Impact on Road Freight Industry

15 August 2013 | Print

It is a well-known fact that the South African road freight industry is a major contributor to the local economy and the development of the country and its infrastructure.

It is a well-known fact that the South African road freight industry is a major contributor to the local economy and the development of the country and its infrastructure.  Since 1994, the local truck market welcomed a host of new manufacturers and brands to its shores. 

 Whilst some endured longer than others, this array of products in the market has had a dramatic impact on the dynamics of the industry, especially from a supply perspective. 

 “South Africa has become one of the few markets in the world which has products from the USA, Europe and Asia operating alongside each other.  Fleet owners have literally been spoilt for choice,” said Rory Schulz, general manager of corporate planning and marketing at UD Trucks Southern Africa. 

 The natural cycles of economy and other noteworthy events, such as the 9/11 attacks in the USA and the worldwide recession of 2008/9, also had significant impact on market dynamics over the past two decades.

 “One of the first major developing trends was a swing towards the use of Extra Heavy Commercial Vehicles (EHCV), as South Africa’s rail capacity continued to reduce,” explained Schulz.

 Secondly, as a general tendency, if the GDP of the country grew and the economy gained some momentum, the sale of Medium Commercial Vehicles (MCV) tended to slow down.  In comparison, sales in the Heavy and Extra Heavy Commercial Vehicle segments then correspondingly increased.  When tougher economic times were the order of the day, the buying trends would swing back to MCVs or a typical buy-down phenomenon would occur in the market. 

 As of late, theSouth African government’s New Growth Path and National Infrastructure Plan, which was announced in 2012, indicated a new vision of development and job creation in the country.  

 Some 18 Strategic Integrated Projects (SIPs)were identified by the Government to grow and develop the country by using South Africa’s vast resources and industrial capabilities, including spatial, geographically-focussed, energy, social infrastructure and water and sanitation projects.  Rail was specifically included as a strategic area of development to increase the country’s transport efficiency as a whole. 

 Transnet Freight Rail (TFR) has over the last couple of years announced a R201 billion investment in infrastructure and maintenance, as well as a seven-year Market Demand Strategy plan, indicating a definite focus on the development of South Africa’s railway network and rolling stock.

 “The road transport industry is definitely starting to feel the impact of an increased transfer of certain cargo to rail,” said Schulz.  “As the various identified industrial corridors are developed even further, the impact on the road freight industry will definitely become more prominent.”

 Of the 1.7 billion tonnes of cargo moved around South Africa during 2012, 88.5% was transported on road versus the 11.5% carried on rail.  Although rail’s portion is only slightly up from its comparative 11.1% share in 2010, projects like the fuel pipeline between Durban and Gauteng are also contributing to a greater impact on the road freight industry.

 These anticipated effects will, as a result, have a dramatic impact on the truck industry’s market dynamics, including a definite shift to smaller commercial vehicles to distribute broken-down bulk over shorter distances.

 “We anticipate that road freight will remain important in the area of construction, agriculture, daily commodities, consumer goods, parcel and post, whereas rail will play a greater role in running automotive cargo (car carriers), petroleum (chemicals) and containers,” explained Schulz.

 “As a company, UD Trucks Southern Africa remains supportive of the government’s investment in the country’s rail networks, as we believe rail forms an integral part of the solution to a better logistics industry, and subsequently to the enhancement of the local economy.”

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