South Africa’s infrastructure bottlenecks in ports and railways have significantly impacted the economy through increased operating expenses, reduced competitiveness, and lost opportunities. The decline of state-owned enterprises (SOEs) like Transnet has exacerbated these issues. For example, the 2022 Transnet strike caused an estimated economic loss of R6 billion, according to an article in Engineering News at the time.
Despite the African Development Bank’s (AfDB) investment of US$44 billion over the past seven years in developing cross-border road corridors, railways, ports, and power pools, African countries still lag in the Logistics Performance Index (LPI). As of 2023, South Africa ranked 19th globally (1st in Africa), with an average score of 3.4 out of 5, while top performers like Singapore and Finland scored 4.3 and 4.2, respectively (Freight News, 2023). According to the same publication, this disparity underscores the continent’s challenges, where 80% of goods and 90% of passenger traffic rely on roads as primary transport.
Underinvestment in rail infrastructure has led to poor operational performance for Transnet. A review of Transnet’s reports highlights a lack of investment in rolling stock technologies and locomotives, resulting in an aging and unreliable fleet needing high maintenance. Maintenance spending, which was R3.4 billion in 2012, should have been R5.57 billion in 2022 when adjusted for inflation but was only R2.6 billion: even lower than the 2012 figure in nominal terms (Journal of Transport and Supply Chain Management, 2023). The same article stated that the government’s refusal to allow private competitors in South African ports has caused a 15% decrease in efficiency from 2010 to 2019, compared to a 30% increase in facilitated state-owned ports. Consequently, port volumes fell from 215.1 million tons in 2019 to 173.1 million tons in 2022.
The lack of investment has also impacted South Africa’s fleet of heavy trailers and locomotives. From 2007 to 2022, the indexed number of heavy trailers increased to 1.72, while locomotives declined to 0.66, affecting GDP growth, which only increased to 1.18 in constant terms. As a result, the direct cost to the economy rose from approximately R9.7 billion (0.17% of GDP) in 2019 to around R15.5 billion (0.23% of GDP) in 2022.
However, these figures do not fully capture the economic impact of port and rail inefficiencies. When considering related costs, including opportunity costs, the impact rose from approximately R84.5 billion (1.5% of GDP) in 2019 to circa R458.4 billion (6.7% of GDP) in 2022 (Journal of Transport and Supply Chain Management, 2023).
In summary, South Africa’s infrastructure challenges, particularly in ports and railways, have led to significant economic losses, reduced competitiveness, and foregone opportunities. Addressing these issues requires substantial investment and policy changes to improve efficiency and global market competitiveness.
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Tamela provides corporate advisory services including debt and equity capital raising for infrastructure-related projects in the public and private spheres. For more information, please contact Tshepisho Makofane on +27 83 287 2651 or Tshepisho@tamela.co.za.
References
Havenga, J.H., Simpson, Z.P., Neethling, H., Bod, A.D. and Swarts, S., 2023. The macrologic effect of a state-owned enterprise, Transnet, on the South African economy. Journal of Transport and Supply Chain Management, 17, pp.1-18.
https://www.engineeringnews.co.za/article/transnet-strike-runs-counter-to-combatting-economic-crisis-says-blsas-mavuso-2022-10-10
https://www.freightnews.co.za/article/sa-placed-19th-global-logistics-performance-index#:~:text=South%20Africa%20scored%20a%203.3,3.8%20for%20tracking%20and%20tracing