Volatile fuel price raises concern for freight industry

The South African freight
industry is not out of the
woods yet, according to
credit insurance company
Coface SA.
“Due to the industry’s
exposure to a variety of
sectors, the industry’s
performance remains
closely linked to the
performance of the
country’s economy,”
Jayson Naidoo, an industry
analyst at Coface, said.
“Some areas of
immediate concern include
the impact from the recent
floods on the agriculture,
building and construction
industries. These industries
utilise freight forwarders
significantly, and as the
rains may have destroyed
some crop shipments as
well as delayed building
contracts, the shift or
cancellation of contracts
for transporting goods is
expected to affect freight
forwarders.”
In the medium term
concerns have been raised
about the cost of transport.
“Fuel represents more
than 40% of transporters’
operating costs and with
the expected increase in
the petrol price, transport
costs are expected to
increase as well,” he told
FTW. “The volatility of
the fuel price is one of the
biggest challenges this
industry will face in 2011.
We are being very cautious
and don’t expect to see
major growth in 2011. The
industry is not out of the
woods.”
He said while the lower
cost of the rand has had
a positive impact on the
importing of goods, the
soon-to-be introduced toll
system in Gauteng posed a
major threat to the already
highly priced competitive
industry.
“It is not only the South
African freight industry
that is facing challenges,”
said Naidoo. “With
increases in the price of
fuel and the slow world
wide economy freight
forwarders across the globe
are feeling the pinch.”
Naidoo said predictions
for the freight industry
in coming months both
locally and internationally
were a migration of some
airfreight traffic to the
cheaper option of freight
forwarding by sea as many
companies remain in
“savings” mode. “This is
likely to be accompanied
by less growth in the
express sector as speed is
compromised in favour of
lower costs.”
He said more mergers
could also be expected
between freight companies
as profitability is addressed.
“The bigger companies
are going to come down
hard on the smaller, weaker
freight forwarders, who are
likely to liquidate in the
tough trading conditions.”