The South African economy is contracting and slowing down with the effects being felt in every single sector – the most important barometers of the nation being the Ctrack Transport and Freight Index and the monthly vehicles sales reported by the National Association of Automobile Manufacturers of South Africa (NAAMSA).
The Index continues to reflect the slowing nature of the South African economy and all logistics sub sectors measured in South Africa, except road freight, recorded declines between August and October 2019 compared to the same three months in 2018.
Concerns must be mounting in boardrooms across the country as the economy struggles with slowdowns in manufacturing, mining and retail.
NAAMSA said the overall new vehicle market declined further in November 2019 and Domestic sales figures, particularly in commercial vehicle sales, had been disappointing. However, passenger cars sales, with strong support provided by the car rental industry, showed a welcome uptick.
It confirmed aggregate domestic new vehicle sales, at 44 738 units, reflected a decline of 2 740 units or 5,8% from the 47 478 vehicles sold in November last year. Although monthly export sales had registered a marginal decline during the month, a new annual record had been set with still one month to go until year-end.
Overall, out of the total reported industry sales of 44 738 vehicles, an estimated 35 168 units or 78,6% represented dealer sales, an estimated 15,9% represented sales to the vehicle rental industry, 3,1% to industry corporate fleets, and 2,4% to government.
The November 2019 new passenger car market registered a modest but welcomed increase of 392 cars or 1,3% to 31 444 units compared to the 31 052 new cars sold in November last year. The car rental industry once again supported domestic volumes, accounting for a substantial 21,9% of new cars sales in November 2019.
Domestic sales of new light commercial vehicles, bakkies and minibuses at 10 679 units during November 2019 showed a decline of 3 038 units or a fall of 22,1% from the 13 717 light commercial vehicles sold during the corresponding month last year.
Sales in the low volume medium and heavy truck segments of the industry both performed weaker during the month and at 733 units and 1 882 units, respectively, reflected a decline of 60 vehicles or a fall of 7,6%, in the case of medium commercial vehicles, and, in the case of heavy trucks and buses, a decline of 34 units, or a fall of 1,8% compared to the corresponding month last year.
Road freight, the largest sector in South Africa by volume and value, increased 1% during the period from August to October 2019 versus the same time in 2018.
Short distance transport volumes of retail goods and FMCG are still expanding, while the continuous shift to online shopping is helping parcel delivery volumes. Black Friday and Cyber Monday propped up this category.
However, the strongest road freight income growth has come from the small furniture transport sector, which may have to do with emigration and families moving to more secure locations – even while home sales remain subdued.
Off the rails
Rail freight volumes declined -1,8% between August and October 2019 compared to the same period in 2018, which indicates primary mining products are not being exported or used as much.
Furthermore, metal products have seen the largest decrease as a few medium-sized firms have closed in the last 12 months. The decline in metal products income in nominal terms was -6% and, although not all of this was in the rail sector, the knock-on effect to mining would have hurt the rail freight industry.
Air and sea freight volumes declined by -2,4% and -3,4% respectively between August and October 2019 compared to the same period in 2018. This reiterates the impact of a weak global economy and the trade war between China, the world’s largest manufacturer and the USA, the world’s largest consumer. Bulk commodity and container shipping are also in decline.
But, by far the worst performing sub sector has been storage. Manufacturers and internal traders are keeping stocks low as they expect trading conditions to worsen. Both the ABSA PMI and the Trade Activity Index from SACCI, show that role-players are concerned about the strength of the economy.
Added to this is the decline in the international storage of containers transhipped in South African ports. Transhipments declined a massive -19,3% between August and October 2019 versus the same period a year ago. While big shifts are not uncommon in the storage sector, it is concerning when all categories in this subsector are so negative.
The total decline of -14,3% in the amount of goods warehoused between August and October 2019 compared to the same period last year, is a relative indicator of the poor confidence that firms have of short-term economic performance.
Thankfully, interest rates are lower than before and are likely to drop further, reducing the cost of storage. Moreover, the shift to online shopping means that at least from that perspective (albeit small) the warehousing sector has a few positives to draw from.
However, the biggest factor in the broader logistics sector is the lack of confidence that goods will be sold relatively quickly, and that quick refilling of shelves will have to take place.
Retail price increases have remained below overall consumer price adjustments for about four years. In fact, retail prices have not increased over 3% for more than three years consecutively. This best reflects the fight that exists for the consumer’s pocket.
“In tough economic times, the cost of operating fleets can become a very difficult task,” says Hein Jordt, MD of Ctrack SA. “The need to provide competitive rates, while part of a fleet is not moving, presents transport and freight companies with additional challenges.
“The trends presented in this month’s Freight and Transport Index show government must look even closer at the supply chain industry and support transport and freight companies with cost-effective road regulation policies.
“Improved safety measures and economic policy that supports efficiency improvements, in conjunction with well-planned integration with our country’s transport and economic infrastructure, will allow us to be competitive in the global logistics market.”
Table: The Ctrack Transport and Freight Index numbers % change
|Percentage Change between||Rail||Road||Pipeline||Sea||Air||Storage & Handling||Ctrack Transport Freight Index|
|October: 2019 vs October 2018||-2,4%||-0,2%||-9,8%||-1,7%||-4,5%||-14,3%||-3,3%|
|August – October 2019 vs August – October 2018||-1,8%||1,0%||-7,1%||-3,4%||-2,4%||-14,3%||-2,6%|
|September 2019 vs October 2019||-0,3%||-1,1%||2,8%||-3,6%||-4,2%||-0,1%||-1,1%|
|August – October 2019 vs May – July 2019