The unprecedented growth in high value cargo by air is a convenient example of the increasing values of time. With 48% growth in global freight tons between 2014 and 2016, the high value goods market is expected to grow between 17% and 28%. According the International Air Transport Association, Africa represented 1.6% of the global air freight market in July, and boasts year on year increases in both Freight Ton Kilometers (FTK) and Available FTKs of 33.7% and 4.9%, respectively. By November 2017, FTKs are lower, and AFTK are significantly high — suggesting that there are seasonal gaps in freight demand, not necessarily a contraction.
For the African continent, this suggests consistent compounding growth in air cargo demand, forwarding, storage and distribution. Inherently, significant benefits for businesses and consumers take the form of lower unit costs as the supply market expands, and increasing affordability as option values (i.e. air travel is a regional mobility option for the first time in many areas) and household expenditure increase. Following declarations and decisions, this year (2018) the lurch toward a Single African Air Transport Market may lurch toward unlocking the benefits of liberalising air travel in Africa as presented by InterVistas a few years ago. The gradual implementation of more liberal market policies and the attractiveness of technology, organic agricultural products and industrial manufacturing are becoming key elements in the South African development-growth trajectory (not just growth trajectory).
Beyond politics, the macroeconomic conditions are fertile and industrial policies seem aggressive enough to initiate action through economic zoning and gradually developing institutional capacity to act. Companies across value chain sectors need to gear up for a somewhat seismic shift in regional industrial development, African industries set to leverage on global needs (i.e. African Growth and Opportunity Act (AGOA)). Municipalities must set the tone to coordinate freight and passenger mobility complexities resulting from the changes in land-use, network capacity, induced, generated and general growth across human settlement economies.
The South African Reserve Bank reported that the GDP is contracting in the first Quarter by -7%. Which media reports quickly reported a recessionary state in the face of credit downgrades and a tense political climate. However, primary sector activities such as agriculture and mining expanded by 22.2% and 12.8%, respectively (completely turned around from the 4th Quater 2016). In the 2nd Quarter of 2017, agricultural output has increased by 33.6%, followed by improvements in other sectors leading to a GDP of 2.5% according to the September Quarterly Bulletin. In the same report, semi-durable goods demand improved from -13%, to 21.2% between Q1 and Q2. Real final household consumption grew from -2.7% to 4.7% between the two quarters. The high value, low tar weight cargo market is probably the most highly demanded goods segment for digitizing economies pursuing unit cost reductions through improved efficiencies.
Economic zoning involves designating specific land parcels for economic development through statutory, pecuniary and other investment inducing incentives (III). The Department of Trade and Industry shifted the policy mandate toward leveraging on broad economic zoning initiatives, over specific industrial development zones. The role of transport, storage and distribution sectors in the value chain is pivotal to coordinate zoning development.
South Africa is in a developmental phase, wherein high capital infrastructure investments in road and rail may enable corridors development between Special Economic Zones and logistics hubs. The sunk costs are higher because the African continent’s industries were designed for exporting — not internal circulation, nor intra-regional exchange.
As part of the transformation central, and highly catalytic hubs in South Africa are Dube Trade Port and the emerging Tambo Springs.
However, on a national scale road and rail supply side shifts aim to leverage on urban and rural extremes of economic activity. Transnet is implementing the Market Demand Strategy to expand capacity and changing its freight service composition — approaching smaller scale production entities is going to be key for their ‘Back to Rail’ strategy. SANRAL is expanding its network by 7% in strategic provinces that are earmarked for increasing commercial and private traffic; and gateways to regional integration namely:
- Limpopo, considering the Thouyando-Musina SEZ, which bridges into Zimbabwe and requires connection with Maputo.
- Mpumalanga, considering unlocking the development of the Moloto Corridor, while leveraging on market demand through connecting Richards Bay, and the Dube Trade Port with Nelspruit through Ermelo to Mozambique. Leveraging heavily on new port capacity expansions and intimating the potentially cenralised role of Africa in global industry and trade.
- North West Province, Rustenburg has an activated SEZ and an SEZ of Mahikeng is gaining value as the operations, rebranding and positioning of the Mmabatho International Airport is under a 15 year concession in the form of Mahikeng Airport Management Company (MAMCO) — leaning on the 4.49km landing strip.
For logistics and supply chain industries opportunities are in airport, dry hub land use development in large towns, cities and metropolitan areas. At the same time, as municipalities absorb municipal transport functions from provincial governments transport planning may become a predominantly internal function. Public Private Partnerships in the city and town freight planning context may become essential for improving the circulation, storage and distribution of cargo traffic. Although Commercial Transport Application (CTA) platforms are venturing into goods and food delivery, one of the most interesting trade offs relate to:
- Balancing the convenience gains across consumers through Just in Time and last-mile integrated services.
- Leveraging on last-mile elements through multimodal services ranging from automated delivery and non-motorized based delivery (i.e. bicycles, trollies, electric micro-vans).
- From a land use perspective, the unit value added for storage would probably contract as storage becomes less necessary for high value, rapid moving goods in food and fashion retail.
- Leveraging on block-chain technology to enable seamless logistics and value chain contracts on liability, insurance, ownership and authorisation (i.e. customs and bureau of standards).
In terms of transportation economic planning, traditional approaches to managing the travel demand from freight and passenger activities may be viable in principle. However, integrated approaches that attempt to balance flow, infrastructure and storage needs in the high value goods and FMCG segments seem to be increasingly important. A number of municipalities are in the process of reactivating airports, which need road and rail efficiencies supported by supply chain rigor. Such spaces are long-term platforms of opportunity for demand responsive cargo services that actively penetrate the continent and support bulky movement on land. On one hand there is National need for a fully fledged supply chain strategy that leverages on the Draft Green Transport Strategy beyond what currently exists. There is also a need for institutional support that will enable private sector participation in the freight mobility and access economy.