Powerless freight traffic could complicate consumer prices

Mogale City Local Municipality is a key gateway into Gauteng for commuters and goods from the North West Province headed to Gauteng or traveling through Gauteng. Here is a shot from a major traffic node near Magaliesburg. The uphill battle swallows some trucks alive, while the sheer volume of freight just makes one wonder how much actually moves around in South Africa.

As cities and towns develop households tend to get smaller, as families plan more and women become increasingly preoccupied. In the most extreme cases, the long term demographic footprint results into fewer youth and a disproportionately larger elderly population. This is not a good situation as elderly people spend less, have a lower buying power than at the peak of their careers, and tend not to contribute to public sector revenues through tax the way they used to. A country that is old-age heavy might be forced to build more livable environments, but it could easily slow down if young people are not both socially stipulated to procreate, and participate in the savings, production and consumption dimensions of the economy.

South Africa is largely bottom heavy with most of the freight movement in terms of income generated being mining related, somewhere near 35%. Consumer and industrial goods are diverse, but they account for the remainder of the market. Agriculture and forestry are not as significant in terms of income. For many day to day a long term products to exist, a complex mix of logistics activities are interconnected to actually convert a chopped tree into the frame beneath a leather couch. Many of these are electrically powered, and industrial activity tends to fluctuate when there is load-shedding. However, on average it is possible that some sectors produce gradually less than they used to. Which implies fewer distribution needs in response to lower production. This affects the materials orders up the supply chain, and influences the availability of products down the supply chain for consumers if the energy lag continues. For trucking companies this could mean fewer trips on many contracts, which would eventually eat into their profit margins in the short-run, but in the long term some smaller firms might not even break-even. At this point the heavy haulers become powerless machines guzzling as much as they can but with a complex value proposition. As the domestic fuel price continues with its artificial volatility, the worst thing that could happen now is if it shoots up due to currency weakness as market confidence slows down. The best thing that could happen is restoring industrial and commercial energy with the same level of priority at scale. However, where we are now seems to similar to having an aging population eating through the hallowing economy and eroding value. The energy crises has deeply latent implications for the road freight sector and the underlying network of logistics activities that keep our country going. Even if they don’t seem to change yet, consumer prices could be more complicated than when business went about as usual.

*My opinion, data from the Land Transport Survey and the State of Logistics Survey. No details.

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