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3 August 2023 – After reaching its highest index level on record at a revised 122.6 in May, the Ctrack Transport and Freight Index (Ctrack TFI) declined by 0,5% in June 2023 to 122.0. This is the first monthly contraction in six months and signals the loss of momentum in the logistics sector.
Early in July, the sector was also the victim of a spate of arson attacks targeting trucks on the N3 in KwaZulu-Natal, which subsequently spread to Mpumalanga and Limpopo.
The negative impacts thereof will, likely, be felt in the July Ctrack Transport and Freight Index too.
In addition, three of the six sub-sectors that make up the Ctrack Transport and Freight Index declined monthly (Rail, Road and Air Freight), two recorded marginal growth (Pipeline Transport and Sea Freight), while Storage and Handling were the only sub-sector to show strong growth. On an annual basis, the Ctrack Transport and Freight Index is tracking 6,5% higher in June, compared to the 7,5% year-on-year level measured in May, but near-term challenges will likely dampen momentum further in coming months.
“The transport sector’s resilience has been incredible, but unfortunately, a variety of additional geopolitical factors has put an end to its recent good performance,” says Hein Jordt, Chief Executive Officer of Ctrack.
Derailing the hope of a continued synchronised recovery is the fact that only four of the six sub-sectors increased on a quarterly basis in June 2023.
Rail and road freight
Rail and Road Freight were the laggards during the second quarter, while the latter’s underperformance might have played a role in the star performance of the storage and handling sub-sector. On an annual basis, four of the six sub-sectors have declined, despite the overall index level increasing by a still healthy 6,5% compared to a year earlier.
Among the sub-sectors, Road Freight, which is also the biggest sub-sector, has always been the most resilient, but annual growth has now subsided notably to 12,0% year on year in June 2023, a far cry from annual growth of 28,2% measured during August 2022.
Road Freight has experienced multiple headwinds in the past two months.
Early in June, an IT glitch delayed the electronic clearance of vehicles going through the borders, causing widespread congestion and delays for cargo transporters. Although this issue was resolved within days, the congestion took some time to unravel and had a material impact, especially on the number of heavy vehicles that could traverse the N4 route.
While heavy vehicle traffic subsided on both the N3 and N4 routes during June, the latter recorded a double-digit monthly decline.
In addition, the Road Freight payload for the country, as published by StatsSA in its monthly Land Transport Survey, also declined by 6,2% on a monthly basis. The Ctrack Transport and Freight Index Road Freight sub-sector declined on both a monthly and quarterly basis in June.
Given its importance, the sector will surely bounce back. According to the Road Freight Association (RFA), trucks carry around 80% of goods in and around the country, but recurring incidents of violence and destruction continue to damage the sector’s reputation. The RFA warns that those who use South Africa as a transit hub into Africa might turn away from us and move to other countries that are safer and more efficient.
Ctrack TFI and GDP growth
The transport sector was among the top three sectoral performers in Q1 2023, growing by 1.1% compared to the previous quarter seasonally adjusted (vs. 0.4% for the total economy), contributing positively to the overall economic performance of the South African economy.
Despite the moderation in June, the Ctrack Transport and Freight Index is still tracking 1.4% higher in June compared to March, indicative of a positive contribution to the second quarter GDP.
The economic narrative remains generally dismal, dampened by ongoing load-shedding, elevated interest rates, a lacklustre job market and low confidence levels.
However, indications that some industries have become progressively more resilient to the effects of load-shedding, as companies reduce their energy dependence on the embattled Eskom, is an underlying positive development that supports an otherwise dismal story. Source: Capital Equipment News