Thursday, June 22, 2017

The Impact of Transport Pricing Practices in South Africa on Freight Transport Costs

HSRC report prepared for NEDLAC, Trade and Industry Chamber, NEDLAC, August 2007

Freight transport cost is one of the core factors that determine product prices, and it has a direct impact on the competitive advantage of South African goods in local and international markets. Inefficiencies in the transport sector, which lead to high freight transport cost, can restrict economic growth and job creation. It is therefore important to understand the factors that affect freight transport cost in order to assess the gap between actual and economically efficient transport costs. The study identified the transport modes with ‘price wedges’ and the worst-affected product categories, and then benchmarked the unit cost of transporting specific product lines with the specific modes against international best practice (or unit costs calculated from first principles). International benchmark costs and mode usage per product line were used as an input into a logistics cost model. The model allowed a comparison between logistics cost without inefficiencies and the logistics cost in South Africa in 2004. Much of the data collection was undertaken as part of the development of the logistics cost model that was used for the CSIR’s 2004 State of Logistics Survey for South Africa study. Although the model can generate very detailed outputs, inputs of the base model are not yet sufficiently refined to present industry-specific data with a great degree of accuracy. Thus there remains a certain level of aggregation in the final output.

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