SA businesses count cost of logistics crisis
• Inefficiencies at ports and in railway networks cost importers and exporters millions, writes Lynette Dicey
AGovernment has recognised that addressing the issues facing Transnet is a priority if it is to end the logistics crisis currently facing the country. A committee advising the president has recommended dismantling Transnet s monopoly on both rail and ports and getting the private sector involved through leases and concessions. The draft road map is expected to be approved by cabinet this month.
Interestingly, a previous attempt by Transnet to attract private sector players to operate trains on Transnet Freight Rail s network was largely unsuccessful. Stakeholders criticised the proposal given that
it required a large investment in equipment designed to last for 30 years for a two-year contract. To get both SA’s ports and railway networks working efficiently requires private sector investment but, as Cline points out, given the headwinds that the state-owned logistics operator is currently facing with a leadership vacuum and high levels of debt, attracting private sector investment will not be an easy task. Futuregrowth Asset Management, one of SAs largest institutional investors in the bond market, says it s hard to make a business case for Transnet given its lack of sustainability. In addition to
Trade initiatives put African exports to US in the spotlight
SA which allows duty and quote-free exports from eligible African countries into the US. Virusha Subban, the partner specialising in customs and trade at Baker McKenzie Johannesburg, reveals that because Agoa is due to expire in 2025 there has been speculation that it might either be replaced by a new agreement or evolve into something different. Either way, it is expected to continue to be used as an effective governance tool by the US to ensure beneficiaries adhere to Agoa eligibility requirements for duty-free trade with the US.
“Currently, eligibility is reviewed annually to ensure that countries are making progress in establishing a market-based economy, as well as following the rule of law and implementing economic policies that reduce poverty and combat corruption and bribery, she explains. Countries must also protect internationally recognised workers rights and not engage in activities that undermine US foreign policy or national security interests. If countries are not making progress with Agoa eligibility requirements, they may be terminated as beneficiaries of the trade preference scheme. Alternatively, the US administration may withdraw or suspend the duty-free treatment of products in a particular country to facilitate compliance with Agoa.
US President Joe Biden said recently that the Central African Republic, Gabon, Niger and Uganda had failed to comply with Agoa eligibility criteria and would therefore no longer qualify to be part of the Agoa programme Along with Brazil and the European Union, the US is one of the leading poultry exporters to SA. Despite calls to impose anti-dumping duties on countries that export poultry to SA, the government has to date failed to implement these duties. A recent decision to increase the quota of frozen chicken that is allowed to be imported into SA from the US was seen by some to be a
AGOA ELIGIBILITY IS REVIEWED ANNUALLY TO ENSURE THAT COUNTRIES ARE MAKING PROGRESS IN ESTABLISHING A MARKET-BASED ECONOMY
compromise made for SA to continue to benefit from the Agoa programme. However, it could also assist in bringing the price of chicken down for poverty-stricken households, says Subban. Despite being the main source of protein for lowincome households, the price of chicken has continued to increase in recent years. In December 2022, Bloomberg s Shisa Nyama Index revealed that 10kg of frozen chicken pieces was the most expensive item on the index. The index uses data from the Pietermaritzburg Economic Justice & Dignity Group and tracks the prices of ingredients used in a traditional South African dish shisa nyama. Subban points out that the US and African countries have been developing strong, sustainability-focused trade and investment partnerships for some time, with some countries particularly successful in increasing the volume of
growth.
products they export to the US via Agoa. In 2021, the Biden Administration announced that it would renew the US Prosper Africa initiative with a focus on improving trade and investment in sectors such as infrastructure, energy and climate solutions, health care and technology. In 2022 it was announced that, through the Prosper Africa initiative, plans were being made to boost African exports to the US by $1bn through investments and partnerships and to mobilise an additional $1bn in US investment in Africa. With continued investment in infrastructure and programmes that boost sustainable trade and empower African businesses, this relationship could rapidly grow among existing beneficiaries and expand into countries with smaller economies. US businesses would also be able to leverage Africa s new free trade zone, helping to create an increasingly beneficial relationship between the two regions that could eventually mature into a wholly reciprocal trade arrangement. Since exiting the EU, the UK has been signing up economic participation agreements with various African countries. The total value of South African exports to the UK in 2022 was R102bn. The UK is the fifth largest recipient of South African exports. Louis du Plessis, head of Trade Finance at RMB, says there has been significant growth in exports to the UK in the past decade. In 2010, SA exported R22bn worth of exports, compared to R102bn in 2022. Its imports from the UK, however, have stayed relatively constant at about R27bn per annum. From an export perspective, what is interesting is that about 50% of the total exports to the UK are made up by precious metals. Vehicle exports, however, have grown five times while vegetable exports have grown three times.
R130bn worth of debt, it had R7bn in long-term bonds maturing on November 7. On a more positive note, Cline says he is encouraged that load-shedding has been occurring at lower levels in recent weeks, adding that the country needs to get loadshedding under control before it can stimulate much needed economic growth. In addition to local challenges, importers are also facing the economic tailwinds of global events including conflict in the Middle East which could potentially impact fuel prices in the months ahead, points out Cline. Exports are facing similar
Virusha Subban investment.
Louis du Plessis exports
Greg Cline mitigate delays.