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  October 29th, 2022 | Written by

Supply Chains are our Lifeline!

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Maintaining the balance of cause and consequence between all parties involved in the supply chain is paramount for SA Inc.

As the architects of the supply chain – and in existence for more than a century – The South African Association of Freight Forwarders (SAAFF) represents more than 300 clearing and forwarding agents accounting for more than 80% of the trade goods in and out of South Africa. While our focus is on our members – enterprises big and small who have incurred logistics costs of nearly R7 billion over the 11 days of industrial action at our ports – as the collective, we have SA Inc and the health of our Nation at heart!

Unfortunately, it was clear that the interests of SA Inc. were not considered (knowingly or unknowingly) during the time of the strike, as South Africa lost the opportunity of moving R65,3 billion worth of goods. Some of that will possibly move later, but the rest is gone and gone forever.

Considering that the wage increase cost – if adopted across the board for all workers at Transnet – is, in relative terms, a mere R1,5 billion, we need to realize the consequences of actions from all parties. We can never allow these events to stand in the way of our drive for economic growth, as South Africans – especially the lowest wage earners – deserves a better quality of life! Therefore, it is imperative to work together and have the interests of SA Inc. in all our minds at all times!

SAAFF calls on the need for growing maturity in resolving matters amicably, in a timely and efficient manner, to strengthen partnerships between Government and strategic stakeholders through early consultation to enable prevention rather than cure, as risk mitigation is our joint responsibility to the smooth running of our national economy. We must learn the stark lessons provided by these operational disasters, or we are going down an endless spiral with the worst possible outcome. Our late President Nelson Mandela created the social compact comprising Business, Labor, and Government, which means we need to work together to achieve our mutual goals in this compact – for the logistics industry, that means trade must occur using shared infrastructure with shared responsibilities from all parties.

If goods can’t move, the economy stops. And if the economy stops, the impact is hugely negative for anything related to the movement of cargo – including time, cost, and service reliability. With the economy’s circular flow, ordinary South Africans will suffer in the end – the very individuals who went on strike against a wage offer way below the inflation figure. While SAAFF is very pleased that an agreement has finally been reached, we must stress that the hard work only starts now, as, according to our consolidated reports, most port terminals are operating at productivity levels that are somewhere between medium and normal levels. So, although it might seem that we are making a return to full operational status, we are certainly not there yet!

In the aftermath, beyond the strike, barring any further destructions, a complete restoration of normal functionality will only happen in early 2023, as the consequences of one day’s worth of stoppage have been shown to result in anything up to 10 days needed for recovery! Restoring normality can only happen if we learn from this experience and adopt better operational practices to improve our logistics performance. We reiterate that this can only be achieved by close collaboration between all the parties – Business, Labor, and Government.

From the perspective of the clearing and forwarding industry – the workhorses of making the merchandise trade tick – the following solutions are proposed as urgent topics for consideration by all parties:

  1. We need backup port facilities to evacuate the ports
    1. We have a high freight demand; therefore, only a multi-modal approach – with all parties operating efficiently – will have a chance of satisfying our demand.
    2. Therefore, we need a robust functional rail sector – especially when evacuating goods from the ports.
  2. We need a precise policy alignment to allow for the practical execution of moving goods
    1. The functioning of the supply chain – nor the economic extent of policies and actions that affect it – is clearly not fully understood by decision-makers.
    2. The Government often ask the private sector to assist in picking up the cost (such as increased taxes and levies). But this help must be reciprocated with the private sector’s ideas comprising meaningful involvement in operations.
  3. We need port efficiency to improve the time, cost, and service reliability involved in moving goods
    1. This approach must include inter and intra-port competition.
    2. And all functions must be overseen by a strong, independent ports regulator.
  4. All role-players must be held accountable for their performance
    1. This approach includes Business, Labor, and Government.
    2. The public choice theory explains this very well, as people react to incentives; however, incentives must be balanced between all role-players.
    3. KPIs across all role-players must be established and published – with all parties being held accountable.
  5. No party should be allowed to profiteer from this crisis
    1. There must be transparency in all dealings.
    2. And there should be no favoritism in alleviating the crisis or afterwards, as we strive for continuous improvement.
  6. It is the responsibility of all parties to educate the economic realities of their actions to other parties
    1. As SAAFF has warned, we will be economically far worse off when calamities such as these are allowed to continue.

We must ensure that we evolve and mature as a nation. We must maintain a balance between the cause and consequence of our actions. We cannot allow for ideology and self-interest to drive the actions of respective parties to the detriment of SA Inc. There are positive lessons to be learned from this situation, as we can work together and create prosperity for all instead of allowing greed and self-interest to cloud our broader holistic view incorporating each player in the industry. The private sector needs to redouble its own work and find new ways to ensure that Government takes its share of responsibility. Bemoaning the status quo is helping no one – every sector and every entity must take responsibility for its own destiny.