South Africa Freight Transport Report Q3 2009

In June, throughput figures at South Africa's ports for the preceding month of May were released and showed that the global downturn in trade was hitting the nation’s maritime sector hard, with total cargo throughput at the nation's ports falling by 11% month on month (m-o-m). Richard’s Bay, Saladanha Bay, Cape Town, Port Elizabeth and East London all recorded m-o-m declines in total cargo throughput in May 2009, according to figures released by Ports & Ships, with just Durban and Mossel Bay increasing their m-o-m throughput. The port of Durban handled 5.76mn tonnes in May 2009, up by 11.2% on the 5.179mn tonnes that the port handled in April 2009. BMI notes that the analysis of y-o-y figures offers indications of a slightly different trend.

Richard’s Bay, Port Elizabeth, Mossel Bay and East London all recorded declines in total cargo throughput. But Durban, Saladanha Bay and Cape Town record growth in total cargo tonnage handled. BMI believes the decline in throughput at Richard's Bay is down to the decline in global coal demand. Richard’s Bay is South Africa's main coal export port. We believe the ports of Durban, Saladanha Bay and Cape Town increases in throughput are down to South Africa's demand for imports, which BMI expects will grow by 1.7% in 2009 on the back of the country’s demand for goods and raw materials, as it prepares to host the 2010 World Cup. Despite our growth projections for the country's import sector, the forecast decline of 2.3% in South Africa’s export sector will pull down the throughput at the country’s ports. BMI Shipping analysts foresee declines in South Africa’s main ports of Durban, Cape Town and Richard’s Bay of 0.1%, 0.1% and 0.3% respectively for 2009.

In this latest South Africa Freight Transport Report, BMI concludes that freight carried across all modes in South Africa is set to increase at an annual average rate of 3.1% over the next five years, ahead of the general rate of GDP growth. Various factors support this prediction. The global recession is taking its toll, with the economy due to contract by 1.9% this year and recover slowly after that. We now expect the economy will grow at an annual average rate of 2.3% across the 2009-2013 forecast period, with foreign trade rising by 11.3% a year in value terms. Government policy favours resumed investment in port development, but this is taking time to feed through. Before the downturn started in the second half of 2008 (H208), South Africa’s rate of economic expansion had been spurred by domestic consumption, investment growth, and international demand for commodities. These resulted in strong demand for transport services. Export shipments of gold, platinum group metals, chrome, manganese, and coal necessitated increased freight services. Looking forward, these forces will take some time to re-asserts themselves. South Africa’s plans to foster regional expansion in southern Africa, which entails improving and extending the transport network, is also a potential plus factor.

BMI believes the global slowdown and domestic problems, such as power shortages, are feeding through and having a negative impact on the transport sector in the short term. Overall freight volume shipped by road is forecast to increase by an annual 2.3% for the rest of the review period. We assume that adequate dockside facilities and port throughput will not constrain the growth of container trade, with volumes weaker on the short term as a result of the recession. BMI expects maritime freight carried to grow by an annual average of 5.4% in 2009-2013. We expect airfreight to edge ahead with 3.0% growth and, not far behind, pipeline throughput at 2.3% a year and rail at 2.1%.

South Africa’s overall freight rating, at 60.7 out of 100, is above average for the Middle East and Africa (MEA) region. It scores well in terms economic factors and in its regulatory background, but its record in relation to historic and forecast growth in foreign trade and in transport remains relatively weak. By the very nature of the industry, many of the problems associated with reforming transport network, facilities, and services have to be considered over a medium-term time frame.

According to our latest estimates, the total value of transport and communications GDP will rise to US$38.8bn in nominal terms by 2013, representing 8.2% of South Africa’s GDP.