Logistics sector sees May recovery amidst slower growth

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Since the beginning of 2024, air freight has stood out as a top performer among sub-sectors. In May, it saw a 15.4% increase compared to December 2023, marking the fourth consecutive monthly rise and reaching record highs. Quarterly growth reached 18.0%, significantly boosting the overall logistics sector recovery.

Despite a slight dip in cargo load on planes in May from earlier peaks, levels remained high, with March seeing a 50.4% spike. The International Air Transport Association (IATA) reported strong global demand, with air cargo tonne-kilometres (CTK) growing by 11.4% annually, supported across all regions and major trade routes. Africa's 10.6% annual growth in CTKs, despite its 2% global market share, reflects positive industry trends.

In May, the sea freight sector rebounded strongly after a challenging April, with a 14.5% increase in containers landed and a remarkable 45.5% rise in containers shipped compared to the previous month. Other handled cargo, excluding vehicles, also saw a 12.4% increase, reversing a decline in April.

Year-to-date sea freight remains up by 5.4% over 2023 levels. South Africa continues to focus on reforming the sea freight sector, highlighted by Grindrod's selection to expand the Port of Richards Bay's container terminal capacity from 50,000 to 200,000 TEUs annually. This development aims to align with TNPA's KZN ports master plan, signalling progress in structural reforms crucial for broader economic growth and development.

In May, South Africa's road freight sub-sector, dominating 83.6% of all freight payload, continued its recovery with a 2.7% monthly increase, marking the third consecutive month of positive growth after a year-long decline. Quarterly, road freight rose by a notable 8.6%.

Heavy vehicle traffic on the N3 toll route increased by 6.6% in May, contrasting with a double-digit decline on the N4 route due to earlier travel restrictions and port issues redirecting traffic to Port of Maputo. As port operations rebounded in May, additional traffic demand on the N4 route diminished.

In May, South Africa's rail freight sub-sector faced a slight setback but continued its gradual overall recovery. From January to May 2024, rail freight increased by 11.0% compared to the same period in 2023, despite starting from a low base. Operation Vulindlela has been pivotal in this progress, aiming to boost Transnet's capacity and reverse the shift of goods from rail to road.

The first phase of Operation Vulindlela recently concluded with a commendation for maintaining private sector engagement and governmental cohesion during economic challenges like load-shedding in 2022/23. The ongoing second phase is expected to expand its focus within the logistics sector and other network industries, indicating a continued push for structural reforms.

In May, the storage and handling sub-sector of the Ctrack Transport and Freight Index saw a 1.1% monthly decline, remaining just 1.6% higher than a year ago. Inventory indicators fell during the month. However, total transhipments of landed and shipped containers rebounded, increasing by 4.3% after a significant drop in April.

Meanwhile, the transport of liquid fuels via Transnet Pipelines rose by 0.2% from April to May, yet declined by 0.3% quarterly and 2.0% annually, reflecting broader economic sluggishness.

Transport sector may boost Q2 GDP

With two months of Ctrack TFI data available, indications point to a quarterly rise in the index, suggesting a potentially positive contribution from the logistics sector to Q2 economic growth. Historically, the transport & communication sector has often exceeded other economic sectors, notably growing by 3.5% in 2023 while overall GDP grew by only 0.7%.

However, in Q1 2024, the sector contracted by 0.5% q/q seasonally adjusted, contrasting with the broader economy's 0.1% contraction. Despite this slow start, Q2 shows promise, with expectations that the transport and communication sector will continue to outpace overall economic growth in 2024.

“In the last two years, since the establishment of the National Logistics Crisis Committee, backed by the business sector's resources and expertise, a new form of collaboration has developed between the public and private sectors, facilitated by the efforts of the Operation Vulindlela team.

"While notable progress has been made in pursuing the reform agenda, it is of utmost importance that the new government must continue and accelerate the efforts, in the interest of the economy as a whole,” says Hein Jordt, chief executive officer of Ctrack.