AFTER THE BELL
It’s amazing how much we have learnt in this post-Covid pandemic period about transport, and how crucial it is to maintain functioning routes. In the same way that just a few potholes in a road can make a big difference to the reliability of an entire transport route, a few restrictions to the global transport traffic lanes can make a huge difference too.
There are loads of indices of international seaborne transport because routes are so different. Let’s take just one, the Freightos Baltic Index, which is a composite of global freight indices. It was puttering along for years at about $1,500 (more or less the cost of a container from China to the US), and then it started creeping up in late 2020.
Then it just went nuts. It rose to a peak of $11,000 in September last year, and stayed there for a few months. Since then it has come down aggressively and it now sits at about $5,000. But that is still almost three times what it has been on average over the past decade.
The increase, among other things, has had the effect of kick-starting inflationary cycles all over the world. And the reason it happened was mainly because of the strict Chinese Covid shutdown policy.
Although you might expect that this would only affect cargoes coming into and out of China, that is not actually how it works. Chinese ports are where about 25% of the world’s transshipment takes place – a stopping-off point where cargoes are moved from one ship to another.
The size of this market is just gargantuan. In 1980, the quantity of goods carried in shipping containers amounted to about 102 million tonnes. Last year, about 1.85 billion tonnes of goods were transported in containers.
I’m interested in this background because one of the questions raised by the national “work stoppage that wasn’t” on 24 August is what the government can actually do to decrease the cost of living in South Africa. Most ideas revolve around providing subsidies, either directly in cash or indirectly by subsidising transport.
Those may help, but there are other things that can be done, too. South Africa has some of the most inefficient ports in the trading world. If the clogging of a small number of the ports around the world can have such a big effect on global trade, couldn’t the unclogging of South African ports make a big difference to the cost of living in SA?
You get the sense that Transnet is really trying hard to fix this problem. But you also get a sense that Transnet is not quite managing to fix this problem. Transnet’s public statements are quite hard to read because the organisation does so many different things, from port management to rail transport and pipelines.
But at the most superficial level, it’s obvious that the organisation is in deep trouble. It did announce a rebound in net profit to about R5-billion for the 2022 year, but the rebound was largely due to a R3-billion reduction in capital investment. Clearly what happened here is that the organisation was shocked by its R8-billion loss in the 2021 financial year – the first loss it has had in decades – so it quickly pulled the plug on the vast majority of its capital investment.
The problem is this means the start of an