Sunday Times Freight Logistics & Warehousing 2021 (May 2021)

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2021

A SECTOR IN RECOVERY INSIDE: VACCINES I SAFETY I CUSTOMS I SUSTAINABILITY

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Contents

F ROM T HE EDI T OR

A sustainable future?

FREIGHT

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ne year ago, this ed’s letter began by talking about COVID-19 – the greatest contemporary global crisis to face humankind – and its spread around the world, and the concomitant knock-on effects on logistics services. So it is with a certain grim satisfaction that this year it begins by talking about the COVID-19 vaccines – surely our greatest logistics challenge ever. Planning coordinating and securing the distribution of a temperature-sensitive product to roughly 5 billion people (two-thirds of the global population, give or take a few hundred million) is too great a challenge to explore in adequate detail over just two pages, but we give it a shot on page 8. If the pandemic itself was a wake-up call for logistics providers around the world, then vaccine distribution is a test of their capabilities. Safety and security will obviously be key – but this is an area in which South Africa faces unusual challenges, as we see on page 12. It will also require the flexible upscaling and downscaling of operations enabled by elastic logistics, which we examine on page 22. Warehousing capacity and management will also be tested, which is where a good warehouse management system can come in handy; check out our rundown on page 54. In times of crisis it’s difficult to focus on nice-to-haves. But with sustainability increasingly a non-negotiable, reducing carbon emissions in the sector is vital, as we see on page 44. On the topic, there’s increasing focus on sustainable, recyclable and reduced packaging – see page 56 for more. Hopefully, considerations around sustainability can be built into the vaccine distribution programme, so that when the dust settles, we don’t lurch straight from this crisis into another one.

LOGISTICS & WAREHOUSING Published by:

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Unpacking the challenges facing the distribution of the COVID-19 vaccines across South Africa

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Safety and security Secure warehouses, airport thefts, truck stop safety and dangerous goods

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Trends Understanding elastic logistics, plus a look at non-logistics companies entering the sector

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Finance How structured trade commodity finance can reduce risk, and a look at the best way to handle foreign exchange transactions

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Shipping Fighting bill of lading fraud, plus a look at the draft Merchant Shipping Bill

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Training How are logistics companies handling training amid the pandemic?

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Road freight What do SANRAL’s new tariffs mean for the trucking industry?

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Rail freight Can third-party access to our rail network help reinvigorate it?

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Air freight A look at the prospects for air freight in a world with so few commercial flights

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Sustainability There’s much to be done in reducing carbon emissions from sea and road freight

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www.businessmediamags.co.za EDITORIAL Editor: Anthony Sharpe Content Manager: Raina Julies rainaj@picasso.co.za Contributors: Samantha Barnes, Trevor Crighton, Delia du Toit, James Francis, Caryn Gootkin, Dale Hes, Anél Lewis, Kim Maxwell, Puseletso Mompei, Thando Pato, Rodney Weidemann, Lisa Witepski Copy Editor: Nia Magoulianiti-McGregor Content Co-ordinator: Vanessa Payne Digital Editor: Stacey Visser vissers@businessmediamags.co.za DESIGN Head of Design: Jayne Macé-Ferguson Senior Design: Mfundo Archie Ndzo Advert Designer: Bulelwa Sotashe SALES Project Manager: Tarin-Lee Watts wattst@picasso.co.za | +27 87 379 7119 Sales: Noel Van Breda, Stephen Crawford, David Johnson, Merryl Klein, Alec Rompelman, Yoliswa Stivin PRODUCTION Production Editor: Shamiela Brenner Advertising Co-ordinator: Johan Labuschagne Subscriptions and Distribution: Fatima Dramat fatimad@picasso.co.za Printing: Novus Print MANAGEMENT Management Accountant: Deidre Musha Business Manager: Lodewyk van der Walt General Manager, Magazines: Jocelyne Bayer

Customs

Borders Smarter borders are more efficient borders

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Warehousing Smart warehouses make for smart supply chains

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Packaging How humble packaging improves brand experience, traceability and security, plus how to make it more sustainable

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PIcasso Headline, a proud division of Arena Holdings, Hill on Empire, 16 Empire Road (cnr Hillside Road), Parktown, Johannesburg, 2193 PO Box 12500, Mill Street, Cape Town, 8010

Government and business need to work together to alleviate bottlenecks, but how can technology help?

Anthony Sharpe Editor

Vaccine

COPYRIGHT: No portion of this magazine may be reproduced in any form without written consent of the publisher. The publisher is not responsible for unsolicited material. Freight, Logistics and Warehousing is published by Picasso Headline. The opinions expressed are not necessarily those of Picasso Headline. All advertisements/advertorials have been paid for and therefore do not carry any endorsement by the publisher.

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A DV ER T ORI A L

THE IMPORTANCE OF SUPPLY CHAIN CERTAINTY The IMM supports marketing and supply chain efforts in minimising risk and growing a robust logistics ecosystem

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ADDITIONAL SOURCES FOR SUPPLY CHAIN TRENDS • E-commerce figures: beeketing.com/blog/future-ecommerce-2019/ • Dark stores: https://www.forbes.com/sites/blakemorgan/2020/04/25/dark-stores-are-thefuture-of-post-pandemic-retail/?sh=54b2fada7826 • 2021 trends: https://www.supplychaindigital.com/supply-chain-2/top-10-supply-chaintrends-2021 • 2020 trends: https://www.riverlogic.com/blog/top-supply-chain-trends-you-need-toknow-in-2020

taught a valuable lesson: supply chains need to build in robustness by balancing cost-efficiency with flexibility and resilience.

HARNESS THE POWER OF TECHNOLOGY With the advance of technology and society towards the fourth industrial revolution, supply chain management will experience upheaval as it moves from being a service industry to an essential service. Brand promises can only be delivered on and customer loyalty secured if the supply chain works and the customer gets their product in time, at the right price and in the right condition. Resilience and the e-commerce boom have characterised supply chain trends in the past year, and supply chain resilience has become a key part of risk prevention. Customer fulfilment expectations are driving accelerated use of analytics and automation across the supply chain. Businesses that can harness the power of big data and automation will have a competitive advantage. While supply chains grapple with a changing world and consumer, the digitisation of the supply chain continues as supply chain solutions move to the cloud and big data analytics are integrated. The omnichannel supply chain was boosted over the past year as businesses offered customers a seamless shopping experience between shopping online and their brick-and-mortar stores. Omnichannel supply chains place greater demand on logistics, so supply chains need to be more agile and sustainable.

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Another trend to watch is the remote working revolution and migration of workers from cities to the countryside or surrounding suburbs. Shopping behaviour will be affected as the regular commute to the city falls away, regional and local distribution hubs will become even more important for efficiency. Even large retailers in the US are creating “dark stores” that serve only as fulfilment centres to distribute products to online customers.

IMM TRAINING To help decode the ongoing industry disruption, the IMM has launched a new campaign to highlight its two key distance-learning streams for postgraduates and mature students in supply chain management and marketing, from Higher Certificates to BCom and Masters programmes. The IMM has been a specialist in distance learning since 1960 and the IMM Graduate School supports students from more than 20 different countries around the world. For more information: 0861 466 476 info@immgsm.ac.za www.imm.ac.za

images: SUPPLIED

ressure on supply chains worldwide has been immense as the pandemic shut borders and brought global transportation to a halt. Brands had no means to transport their goods and retailers faced stock shortages. Marketing campaigns had to be paused as businesses took stock and waited out the uncertainty. The correlation between supply chain management and marketing is clear: when the supply chain is disrupted, marketing efforts are gutted. One of the most memorable examples of this time must be the “great toilet paper panic of 2020”. It demonstrated what happens when fear sets in and consumers worry that retailers and brands will run out of stock of an essential item. In this case, consumers did not trust the supply chains to work properly due to the pandemic. What was also made abundantly clear was that supply chain management is an essential service. Without effective supply chain management during hard lockdowns globally, many consumers would not have been as comfortable as they were – with their newly ordered home gyms and entertainment stations – or able to work from home and/or homeschool with the right technology and equipment. Supply chains and marketing are intricately connected in the product life cycle – from raw materials and manufacturing to transport, brand building and marketing once the product is in store. To ensure certainty following this period of rampant uncertainty, risk management is key. Effective identification and mitigation of risks with suppliers, supply chains and global supply chain routes will create confidence in the global economy once again. Definitive changes in consumer behaviour – with the demand for rapid and instant service and high-quality, longer-lasting products – will influence the need for a more agile, responsive, sustainable, customer-centric, and cost-efficient supply chain. The current global crisis has

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Getting the jab It’s possibly the greatest logistical challenge ever faced by humankind: distribution of temperature-sensitive vaccines at unprecedented speed and scale. ANTHONY SHARPE delves into the challenges facing South Africa’s roll-out plan

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outh Africa’s COVID-19 vaccine programme is underway in fits and starts, with the AstraZeneca option first being rejected, and the subsequent Johnson & Johnson roll-out paused and then resumed. And while procurement has been centralised in the hands of the National Department of Health, experts in the logistics market need to be involved in the distribution process, says Daniel Dombach, Director EMEA for Industry Solutions at Zebra Technologies. “That’s what we’re seeing in the majority of countries. Most governmental organisations don’t have the knowledge or infrastructure. The police and army can play an assisting role but should leave track-and-trace and cold chain monitoring to the experts. “Transportation of pharmaceuticals has been happening for a long time, so most countries have an existing

infrastructure of logistics providers, many specialising in the cold chain, who are adept at handling vaccine transport,” says Dombach. Thankfully, South Africa is well equipped in this capacity, asserts Mohammed Akoojee, CEO of Imperial Logistics. “There’s no lack of warehousing capacity or transport expertise in the private sector to handle a project of this scale.” What will determine the success of the endeavour, says Akoojee, is coordination at the front end because rapid mass vaccinations require supply chain efficiency. “To enable effective coordination, there needs to be good information flow between the point of vaccination and warehousing, distribution and logistics.”

Vaccines usually take years to develop, prompting concern among some about the safety of those being rolled out with such relative speed. These development cycles have been enabled by unprecedented funding and global sharing of financial risks. The COVAX initiative for example, which provides vaccines to the developing world, has the support of 190 countries. Such development cycles are also not unprecedented: a vaccine was developed for the 2009 H1N1 swine flu pandemic in just six months, and one for the Zika virus took just two weeks more than that. Source: Gavi, The Vaccine Alliance

Distribution points Mass vaccinations also require a massive number of vaccination points. “Authorities around the world have set these up in major sports arenas, parking garages, concert halls or repurposed exhibition halls,” says Dombach, “with some places even offering drive-through vaccinations. “Doctors’ offices will play an important role, but if you

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VA-VA-VOOM VACCINES

Mohammed Akoojee

want mass vaccinations of as many people as fast as possible, you’ll find the logistical challenges of delivering to individual doctors are greater than those of delivering to a larger venue.” Akoojee estimates there are presently around 50 centres across the country doing phase one vaccinations for healthcare workers, adding that this needs to be amped up significantly.

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COV ID-19

“Transportation of pharmaceuticals has been happening for a long time, so most countries have an existing infrastructure of logistics providers.” – Daniel Dombach “The good news is the private sector distributes to thousands of points, ranging from pharmacies to public hospitals,” says Akoojee. “We can use those points of care to expand the vaccination network.” He says that while these will need to have the right infrastructure, as well as trained medical staff, if the public and private sectors cooperate effectively this should be feasible. Anthony Diack, MD of healthcare for DSV South Africa, says the company alone delivers to 14 depots and another 500 direct delivery points around the country, including state hospitals, clinics and correctional services facilities under contract to the National Department of Health. “In excess of 7 800 public sector orders are processed and more than four million packaged units are delivered each month.”

Working together Akoojee believes government engagement with the private sector at both a planning and execution stage is on track. “The interaction between the public and private sectors is good. The formation of the Presidential Coordinating Council enabled business and government stakeholders to engage around planning this properly. Our experience with the National Department of Health has historically been pretty good – we’ve worked with them on the roll-outs of antiretrovirals and childrens’ vaccines – and our engagements have been positive and constructive.” The tender for distribution of vaccines was a result of these engagements. Unfortunately, where there are tenders, there’s a chance of corruption. but Akoojee believes there is reason for optimism. “The risk of corruption is limited because of the type of product and the regulations around distribution. It’s stricter than PPEs. To deal with vaccines, you need the right South African Health Products Regulatory Authority approvals, you need the right sort of warehousing. It’s not something every logistics provider can do.”

Precious cargo While South Africa may have plenty of experience in vaccine distribution, those developed for COVID-19 present their own unique challenges. “What’s different now is that some vaccines, for example the Pfizer-BioNTech one, need to be transported at arctic temperatures of -70 to -80°C, and others need special care,” says Dombach. “For this reason, it’s essential to monitor the temperature corridors at which vaccines are transported, which requires additional technology.” To this end, Zebra employs its Temptime temperature-sensitive labelling monitoring solution. “We have data loggers that can monitor the temperature of a product on its journey, in the range of 200 to -200°C,” explains Dombach. “At the point of arrival you can read all the data from this device through a Bluetooth connection to a handheld terminal or smartphone, and immediately see which shipments are or aren’t in good shape.” Diack says DSV can accommodate both Johnson & Johnson and Pfizer vaccines. “J&J vaccines are stored and distributed between 2 and 8°C and present no challenge outside of DSV’s existing cold chain service. Pfizer vaccines are stored long-term at -70°C. We’ve invested in ultra-cold freezers to store these, which are augmented by passive KryoTrans

IMAGES: SUPPLIED

DEFENCE VECTORS The Johnson & Johnson vaccine is what’s known as a viral vector vaccine. This works by injecting a patient with a harmless adenovirus that has been modified to include instructions for creating SARS-CoV-2 spike protein. When the patient’s cells read this instruction and create the spike protein, their immune system responds by producing antibodies against them, protecting them in the event of future exposure to COVID-19. Source: US Center for Disease Control

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storage locations, with dry ice validated at -70°C.” Diack says DSV’s end-to-end cold chain service makes use of a range of passive packaging solutions validated for up to 144 hours. “Product integrity is ensured because there is no break in the cold chain at all, from source of product or vaccine to OR Tambo International Airport, on to our cold chain facilities and then via our vehicles to the destination.”

Keeping it safe In this process, as with any modern logistics operation, visibility throughout the supply chain is key. Akoojee says government has put out a tender for a validated solution to maintain supply chain visibility and product integrity. He says control tower solutions – which function like the control tower at an airport, monitoring and controlling the flow of traffic in and out – are applicable here. Visibility is also essential for security. While thefts and counterfeiting have plagued supply chains around the world (not least of all in South Africa) throughout the pandemic, the vaccine presents an extraordinarily tempting target for nefarious activities. “We’re a logistics company operating in Africa, so it’s part of our business to ensure security through satellite tracking, armed escorts, spot checks and technology like control towers that helps identify where the product is at all times,” says Akoojee. Dombach says the first counterfeit vaccines have already been discovered. “Serialisation plays a very important role here – being able to identify each and every box, or even vial, because they’ve been marked with a unique serial number or barcode sticker that can be read and checked to see it’s not a duplicate of another number somewhere in the world.”

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A DV ER T ORI A L

VACCINATION ROLL OUT SIGNALS DISTRIBUTION SUCCESS DSV’s investment in -70°c cold chain helps South Africa’s fight against COVID-19

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he mass roll out of vaccinations against COVID-19 started in mid-May this year. DSV Healthcare was awarded the tender (jointly with The Biovac Institute) by the National Department of Health (NDoH) to distribute the -70°C vaccines – jointly developed by Pfizer and BioNTech – to multiple private and public vaccination sites around the country. There has been much debate around South Africa’s capability to distribute vaccines at -70°C, and while the challenges are many, DSV has been working successfully in this space for 20 years. DSV was so keen to contribute to the fight against COVID-19, that it bought nine highly specialised ultra-cold freezers on risk – there would have been no time to boost capacity once the tender was awarded. The turnaround time from the first delivery of the vaccine to DSV to DSV’s first delivery to a vaccination site was 10 days (this includes the seven-calendar day stability testing process). This is testament to DSV’s forward planning and the commitment and efforts of the NDoH planning team. For DSV, success means staying true to the standard operating procedures that have been specifically developed for the NDoH and which factor in four variables that make this project like no other: 1. Risk mitigation planning. Storing and transporting product that must remain consistently at a temperature of -70°C involves high risk. To counter this, every risk has to be understood and a primary and secondary risk mitigation plan developed. 2. Scale. DSV will distribute high volumes over a sustained period, which requires meticulous planning. 3. Time. Due to the urgency of getting the product to vaccination sites, receiving and

The first order of Pfizer vaccines – packed and ready for dispatch from DSV on 12 May 2021. From left to right: Back row: Daniel van der Linde, Tracy Frank, Lavelle McAnda, Eben Zandberg, Jeffrey Nkonyane, Mishell Mathipe, Nishan Ramsamy, Dudley Saunders, Christel Lupton Front row: Ralton Moses, Carine Labuschagne, Adrienne Youell, Ravina Govender.

sampling timelines have been halved and a white glove delivery service put in place. 4. Accuracy. It is critical to get the right amounts to the right place at the right time to support each site’s daily vaccination plan. For risk mitigation, DSV’s planning includes a product recovery process should a delivery fail for whatever reason. In this instance, DSV would use its national footprint of cross-dock hubs to re-ice the consignment, thereby enabling 72 hours to return that product to DSV’s main storage hub. These critical success factors are woven into the three processes – warehousing, distribution and DSV’s control tower – which have been recalibrated to make sure the vaccinations are received as scheduled.

WAREHOUSING Warehousing involves receiving, sampling, storing, picking and packing, dispatching, and inventory control. Each step is time-critical.

Warehousing insight: A vaccine is allowed no more than five minutes outside of frozen storage status and requires two hours at -70°C before it can be handled again.

Distribution includes delivery to NDoH appointed vaccination sites, collection of cold boxes and temperature monitors and a returns process.

CONTROL TOWER DSV’s control tower is responsible for inventory management, reporting, monitoring and assessment and order management.

Reporting insight: Compile and distribute intra-day, end of day, weekly, monthly and KPI reporting to stakeholders.

DSV is the largest private distributor of cold chain products to the public and private sectors in South Africa. It has the experience and capabilities to support the national vaccination initiative countrywide. DSV has one of the largest GDP-compliant cold rooms in the Southern Hemisphere and an extensive range of passive cold packaging solutions are validated to up to 144 hours.

For more information: www.dsv.com/en-za

Storage solutions include nine ultra-cold freezers with overflow product moving to Kryotrans containers with dry ice, should the need arise. There is a dedicated dispatch area, the cross-dock hubs have dry icing capabilities, and stock will be counted twice a year with weekly cycle counts taking place.

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Warehouse security needs to be updated to counter increasingly sophisticated syndicates.

safe as warehouses?

Logistics companies need to adapt to increased warehouse thefts, as DALE HES discovers

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ecent research by transport and logistics insurer TT Club and business standards company BSI found a significant shift in the risks posed to logistics companies in 2020. While theft of in-transit cargo is still the biggest threat to businesses, the research showed a decrease in this sort of crime. Instead, due to stockpiling of goods and restriction of movement, there has been a concomitant increase in theft from storage facilities such as warehouses, which are now targets of highly sophisticated criminal syndicates. The BSI and TT Club Cargo Theft Report 2021 found that, globally, theft from facilities doubled in 2020 compared to 2019, making up 24 per cent of all cargo theft. This trend has forced logistics and warehousing companies to increase their levels of security. “Crime syndicates have become increasingly sophisticated and we’ve seen a lot more in-warehouse incidents in the sector, which means that the industry has to keep adapting,” says Bridgewater Logistics general manager Richard Venter. Venter says that syndicates target IT systems, plant informants within businesses and even use “military-grade jamming systems”, which shut down companies’ communication systems. “This means that we constantly need to upgrade our systems and procedures. Over and above strong security systems including cameras, secure IT systems, facial recognition software, alarms and anti-jamming systems, staff training is very important. They are our eyes and ears on the ground,” Venter explains.

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Warehouse security systems need to incorporate highly secure IT systems.

CRITICAL EMPLOYEE CHECKS The following should be probed when vetting new employees, says Bridgewater Logistics general manager Richard Venter: • Past employment history going back 10 or 15 years. Research into why an employee left a company or whether they were engaged in any bad behaviour. • A full criminal history check on any prospective employee. • For large and long-established companies, a check should be done on whether the company is rehiring a previous staff member, establishing the reasons for originally leaving the company.

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S a f e t y a nd securi t y

Bridgewater is affiliated to the Transport Asset Protection Association (TAPA), which provides certifications to help protect against theft at warehouses and distribution centres. “We are a level A certified facility and have invested hundreds of thousands of rands in state-of-the-art equipment to protect clients’ assets in our control,” says Venter. “Being certified by TAPA also means that we have to follow very strict standards and procedures. If any of the stipulated procedures are not followed, then an alarm will immediately go off. This helps to keep our security protocols extremely well managed.”

A layered approach Supply Chain Junction founder Michael Badwi says that a multi-pronged, layered security approach – whereby security is implemented at all levels of the organisation – is essential to prevent theft. “There’s no single, simple

solution to prevent warehouse theft. It takes a combination of strong processes, security systems, warehouse management software and excellent hiring criteria to reduce theft in your business.” Badwi adds that the best way to identify theft in the first place is to conduct regular stock takes. “The more accurate your inventory data, the faster you’ll pick up on theft. Without regular stock takes, you may not even notice that inventory levels are shrinking until months down the line – by which time you’ll be haemorrhaging cash.” Small inventory shrinkage is normal within certain limits due to stock being destroyed, damaged, expired or recalled, says Badwi. Although it’s very difficult to prove that someone is guilty of warehouse theft without catching the person red-handed, there are several warning signs. “If your stock levels don’t match your sales records, sales seem to dip when

In-transit cargo remains the biggest target for theft.

particular staff members are on duty, there are staff rumours that theft is taking place, invoices are missing or stock is constantly found near exits or loading bays, then these could all be possible indications of theft.”

Airport cargo security Recent incidents of personal protective equipment theft at OR Tambo have highlighted the security concerns around our airports, writes Puseletso Mompei

images: Pixabay, Mantis Security, istock.com

TT Club and BSI Screen (Fight Crime in South African Supply Chains)

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he Transported Asset Protection Association has warned that the transportation of COVID-19 PPE, and vaccines in particular, presents the “biggest security challenge for a generation” in supply chains. The South African Civil Aviation Authority’s spokesperson Kabelo Ledwaba says freight security is a shared responsibility. “Cargo operators wishing to participate in the secure supply chain have to apply to the South African Civil Aviation Authority for approval as regulated agents.” One of the requirements is to develop a security manual detailing the security

measures they plan to implement in terms of the protection of cargo. With regard to those agents at the airport, this is a shared responsibility between airlines, the regulated agents and the airport.

Targeting of virus-related cargo According to CargoNet, there was a 300 per cent increase in cargo theft in April 2020, compared to 2019 figures. An incident at OR Tambo made headlines in July 2020 when the South African Police Services arrested seven suspects following a shoot-out after criminals tried to make off with scores of PPE.

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There was a 300 per cent increase in cargo theft in April 2020, compared to 2019 figures. Ledwaba says there are formal structures at the airport for the coordination of security responsibilities between the airport and government departments and agencies as well as other stakeholder representatives. “Airlines, ground-handling companies and law-enforcement agencies collaborate extensively with airport managers.”

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Highway Junction Truck Stop, Harrismith

Making truck stops

safe and secure

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here is only a handful of proper truck stops in South Africa that provide adequate security. That’s according to Ben Deysel, chief executive of Highway Junction Truck Stop, who says security controls, dog handlers, armed response, serious fencing and entry/exit controls are not a given everywhere. “Over and above the security, these select stops provide diesel for refuelling at marginal tariffs, and provide an accredited retail shop such as an OK Express, where high-quality food is prepared and served in proper restaurants.” More common across the country are the so-called truck-stops as provided by the oil companies at general public retail sites. According to Deysel, in

these locations there is no security, no safety standards, no control on access or exit, nor is there any control over the drivers with passengers entering to stop, eat, perhaps refuel, but mainly “rest”. “These sites cannot be recognised as truck stops as they primarily provide fuel and food to the public in general and are earning serious money under the protection of the Regulatory Accounting System model, which regulates the retail industry, but not the truck stops,” says Deysel.

A problematic model Most truck stops only earn income from parking fees, which is not viable nor sustainable. Deysel says the only major truck stop that provides all the necessary security and safety components is found on the intersection of the N3 and the N5, in the industrial area of Harrismith.

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Truck stops are an essential part of maintaining driver safety, but in South Africa they often present risks, says PUSELETSO MOMPEI

“This facility is accredited by the trucking industry as well as recognised as one of the three largest truck stops in the world, and certainly by far the biggest and safest in Africa,” he explains. The main obstacle in the Ben Deysel way of developing more proper truck stops is the fact that they’re regarded as retail sites by the Department of Energy but not recognised nor regulated similarly to the general retail sites. Deysel says the main high-risk areas are near all toll gates, where vehicles park illegally. These areas are notorious for the hijacking and theft of cargo from these trucks. “If the government is serious about road safety, then they should regulate the industry to enforce strict compliance to public safety by keeping trucks out of town centres.”

“The main high-risk areas are near all toll gates where vehicles park ILLEGALY.” – Ben Deysel

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S a f e t y a nd securi t y

An ever-changing landscape

Pre-trip check before delivery of hazardous tanks to client

Danger Zone The transportation of dangerous goods remains a highly specialised field that should only be taken up by committed operators, says Trevor Crighton

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ll dangerous goods pose significant danger to people, property or the environment and all need to be treated with extreme caution,” says Geoffrey Barlow, MD of DGM South Africa, which specialises in transporting dangerous goods. Barlow says they are classified into three levels of packing groups. “Packing Group I materials presenting the highest level of danger.” The National Road Traffic Act lays out strict conditions for the transportation and handling of such freight described as “any substances which may cause injury, ill health or death of

CLASSIFYING DANGEROUS GOODS Dangerous goods are classified in nine classes listed in SANS 10228. Some of the categories are further subdivided based on their properties or risks that they present. Each category is clearly defined by different risk hazard diamonds for easy visual recognition. Classification of dangerous goods according to the type of dangerous materials or items present: 1. Explosives 2. Gases 3. Flammable liquids 4. Flammable solids 5. Oxidizing substances 6. Toxic and infectious substances 7. Radioactive material 8. Corrosives 9. Miscellaneous dangerous goods Source: Arrive Alive

a human by reason of their toxic, corrosive, irritants, strongly sensitising or flammable nature, are considered flammable goods”. Barlow says that these goods can range from household products like aerosols, detergents and pool chemicals to laboratory chemicals and automotive parts such as airbags and batteries.

Regan Moodley, MD of freight mover Shipping & General, says keeping abreast with ever-changing regulations around the transportation of dangerous goods is “complicated”. “Ensuring complete compliance and training is critical to an organisation’s ability to maintain a smooth, incident-free dangerous goods supply chain,” Moodley says. “Road transportation of dangerous goods on South African roads over the past decade has not been without incident. Many innocent lives are lost on our roads annually, which can largely be attributed to non-compliance and inadequate training.” Barlow says that there is a huge amount of importing and exporting of hazardous material from South Africa. “In our position in the export logistics chain, we see a large amount of these items including paints, solvents and raw product for manufacturing, and in the last year, a large amount of hand and surface sanitisers.”

Safety tips Aside from ensuring emergency preparedness and having a documented response plan at all times, Moodley’s tips for running a successful road transport operation that deals with dangerous goods are: • Ensure that staff at each node are trained and are part of regular refresher courses. • Always ensure that your road transporter carries sufficient goods in transit cover, public liability and, in the case of a dangerous goods transporter, a suitable environmental spillage cover. • Ensure your vehicles are suitably placarded and have all mandatory equipment. Should your commodities be flammable, it is essential to obtain a fire permit from your local fire department, which must be displayed. The vehicle and trailer must be appropriately licensed as a category D, as should the driver. • In cases where multiple loads are transported, which are essentially various IMCO classes and UN numbers loaded on the same truck, it is critically important that load planners ensure that thorough compatibility screen checks are conducted prior to loading.

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KNOW YOUR NUMBERS

“Ensuring complete compliance and training is critical to an organisation’s ability to maintain a smooth, incident-free dangerous goods supply chain.” – Regan Moodley

The orange signs with numbers affixed to trucks are there to indicate that dangerous goods are being transported. Each of these four-digit UN Numbers – assigned by the United Nations Committee of Experts on the Transport of Dangerous Goods – refers to a list of instructions contained in resources such as the Emergency Response Guidebook of Southern Africa. There are more than 3 500 substances with UN numbers. Source: Arrive Alive

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A DV ER T ORI A L

LOCAL TRANSPORTER HOLDS STEADY Amid the global impact of the coronavirus, Shipping & General Transport is on course to expand its offering and create opportunity for growth 16

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A DV ER T ORI A L

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he past year and a half proved to be more than challenging as logistics companies worldwide fought to hold steady amid the chaos caused by COVID-19. When the world went into lockdown, ports closed, movement was severely restricted and the exchange of goods across the world came to an abrupt halt. The transport industry was at the frontline of what can only be described as a logistical tsunami moving through the world. It took the first impact before the effects reverberated through all other sectors. Now, almost 18 months after China faced the first wave, a South African transporter is defying the odds and has set course for expansion and innovation. Shipping & General Transport (SGT) has acquired a training and conference centre and 75 000m2 of adjacent land from JSE-listed Imperial Logistics. Regan Moodley, SGT’s managing director, was quick to recognise the facility’s potential when Imperial Logistics made it known that it was keen to open the way for smaller logistics companies by making a portion of its property available for purchase. This opportunity aligns with the vision that the success of a company is based on its clients’ success, which, ultimately, leads to the success of Africa – this is a sentiment that both SGT and Imperial Logistics value.

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THE HOME OF TRAINING AND CUSTOMER SERVICE The 8 000m2 property, along with 75 000m2 of land, situated in the heart of Rand Refinery’s’ landmark precinct, east of Johannesburg, cost SGT R26.5-million. The purchase enables Moodley to steer the company towards fulfilling two aspirations: offer quality training to upskill the company’s workforce and develop the adjacent land for the company’s growing depot operations. The training centre, originally designed and built by Imperial Logistics, is one of a kind. The beautifully finished building is a jewel in the rugged landscape of transport businesses, emitting a feeling of peace and tranquillity. It will be an environment where SGT staff and trainees can tackle and learn the complexities of the transport business. Just outside the centre, trainees will be exposed to one of the crucial steps in transport operations: SGT’s container depot operations. The company has already expanded its transport services to depot operations at its current location, but now, with the acquisition of the new land, it can respond to shipping lines that are increasingly showing interest in SGT’s depot operations.

A tastefully finished client welcome centre.

Reception area.

The purchase enables Moodley to steer the company towards fulfilling two aspirations: offer quality training to upskill SGT’s workforce and develop the adjacent land for the company’s growing depot operations. Perfectly located with access to all arterial routes, Regan says: “We built our reputation on understanding our clients and honouring their work by providing a great service. Acquiring this property allows SGT to elevate that service by expanding our customs depot and our empty container facility. I am excited to be able to meet the needs of SGT’s clients so that their businesses can move forward too.” Regan’s plans include relocating the finance and marketing departments to the new facility, which will also serve as a client welcome centre. Even though the tide may not have turned in the greater context of worldwide logistics Regan since the beginning of the Moodley pandemic, SGT has shown its ability to hold steady, read the wind, and know when to set sail for the horizon. In a time when the world’s transport sector seems shrouded in a veil of bleakness, SGT is a reminder that when passion meets innovation, there is the hope of a new dawn.

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A fully equipped catering facility.

There are several executive boardrooms.

For more information:

011-873 4786/7/9 reganm@shippingandgeneral.co.za www.shippingandgeneral.co.za

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A DV ER T ORI A L

PROTECTING HIGH-VALUE CARGO Top tips for protecting valuable cargo in transit, from industry leaders Shipping & General Transport

HOW TO REDUCE RISK Moodley says that to minimise disruption in the supply chain, transport operators must implement and monitor best practices at all times. “Bear in mind that there is no one-size-fits-all solution when it comes to protecting high-value

loads. There are also absolutely no guarantees. At some point, your organisation or your road transporter will be targeted by organised syndicates or opportunists.” With that in mind, Moodley outlines several practical steps that one can take to reduce risks on South Africa’s road network. 1. Make sure that, first and foremost, you partner with a reputable company that has the resources, expertise and experience to move high-value cargo. 2. Constantly train your staff, and insist that your road transporters train and create ongoing awareness campaigns around how to react should they ever be in a compromised position. In the case of the latter, transport operators should conduct soft hijack simulation exercises, monitoring how swiftly and effectively their control rooms are notified of the distress alert signal and how fluid they are in handling the distress call. No life is worth any amount of cargo being transported, so continuous training and a culture of absolute vigilance along all supply chain touch points are key to successful loss and risk mitigation. 3. In difficult economic times, particularly as we navigate the pandemic, companies will seek to reduce transportation costs by cutting corners Moodley urges companies to refrain from doing this. 4. High-end syndicates are known to deploy their own kind – and what may appear at first to be a committed, hard-working addition to your organisation may be an insider. It is, therefore, important always to ensure strict adherence to detail when vetting personnel who deal with high-value cargo. Vetting staff using merely their referrals on a CV is irresponsible and could be hugely detrimental to your business. 5. Always ensure that you procure adequate insurance and that it is updated to include your specific requirements. Inclusions and exclusions that are specifically noted on

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a policy schedule ensure clarity and eliminate misunderstandings in the case of a claim. Always insist that your road transporters have reasonable first loss, all-risks goods in transit cover that adequately covers driver infidelity. You will realise the value of this in that your insurance portfolio loss ratios as a cargo owner will be somewhat reduced in the case of successful subrogation recovery. 6. Utilise technology, and collaborate with shippers, carriers, law enforcement and various forums that deal with organised crime trends and incidents in the lanes that you service. Keep your ear to the ground and share information.

“There is no one-size-fits-all solution when it comes to protecting high-value loads.At some point, your organisation or your road transporter will be targeted by organised syndicates or opportunists.” – Regan Moodley PARTNER UP FOR SAFETY Moodley believes that you need a solutions-obsessed partner that is always one step ahead of the curve. “Shipping & General’s multilayered approach ensures the safety of your high-value and high-risk shipments. Our portfolio of services is based on and considers a variety of factors, including your risk tolerance, commodities and the markets that you serve.” Shipping & General offers comprehensive, customised containerised road transport solutions to local and international clearing and forwarding agencies, shipping lines, importers and exporters, with road transportation and warehousing services offered between various important seaside ports to inland Johannesburg and surrounding destinations. For more information:

011-8734786/7/9 www.shippingandgeneral.co.za

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n spite of COVID-19 lockdowns restricting the movement of people and vehicles for much of last year, around R2.95-billion of losses were incurred through product thefts from road, air, rail and sea freight supply chains in 46 countries in the EMEA region in 2020, according to the Transported Asset Protection Association’s Cargo Theft Annual Report. Research by TT Club and BSI revealed that although the lockdown restrictions caused cargo theft locations to diversify in the first half of last year, in-transit theft returned to pre-COVID-19 levels by the end of the year. Industry gurus across all modes of transportation predict a continued increase in cargo theft as syndicates become more sophisticated in their operations. Shipping & General Transport MD Regan Moodley says that historically cargo thieves targeted freight such as electronics, apparel, pharmaceuticals, and other obvious high-value items. “Recently, however, truckloads of personal protective equipment and consumer packaged goods have been targeted and stolen while in transit. While these items may have not been obvious high-risk items some 18 months ago, the impact of the pandemic has increased the need for these products – as well as the risk for their theft.”

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Warehouse automation allows logistics partners to be more flexible and agile.

Data analytics from a single dashboard leaves controllers free to address any issues rapidly as they arise.

Elastic logistics While agile supply chain management is a necessity in the logistics industry, elastic logistics stretches further. By Delia du Toit

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n 2013, the total payload transported on South Africa’s roads was 531 million tonnes, according to the Department of Transport. Today, this figure has increased to over 750 million tonnes. It’s no wonder that “agility” is one of the terms most frequently used in the ever-fluctuating environment of the country’s multi-billion-rand freight and logistics industry. Industry experts Tracey le Roux, head of supply chain solutions at Value Logistics, and Renko Bergh, COO of Forte Supply Chain Consulting, agree that with operating costs rising every year, optimising every step of the logistics process from source to stopping point has become a necessity. Lean business practices, though important, tend to suit the beginning and end of the supply chain better. Le Roux and Bergh concur that to achieve the agility needed in the middle of the chain, elastic logistics is essential.

What is it? Elastic logistics is the flexible upscaling and downscaling of operations to meet market demands – including adjusting schedules, warehousing and shipping as production increases or decreases or to factor in seasonal demand, weather conditions and carrier space constraints. Le Roux says that it allows customers to inflate or cut inventories when required, giving them greater control over cost and efficiency. “Value has been implementing these principles since 2012,

when ‘7PL’ became the basis of its business model. We provide customers with both 3PL and 4PL solutions, taking all the risk and hassle of the supply chain out of their hands through our ability to adapt to market conditions and volatility in our everyday operations.” Value has implemented omnichannel solutions that reduce the complexities customers often face – from import to warehousing and distribution. “Our fleet comprises more than 3 800 vehicles and forklifts, we have 350 000m² of warehouse and operational space, and our automated warehouse management and transportation management systems analyse data on drop points, vehicle routes and desired quantities,” says Le Roux. “This allows us to upscale and downscale with changes in demand. In the event of manufacturing over- or under-runs, we can dynamically scale not only warehousing but also transport quantities to drop points on the fly.”

How it works Clearly, providing this level of customer satisfaction requires the control and visibility that only comes with data analytics and automation – preferably from a single dashboard that leaves controllers free to address any issues rapidly as they arise, says Bergh. Transportation management systems are key, with advanced analytics, warehouse automation, artificial intelligence and blockchain technology enhancing the process. He says the single biggest challenge logistics operators usually face in their

The future of elastic logistics In 2017, a typical supply chain generated 50 times more data than in 2012, according to IBM. But only 20 per cent of this data is structured and can be easily analysed. The company is developing AI systems that can analyse the remaining 80 per cent, known as “dark data”, to forecast and predict events proactively, streamlining supply chains. Source: https://www.ibm.com/za-en/ topics/supply-chain-analytics

quest for agility is the capability to integrate data across the multiple facets of the business. “Most companies today have reports coming from different silos in the business, but the data is neither integrated nor readily available. Without such systems, decision-makers aren’t equipped to react to changing market conditions.” Bergh’s advice is to first implement best-of-breed software designed to improve niche aspects of your business, then integrate these systems to ensure continuous data flow and reporting on improvements as well as risks. “Avoid applications that generally serve all areas of the business, as they usually don’t focus on any specifics in much detail.” Creating a culture of innovation and adaptability in your company is also crucial, Bergh adds. “As software implementation consultants, we ironically find that software alone does not create elastic logistics. Rather, a company must have the type of mindset that embraces elastic logistics and makes agility a habit – then, the right software will give them the edge.”

“Most companies today have reports coming from different silos in the business, but the data is NEITHER integrated nor readily available.” – Renko Bergh 22

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T REND S

New market entrant: Uber Freight

Schubert uses Airbnb as an analogy: “It was much more difficult to make a hotel booking 20 years ago. You had to browse through a magazine or use a travel agent. Now, new entrants like Airbnb offer an end-to-end solution to consumers, creating opportunities for both traditional companies and small operators.” Transnova itself is no stranger to this trend. In 2019, they entered a partnership with investment and business consulting firm Letsema. “Though not a traditional logistics company, their skills complement our offering in transport and logistics, and together we can solve more problems for our clients,” says Schubert.

Opportunity or threat?

The disruptors Non-traditional logistics companies are increasingly entering the logistics space. What is the impact? By DELIA DU TOIT

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hen passenger transit service Uber launched Uber Freight in the US in 2017, it was just one of a wave of new market entrants. That’s because, says Carsten Schubert, co-founder and director of sales and operations at Transnova, a Johannesburg-based logistics advisory, technology and managed services fi rm, more non-traditional companies are dipping their toes in the logistics pool. According to Schubert many more are using technology to do so, and often with few to no physical assets of their own – as is the case with virtual freight forwarders that offer interactive benchmarking of freight rates or match shippers with available capacity.

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DID YOU KNOW?

Last year, US e-commerce giant Amazon started piloting a 30-minute delivery offering using drones. The drones can fly up to 24km and deliver packages of around 2kg to customers in less than 30 minutes. The company also recently bought 100 000 electric delivery vans and is testing a new service that uses small autonomous delivery vehicles. Source: www.aboutamazon.com/ www.amazon.com

FAST FACT

Asia’s e-commerce behemoth Alibaba set up a joint logistics venture to improve delivery services for its sellers. Called Cainiao, the network comprises several logistics companies, a department store, an investment firm and a company with port logistics operations. Source: https://cainiao.medium.com

Nature of the game On local shores, e-commerce store Takealot is one example of the trend. After launching in 2011, it soon acquired Mr Delivery in 2014 to take control of its own logistics network. Schubert says such new entrants are not confined to the logistics industry. “Like most industries where there are opportunities to optimise sectors and better utilise assets, non-traditional players are entering these markets and using technology as an enabler for collaboration, linking the buyer and seller, and thereby democratising the industry.”

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Though new entrants may change some aspects of the industry, that doesn’t necessarily make them a threat. “Traditional businesses offering walls and wheels will always be required in the supply chain, as products need to be moved and stored,” says Schubert. “In many cases, new entrants simply change how the demand is delivered and are only a threat to those who don’t adapt their business models to this new way of receiving demand.” Others, however, can be competition. “But, even then, it’s all about managing and differentiating your offering,” says Schubert. Evolution is a given in any industry, and those who don’t adapt get left behind, says Mandisi Khumalo, managing director of supply chain consulting company Phambili SCS. “Customers, too, evolve all the time and companies need to be agile, continually adapting to the ever-changing environments they serve.” Technology is a key component of such agility, Khumalo adds. “As supply chains become more complex, organisations need to invest in customisable technology. Business intelligence, predictive analytics and quick decision-making are critical in modern supply chains.” Just don’t let technology lull you into a false sense of security, warns Schubert. “Technology is only as helpful as the (human) strategies in place behind it. Don’t expect automation to fix your problems – if your strategy deploys technology in the wrong direction, it will only Mandisi compound your supply Khumalo chain problems faster.”

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F IN A NCE

Trade solutions:

Structured trade and commodity finance helps mitigate risk

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he road of cross-border and -country trade does not always run smooth. That makes mitigation of financial risk a very welcome addition for those in commodity trading – and more especially for small to medium companies. That’s according to Bobby Madhav, head of FNB’s trade, structured trade and commodity finance, who says structured trade and commodity finance (STCF) provides this benefit. “The product lends itself to companies who are in a growth space and need to deliver on confirmed orders. Sectors range from electronics, fast-moving consumer goods, pharmaceuticals and machinery to soft and hard commodities. Benefits include cash flow for more output and repaying the loan once payment is received.” Dinos Demetriades, chief financial officer at Pelagic Resources, explains: “Structured trade finance is a type of non-conventional lending, predominantly used in commodity trading, which looks at Bobby the type and value of the Madhav product being financed as a collateral, rather than the balance sheet of the borrower. It’s used regularly in developing countries and in relation to cross-border transactions. The aim is to promote trade by using non-standard security in high value transactions in bilateral trading relationships.” Tried and tested trade finance risk mitigation techniques are used. “There are multiple risks involved in typical structured trade, but the risk usually falls

FAST FACT

The 2020 ICC Global Survey on Trade Finance highlights the potential of increased demand for trade finance over the next two years: 86 per cent and 75 per cent in Asia Pacific and Africa, respectively. Source: International Finance Corporation Why Trade Finance Matters – Especially Now, November 2020

with the last counterparty that has put money out the door,” explains Demetriades. “For example, if a trader purchases cargo to supply into a sales contract against a letter of credit and the bank fails to honour the payment, the risk lies with the trader. If you deliver successfully, get paid, but the vessel sinks on its way to the destination, the risk lies with the bank and the insurance companies.” STCF allows for mitigation of supply and demand and price risks. “We can look at fixed price off takes,” says Madhav. “A key factor is liquidity management for production and sale of goods and materials. We ring-fence transactions, and with fixed off takes we can manage client pricing and cash flows. The quantum

Financing cross-border and -country trade requires a high degree of certainty and expertise – with as little risk as possible, says SAMANTHA BARNES

of funding depends on clients’ contribution in business and relatively strong off takers who pay into a ring-fenced account, and allows facilities to liquidate and roll over. “STCF is about assessing the goods, having control of goods and ensuring the entire chain of delivery is under the guidance of the bank. In STCF you require a skilled team with a long track record in understanding trade instruments,” says Madhav. “The structures and partners form part of the offering.” Demetriades says the common costs associated with structured trade include letter of credit issuing costs, other bank fees, interest costs, insurance and multiple inspection costs regarding cargo, and documentation handling. STCF has an even bigger benefit in emerging countries due to perceived risks. “Economies where there are major challenging factors from instabilities of financial sector and lack of governance framework lean more towards STCF structures,” says Madhav. “In these markets we find gaps in financing, private sector and private financial institutions. STCF reviews deals and ensures they are transactions which can liquidate within a short period.” All the major banks in South Africa offer STCF while many trade houses and freight companies offer these services too. “For smaller traders,” Demetriades observes, “there is a shift towards alternative financiers such as Teybridge Capital or Challenger Trade Finance, which are rapidly growing their presence.”

“There are multiple risks involved in typical structured trade, but the risk usually falls with the last counterparty that has put money out the door.” – Dinos Demetriades

DID YOU KNOW?

• As of 2019, the trade finance gap in Africa was already estimated at $82-billion and is now growing post COVID-19. • While in 2014, 92 per cent of banks surveyed engaged in trade finance activities, in 2019 it dropped to 71 per cent of banks. Source: Trade Finance in Africa Report: Trends Over the Past Decade and Opportunities Ahead 2020

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“In tough times the focus should be on efficiency, consolidation and digitalisation.” – Simon Woodward

Electronics payments are now the way forward for foreign exchange across borders.

Mitigating the risk of mercurial exchange rate fluctuations Savings from risk management are especially important in a contracted economy, says SAMANTHA BARNES

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F IN A NCE

t will take at least two to three years for a recovery to pre-COVID-19 trade levels, says Simon Woodward, sector head of logistics at Rand Merchant Bank. With GDP down 8 per cent from a year ago, logistics is thought to have been hit even harder. “We expect to see consolidation in the mid-tier sector,” says Woodward. “In tough times the focus should be on efficiency, consolidation and digitalisation, which will become increasingly important. Many of our clients have fared pretty well considering COVID-19. They have sold off some assets with stellar subsectors carrying them through.” On the logistics side in Africa, RMB is seeing executives focusing their efforts on SADC countries, including Zambia. But it’s not plain sailing. “Some may have thought a ship blocking the Suez Canal could create opportunities for trade in our ports,” notes Woodward. “Consider that the Port of Durban needs to be dredged to reach an inflection point on growth. Large domestic logistic companies understand the need to grow capacity by investment in infrastructure beyond South Africa.” Firms should also take steps so as to handle foreign exchange transactions relating to international suppliers in the most optimal manner, says Woodward. “First, mitigate the underlying risk or forex exposure by hedging that risk or exposure. This will eliminate market and currency fluctuation uncertainty, allowing the firm to gauge costs of goods upfront pertaining to the rate of exchange. “Second, process the cross-border payment via an online portal where beneficiaries’ details and banking details are pre-populated and where balance of payment reporting to the reserve bank can be done with ease, ensuring a full payment to the international supplier.”

OUR MERCURIAL CURRENCY The rand has seen great volatility. Rand Merchant Bank’s Simon Woodward emphasises how prone to sudden weakness the rand can be: “Consider that the USD/ZAR rose from 14.50 to 19.00 as the virus struck - a move of over 30 per cent within a few weeks. “Our expectation is that the rand will be less volatile this year. Our forecast is for trade to be centred around the 15.20 level. Explicit in our forecast is that the dollar stops weakening.” Woodward cautions that such “blowouts” happen approximately once every four years, presenting huge risks to importers. Currency risk management is vital.

Woodward recommends a portfolio approach, using a combination of spot, vanilla forward exchange contracts (FECs) and options structures, or the firm can use a combination of only spot or vanilla FECs. Each contract and structure has its merits, with their use dependent on the market’s behaviour at the time of execution and the firm’s structure.

Know your options Domisa Treasury founder James McKeown says larger forex transactions are always preferable to multiple small transactions. “This reduces total fees as your foreign exchange provider should provide more competitive pricing for larger transactions.” Of all the currency management tools available to implement a hedging strategy, McKeown says foreign currency accounts are the most important and cost effective. “A foreign currency account is a bank account

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for the business denominated in a foreign currency. Businesses with reasonable volumes of such transactions could increase profits by 5 per cent to 15 per cent by making them through foreign currency accounts with a diligently selected provider.” Electronics payments are the way forward, and as such play a substantial role in foreign exchange across border payments. Woodward explains: “These systems are designed for straight-through processing from the firm to their international suppliers. Beneficiaries and their banking details are preloaded. Reserve Bank supporting documentation can be uploaded per payment transaction and balance of payment reporting to the Reserve Bank executed at a click of a button.” Companies can also mitigate currency fluctuations by engaging in an FEC or an option structure, explains Woodward. “With an FEC, money is exchanged on an agreed future date and at an agreed exchange rate. These contracts provide 100 per cent protection against market fluctuation but zero participation in favourable market conditions.” Woodward says option structures are similar to an FEC, with the key difference being that the former provides the buyer of the contact with additional flexibility, allowing a certain percentage of participation in favourable market conditions.” “Rand gains have been helped by dollar weakness and a superb export performance but mostly just reflect recovering global sentiment around the economic outlook as the effects of the pandemic become clearer,” Woodward notes. “Gains have been seen on the crosses, although not to quite the same extent as against the dollar: euro and sterling gains have partially restricted the moves on EUR/ZAR and GBP.”

Simon Woodward

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“F

orty years ago, logistics was not directly associated with the transport business,” says Steven Gottschalk, founder and Group CEO of Value Logistics. “Nowadays, thanks to staggering digital developments and new technologies, logistics and IT hold their own in the transport business. In fact, one can even go to university and study a degree in Logistics – not so when I was starting out.” Gottschalk launched Value Logistics on 1 May 1981. The company’s fi rst commercial truck was a used 1976 petrol-driven 2-ton dropside Mazda, which now sits at the entrance to Value City, the company’s largest super-hub in Tunney, Johannesburg. On 1 May 2021, Value Logistics’ 40th birthday, Gottschalk got behind the wheel of the Mazda and led a convoy of 550 vehicles out of Value City’s gates and onto the road. At the same time, four other Value Logistics convoys set out from their hubs in Cape Town, Durban, Port Elizabeth and Bloemfontein. It was a symbolic display of the company’s history and current capabilities, and a way for employees to celebrate their company’s success in a COVID-19-compliant manner.

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SMART TOOLS, SMART PEOPLE

VALUE LOGISTICS SHIFTS INTO SIXTH GEAR FOR THE ROAD AHEAD Steven Gottschalk, founder and group CEO of Value Logistics, celebrates four decades of success, talks the evolution of logistics and discusses the importance of smart tools and smart people

“The past four decades have been extraordinary,” says Gottschalk. “Our logistics business has evolved into a science that requires the best IT to manage, control and Technological disruption pre-dates the optimise our warehouses and fleets. Our COVID-19 pandemic. However, there’s no drivers, for example, are not simply highly doubt that the past year has fast-tracked skilled behind the wheel, but are also trained to change within the transport and logistics use smart tools such as POD scanners to ensure sector, particularly regarding e-commerce and that all deliveries are recorded in real-time on our remote working. master system.” “In January 2020, our The basic principle of logistics proactive IT team called our is to move product from A to attention to the pandemic and B. The rules are simple: do motivated for increased spend it correctly, cost-effectively on smart tools, systems and and on time. Value Logistics devices,” explains Gottschalk. uses relevant technologies to “When the country went into augment its human and fleet lockdown in March 2020, our capabilities to ensure that its entire company was fully set customers’ needs are met on up to work off-site. It was a Steven Gottschalk, time, every time. seamless shift that enabled Value Logistics CEO “Our use of advanced IT us to set up a national home solutions to manage our deliveries business to support fleets, gather data and ensure driver and our customers’ businesses in just two months vehicle safety is not necessarily unique,” during peak lockdown.” says Gottschalk. “However, where we differ Over the past 40 years, the company has is that we own our vehicle infrastructure and consistently invested in its infrastructure, have specialised teams in areas such as data vehicle assets, people, customers and analysis and simulation and fl eet safety and services – even during tough economic times. security. We even have a fuel bureau, which The company’s growth has always been works closely with our planning department. in response to its customers’ needs. For Every delivery is optimised to ensure the example, when it’s customers’ needs shifted best routes, maximum capacity loads and in the early 2000s, it launched its distribution satisfi ed customers.” business to provide the requisite supply

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chain solutions. What began as a truck rental and transport business has become one of South Africa’s leading fully integrated logistics providers. Nowadays, Value Logistics supports its customers from point of origin to delivery with a fleet of 4 500 trucks and forklifts, 21 nationwide depots, 350 000m² of warehouse and operational space, advanced IT systems and more than 4 300 employees. “We’re a local business, which means that we can make fast decisions in the best interests of our customers,” says Gottschalk. “This gives us a lot of flexibility and control. Technology has certainly enabled our growth and success, but our smart tools and IT systems work for us – not the other way round. At the end of the day, our customers’ cargoes make it safely and cost-effectively from point A to point B, thanks to our smart people.” For more information: Tracey Le Roux +27 82 448 7094 traceylr@value.co.za www.value.co.za

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A DV ER T ORI A L

MANAGING THE LEGALITIES AND RISKS Global law firm Norton Rose Fulbright is well-versed in the legalities and complexities of transport and trade and offers a range of services to assist logistics companies

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he global trade in goods and services in 2019 was valued at approximately US$19-trillion, according to results released by the World Trade Organization, a 300 per cent increase since 2000. Of this, the data shows that South Africa’s share was about US$220-billion – almost 60 per cent of our GDP. Logistics is so much more than the multimodal movement of goods – it involves the organisation of the following tasks, among others: • planning of supply chains • establishing communications • creating specialised models of exchanging “goods as documents” through electronic bills of lading and blockchain • connecting to sophisticated tracking systems through satellites in space • appropriately allocating responsibility for the various risks involved in moving goods • insurance of risks and assets. To appreciate the challenges that the above presents requires an understanding of many disciplines. Lawyers that specialise in logistics must have an understanding not only of international trade and the many international conventions that govern the transportation of goods, but also of how trades are financed and insured. Regarding the latter, there is a myriad of different insurance options available depending on the goods themselves, the risks being insured, the conveyance being used and the period of cover required. A single movement of a product may involve several contracts of sale; various contracts of carriage; insurance contracts covering the goods and the carrier’s liability; financing arrangements, and navigating the complex

and varied regulatory regimes dealing with the purchase, sale, licensing and transport of goods. A clear understanding of all these aspects, and how they are inter-related is necessary to properly advise clients on their logistics operations. As the COVID-19 pandemic and the recent cargo ship stranding in the Suez Canal have demonstrated, the carriage of goods remains fraught with risk. When things go wrong a client must be properly advised of the prospects of either succeeding with a claim, or being able to adequately defend it or mitigate the probable loss. In many instances, carrier’s liabilities are curtailed by conventions or contractual limits, or both. Understanding disputes, especially when they may involve many different sets of laws and jurisdictions, is important. It is, therefore, extremely beneficial to clients if they can use the services of a properly connected global law firm to advise on the contractual, financial and dispute related aspects of any logisticsrelated matter. Risk management oversight is now viewed as one of the most important functions of a board of directors. Companies need systematic processes in place to identify and manage risk. Regulator expectations as to what makes a good compliance programme have changed dramatically in recent years, and the programme continues to evolve. A supply chain is only as strong as its weakest link; therefore, it has to consider cybersecurity and data privacy protection; ESG and sustainability; increasing regulation and regulatory scrutiny, and incident response and crisis management.

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THE NEED FOR EXPERTISE AND EXPERIENCE Navigating the numerous complexities involved in trade and logistics requires regional and global companies with expertise, equipment and the infrastructure capable of meeting those challenges. Most companies need advisors with the national, regional and continental footprint to assist their customers. Norton Rose Fulbright with that footprint and a focus on transport and trade is one such company. Its experience in Africa and the developed and developing economies globally gives Norton Rose Fulbright access to experience, precedents, knowledge and capacity to advise anybody involved in trade and logistics in South Africa and Africa on these complex issues. To this end, among other things, Norton Rose Fulbright offers a service to identify and manage the matrix of risks involved in logistics operations. In addition, it offers numerous complimentary resources for training and knowledge, including monthly webinars to the insurance and marine insurance industry, a knowledge institute offering training and guidance on, among other things, trade and its financial institutions and an Africa blog, which provides up-to-date comment on matters affecting clients in South Africa and Africa. For more information:

Malcolm Hartwell, Master Mariner and Head of Transport at Norton Rose Fulbright Malcolm.hartwell@nortonrosefulbright.com Andrew Robinson, Director and SA Chair at Norton Rose Fulbright Andrew.robinson@nortonrosefulbright.com Durban Office: 031 582 5600 www.nortonrosefulbright.co.za

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2021/05/14 3:25 PM


Shipping

The shipping news

Local shipping by the numbers South Africa has

2 954km

The winds of change are blowing through SA’s shipping law. Caryn Gootkin analyses their impact on our shipping industry

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overnment recently published the Merchant Shipping Bill 2020 which proposes changes to the Merchant Shipping Act of 1951. Andrew Pike, head of ports, transport and logistics at Bowmans, lists some of them: • Incorporating the Ship Registration Act into the Merchant Shipping Act • an emphasis on the rights and treatment of seafarers, including the International Convention for the Safety of Life at Sea provisions • an increase in shipowners’ limitation of liability for loss, damage, injury or death • the safe carriage of certain cargoes • enhanced powers of casualty and incident investigation • the introduction of cabotage (the right to transport cargo between South African ports). In June 2017 South Africa approved the Comprehensive Maritime Transport Policy (CMTP), which aims to “facilitate growth and development of South Africa’s maritime transport system in support of socio-economic development of the country whilst contributing to international trade”. According to Shane Dwyer, shipping and logistics consultant for Shepstone & Wylie, “The CMTP followed the 1996 White Paper on Transport which identified the lack of a national shipping carrier to carry our exports and imports as a major economic weakness. “The bill is an attempt to meet the lofty cabotage ideals envisaged in the CMTP, but it introduces very little that is groundbreaking nor does it provide mechanisms to re-foster an indigenous merchant shipping industry or a new national carrier.”

Sabotaged by cabotage This complicated issue is contained in a single short section of the bill, says Pike, and will almost certainly create “enormous” problems. “The consumer will bear the brunt of double handling costs for all containers and cargoes as they are offloaded, reloaded and then incur additional freight charges to carry the containers to new ports.” Complicating matters is the stipulation that all coast-wise cargo must be carried on South African ships. “There are simply insufficient ships to carry huge volumes of containers up and down the coast if inward bound containers have to be offloaded at the first South African port, transshipped and then carried by South African ships to other ports,” says Pike. “Internationally, cabotage acts often provide exemptions where there are insufficient local ships, but the bill does not.” “A recent Council for Scientific and Industrial Research (CSIR) paper notes that ship owning is difficult and expensive here,” says Dwyer. “It lists the following requirements for local cabotage: Ships must sail under the South African flag, be manned by local crew, be built in South Africa and be owned by South Africans. The CSIR foresees difficulties in meeting these four requirements.” Both lawyers agree that incentives to build or register local ships should come before introducing a cabotage law. “The bill provides for ‘licensing’ of carriers to undertake coast-wise carriage of coastal cargo – and foreign ships calling at a South African port with imports for a number of local ports will be banned from calling at more than one such port to load or discharge purely coastal cargo,” says Dwyer. “But ocean carriers appear to be able to call at more than one local port to discharge foreign-sourced cargo at the contractual destination.” As Pike says: “Cabotage has not worked well in a number of countries, including Australia and Nigeria, in circumstances where they had given a lot more thought to their legislation”.

of coastline.

SA is in the

top 15 of countries that trade by sea. There are

eight

commercial seaports.

In 2020, SA ports handled over

4 million containers and 222 million tonnes of cargo aboard

9 000 vessels.

In 2019, our total import and export trade amounted to

R2.84-trillion, 46 per cent of our GDP, and

transport services contributed a further

R426-billion to the economy.

Source: Malcolm Hartwell, master mariner and director at Norton Rose Fulbright

“The bill is an attempt to meet the lofty cabotage ideals envisaged in the CMTP, but it introduces very little that is groundbreaking.” – Shane Dwyer 36

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2021/05/20 9:30 AM


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Blockchain technology in international maritime transactions secures the exchange as the chain cannot be altered without parties receiving an alert.

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he chain of trust between the various parties of a financed international trade deal creates opportunities for various forms of fraud, says Malcolm Hartwell, master mariner and director at Norton Rose Fulbright. “Common ones include procuring multiple sets of bills of lading, which are then used to sell the cargo to multiple buyers, and fraudulent bills of lading that do not reflect the actual goods shipped.” “Fraudsters can also backdate bills of lading Malcolm for goods loaded at a Hartwell later date or present forged bills of lading for nonexistent goods, resulting in payment of money under false pretences,” says Mohamed Hoosen, senior associate at Werksmans Inc. “One way to combat this type of fraud is to require more stringent documentation verification like watermarks, holograms and other unique identifiable markings.”

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Financiers should also always conduct strict due diligence on potential borrowers, says Hoosen. “Fortunately, technology allows for an easier, more streamlined information-gathering process,” says Hoosen. “Potential lenders should not merely rely on risk-assessment tools, but also perform their own open-source information searches on the potential borrower and, if necessary, request additional security.”

FITTING THE BILL Paper bills of lading issued by carriers to acknowledge receipt of cargo for shipment are open to various types of manipulation by fraudsters. CARYN GOOTKIN looks at solutions Hoosen adds that lender should always be cautious when dealing with new borrowers. “Some seek to establish a relationship in order to earn the trust of the lender, performing a series of legitimate transactions over a period of time, then subsequently requesting excessive credit only to renege on their obligation to repay the funds borrowed. Lenders should always require sufficient security Mohamed notwithstanding prior Hoosen business transactions.” Hartwell says additional security may take the form of a guarantee from the trader, its parent company or its shareholders. “Lenders should check the trader

An unbreakable chain Hartwell says it’s more difficult to tamper with documents on a digital platform because authentication and traceability are an integral part of the technology. “Fraud risks are mitigated to some extent by the use of electronic bills of lading. Electronic bills of lading are now widely used, with TradeLens, an IBM/Maersk blockchain solution that is used to verify bills of lading, acting as a portal through which traders, financiers, carriers and customs authorities can interact.” “Blockchain is going to play a major role in the future,” says Hoosen. “Smart contracts built on the blockchain require a number of sequences to be fulfilled before the contract can be completed. Information stored on the chain cannot be altered without parties receiving an alert. Using blockchain technology in international maritime transactions will definitely make the process more secure.”

“It’s more difficult to tamper with documents on a digital platform because authentication and traceability are an integral part of the technology.” – Malcolm Hartwell 39

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and issuer of the bill of lading through the International Maritime Bureau, a division of the International Chamber of Commerce that specialises in tackling maritime crime and malpractice.”

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2021/05/20 9:29 AM


T R A INING

TRAINING TO HANDLE VACCINES

The rapid digitalisation of freight means additional training is essential, says ANÉL LEWIS

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igitalisation bears the potential to ease and improve the daily business of shippers and freight forwarders simultaneously. So says managing director of DHL Global Forwarding (South Africa) Clement Bernita Buitendag Blanc, who adds: “In the last 12 months we have witnessed an acceleration in technological adoption globally and in Africa. If anything, the pandemic has quickened rather than stymied transformation.” Naturally, greater reliance on technology and adaptations to new ways of doing business require additional training and education. For its part, DPD Laser, through its trading division Dawn Wing, responded to the need for social distancing by implementing contactless deliveries. This required “rigorous” training, as obtaining proof of delivery was entrenched in company procedure. DPD’s COO Benita Buitendag says the company introduced frequent toolbox talks to inform staff of new delivery methods. It also launched an intranet site to make learning material more accessible. Justin Manson, head of sales at Webfleet Solutions, says its clients have used fleet management software in innovative ways to mitigate COVID-19 disruptions. This has meant additional training so that their teams can make greater use of solutions such as asset tracking and geofencing. “This makes it possible to handle more

freight, pull more data out of the system and manage the fleet with a leaner team,” says Manson.

Online innovation Online solutions have become more robust in response to the pandemic, says Hilton Eachus, DPD Laser’s chief customer officer. “We’ve seen an increase in how many businesses have expanded and developed these solutions.” It’s also imperative that companies innovate by offering additional services, entering new market sectors and evolving their operating models, Eachus says. “If your internal rate of change is slower than the external rate of change in the market, you have a problem.” Eachus says with the accelerated integration of technology in the logistics sector, it’s imperative that companies use new methods effectively. “The days of courier companies being manually run businesses with truckers in caps and overalls are long gone. Companies that are successful in today’s environment are those that have great technology.” Manson concurs, adding that an integrated digital solution makes it easier for fleet managers to digest information, manage their fleets and streamline operations.

“The days of courier companies being manually run businesses with truckers in caps and overalls are long gone.” – Hilton Eachus “One of the challenges fleet managers face is operating with disparate systems like a fleet management system, in-cab cameras, and asset tracking on different platforms.” Being able to dispatch, monitor workflow and track assets all from one platform will ensure a more robust and accessible solution, Manson says.

Risk planning Also important is continuous risk planning to make provisions for epidemic and pandemic risk scenarios, says Blanc. “A critical requirement in handling any tricky situations and emerging stronger is to have the right people on the ground, with the local knowledge and market expertise to deal with changes immediately.” Hassan Bouadar, vice president of legal, regulatory and human resources at FedEx Express for the Middle East, Indian Subcontinent and Africa, says ongoing training is critical. “We train our team members regularly so that when we have an event like COVID-19, we leverage our professional training staff to update Hassan on new processes Bouadar and procedures.”

DIGITAL OFFERINGS DHL Global Forwarding has developed the only fully integrated online platform for freight forwarding customers that provides access to online services for full shipment visibility and control. myDHLi provides a highly intuitive user interface that makes it easy to navigate and also features common social media functions like following and sharing. Source: Clement Blanc, managing director of DHL Global Forwarding (South Africa)

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Pandemic training

FedEx Express’ Hassan Bouadar says the COVID-19 vaccine roll-out has necessitated additional training. “In the case of some of the vaccines that require super-cold storage (-70 to -80ºC), we trained team members around the region on handling procedures to ensure their safety as well as the viability of the vaccine.”

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2021/05/20 9:00 AM


Taking its toll The latest toll tariffs add extra pressure to freight transporters already struggling with the economic hardship of the past year. RODNEY WEIDEMANN investigates their impact

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he new toll tariffs for South Africa’s national roads came into effect in March, following Transport Minister Fikile Mbalula’s approval of the South African National Roads Agency (SANRAL) recommendations. While these annual increases are always a source of concern among freight movers – particularly with regard to how such costs might multiply across the business – it’s become more acute after more than a year of extreme economic hardship following multiple pandemic-related lockdowns. Gavin Kelly, CEO of the Road Freight Association (RFA), indicates that routes are tolled based on the wear they experience, and the price per kilometre is based on factors that affect the particular stretches of road. “These factors can include what the road is built on, water ingress, foundations, camber and incline, loads carried, environmental factors and more. Each piece of a tolled route may have a different cost impact based on these factors. Either way though, the roads require continuous monitoring and preventative maintenance – so this increase should be in line with what those costs would be in the foreseeable short term.” Kelly explains that when statutory increases occur, a freight transporter will add those increases to the operational cost structure of the business and pass these on to the customer. After all, he states, the freight

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“The roads require continuous monitoring and preventative maintenance – this increase should be in line with what those costs would be in the foreseeable short term.” – gavin kelly

transporter cannot absorb these costs without there being a negative effect on the sustainability of the business. “The discussion has always been around the quantum of the increases pushed through by government. The RFA, through negotiation with various authorities, has ensured that this quantum should not be more than the current consumer price index increases. Some authorities have held to this, while others have not.”

Frequent user discounts According to SANRAL general manager for communications Vusi Mona, the adjustment was announced as 5 per cent but is, in fact, 3.39 per cent. “It should be noted that toll-fee costs are only one component of the travel cost for road freight. Toll costs for a trip are not only dependent on the origin and destination but on the actual roads used, the toll plazas passed, and the vehicle type used for the freight. “This is because different toll tariffs are applicable to different vehicle types (classes) at different toll plazas. Of course, we do offer discounts at specific toll plazas for qualifying

COSTLY UPGRADES Trans African Concessions communications manager Solange Soares notes that ongoing routine road maintenance, as well as planned rehabilitation and upgrade projects, are undertaken throughout the N4 toll route to ensure that its infrastructure is on par with world-class standards. “This ongoing maintenance includes four major construction projects, namely the R380-million Emalahleni-Middelburg rehabilitation and upgrade, which is 48 per cent complete, with a completion date of March 2022; the R400-million Belfast-Machado rehabilitation and upgrade, which is 61 per cent complete and scheduled for completion in May 2022; the new Karino Interchange, a R390-million project in Mbombela that is 60 per cent complete; and the Kaapmuiden-Kaalrug rehabilitation and upgrade, which is 70 per cent complete and expected to be concluded in August 2021,” she says.

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frequent users, as well as for qualifying local users,” he adds. Trans African Concessions (TRAC), which operates the vital N4 toll route, also offers discounts to frequent and local users who qualify for the concession as per its terms and conditions, according to TRAC communications manager Solange Soares. “The N4 Toll Route was established primarily as an economic development driver to boost trade and investment between landlocked South African provinces and the Port of Maputo. “To date, as the concessionaires of the route, we have met this mandate. We are, after all, aware that should the road ever go into a state of disrepair it would have a severe impact on the transport industry as well as the import/ export industry and numerous others that thrive off this so-called Maputo Corridor.” Kelly agrees about the potential impact, but suggests it may even be worse. “We need to understand that well-maintained roads are an essential part of our efficient road transport network. Should these be left to deteriorate, there would be no alternative for transporting goods by land, since the South African rail network is in a sorry state.”

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2021/05/20 9:26 AM


R A IL F REIGH T

Traxtion has announced a R1.5-billion initial investment in rail infrastructure upgrades.

On the right track With government planning to open the freight rail network to private service providers, RODNEY WEIDEMANN investigates its implications

On time, every time Not everyone is as optimistic, however. Gavin Kelly, CEO of the Road Freight Association, believes that the rail network is in a bad state. “Somehow, as a country, we have allowed the network to deteriorate to a point where major rebuilds are required, rather than just needing maintenance. There are horrendous examples of where the infrastructure has been destroyed, lines and power cables stolen, and the basic infrastructure to run a reliable and efficient rail transport system looted. “Rail will need to prove that it can deliver on time, every time, that it can reach both customers and manufacturers with ease, that it is actually price efficient, and can meet the needs and expectations of the customer.” But Holley points out that the Africa Rail Industry Association has conducted a study on rail infrastructure, finding there is significant

“We are more than happy to make significant investments into new train sets in order to work on the existing infrastructure.” – james holley

capacity and that slots are available to put additional trains into the network. This means that investments in infrastructure won’t be needed in order to unlock this capacity. “There have been suggestions that our narrow-gauge rail may be a problem, but we feel a well-maintained narrow gauge will facilitate efficient logistics in South Africa, and we are more than happy to make significant investments into new train sets in order to work on the existing infrastructure.” Holley adds that in terms of rolling stock, we will definitely need more trains, which will require serious investment. To this end, Traxtion has announced a R1.5-billion initial investment, subject to concluding an access agreement with Transnet. “It is also worth noting that there are workshops in Boksburg that have been manufacturing trains for more than a century, so becoming a manufacturing hub of sorts is a strong possibility.” In fact, says Holley: “The vast majority of our trains have been assembled locally, so there is already strong IP available. We are confident that this will be a big win for us locally, in terms of manufacturing and sub-components supply.”

POLICY GUIDELINES Key policy guidelines on private participation in the rail sector: • Attract, encourage and regulate private sector participation in respect of investment, operations and maintenance. Invite private sector participation where the government cannot or should not invest, where it demonstrates superior value for money or where it is quicker to market. • Retain all state-owned railway network and rights of way but make them available to the private sector on mutually agreed terms. Source: Liberalising the rail network in SA: Pinsent Masons law firm

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hen the government’s Economic Reconstruction and Recovery Plan was announced last year, rail was singled out as being at the heart of South Africa’s economic recovery, with a plan outlined to open the freight rail network to private service providers. According to rail services and solutions company Traxtion’s chief executive officer, James Holley, this will be a game changer. “This will offer significant benefits to upstream customers and improve the competitiveness of South Africa’s economy by increasing the rail capacity for a large body of freight that moves most efficiently on rail, but is currently transported by road.” Holley says that not only will it be a game changer in respect of a reduction of transportation costs for customers, but it should also lead to greater efficiencies being introduced in the system itself, by virtue of additional users of the rail network generating track access fees. “There are additional impacts in terms of job creation, increased GDP and road safety. With fewer trucks on the road, there will be less maintenance required on the roads themselves, and fewer large vehicles will also make the roads safer.”

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2021/05/20 9:25 AM


After lockdown in March 2020, Air France and KLM continued operating by deploying passenger aircraft for cargo-only flights and offering repatriation flights to Europe, along with their five-times-weekly Martinair Cargo flights. “The extra capacity deployed by the airlines came at an extra cost. Operating passenger planes to carry only cargo is a pricey operation if not supported by passenger revenues and is mostly deployed to sustain the industry where margins are very tight,” says Vigada.

Air freight keeping

airlines afloat The airline industry has taken a huge knock but air freight has kept many carriers airborne, says TREVOR CRIGHTON

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he International Air Transport Association’s (IATA) data for global air freight shows that demand for air cargo decreased by 10.6 per cent in 2020 compared to 2019 – the largest drop in year-on-year demand since IATA started monitoring it in 1990. This figure outpaces the 6 per cent drop in the global goods trade. In South Africa, average international air freight cargo handled at OR Tambo International Airport in February 2021 was 806 136kg per day, compared to 854 139kg per day in February 2020, according to Business Unity South Africa statistics. That volume was down to about 300 000kg a day in April 2020 and only recovered to above 800 000kg daily in the last week of January 2021. Pier Luigi Vigada, director Eastern and Southern Africa at Air France KLM Martinair Cargo, says that despite some positive results, the air freight industry was as affected Pier Luigi Vigada as passenger services,

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A IR F REIGH T

A fully loaded cargo aircraft can transport 100 tonnes of goods – but capacity has been diminished under global lockdowns.

“Operating passenger planes to carry only cargo is a pricey operation if not supported by passenger revenues.” – Pier Luigi Vigada

CARGO FACTS IATA data shows that: • Global demand in 2020, measured in cargo tonne-kilometres, was 10.6 per cent below 2019 levels. • Global capacity, measured in available cargo tonne-kilometres, shrank by 23.3 per cent in 2020. This was more than double the contraction in demand. • Due to the lack of available capacity, cargo load factors rose 7.7 per cent in 2020.

and had to reinvent itself to ensure it could continue delivering to customers. “We had to face challenges at all levels, like customers not having enough staff to deliver to our warehouses, where we had to ensure working staff and environment were safe to operate and handle goods. Testing, disinfecting, sterilisation of goods and crew regulations were just some hurdles that soon became the norm for us.”

CFR Freight air freight director Stephen Bishop says that getting cargo in and out of South Africa became a huge challenge because the bulk of the country’s cargo is carried in the holds of passenger Stephen Bishop aircraft. When carriers stopped operating passenger flights under lockdown conditions, capacity dried up rapidly. “Ethiopian Airlines helped keep the country and the continent running, operating as our major connection to the rest of the world, particularly the Far East. While the cargo industry was deemed an essential service under lockdown, there were challenges with ground handling companies operating on skeleton staff and a myriad new COVID-19 protocols”. According to Vigada, air freight costs fluctuate alongside all other costs in relation to the supply-demand ratio. “Freight into South Africa comes from all over the globe, and pricing depends on where the cargo originates from and how constrained the capacity is on that leg – and, ultimately, on the capacity on the final leg. The demand for capacity has been massive all over the world; both capacity and volumes are currently lower than they were back in 2019.” Bishop says that in Q2 of 2020, they saw inbound freight pricing increase five-fold, particularly from the East. “It was simple supply and demand economics – and prices remain two to three times higher now than they were before lockdown last year.”

DEDICATED CARGO FLIGHTS VS CARGO ON PASSENGER FLIGHTS Pier Luigi Vigada, director Eastern and Southern Africa at Air France KLM Martinair Cargo, says that Air France KLM can carry up to 40 tonnes of goods on a cargo-only flight with a passenger aircraft, but recently set a record by loading 62 tonnes on a B777-300ER, which normally carries 15 tonnes when filled with passengers. According CFR Freight air freight director Stephen Bishop, a dedicated cargo aircraft can transport upwards of 100 tonnes, so while converting or redeploying passenger aircraft to carry cargo is helping to keep the cargo world operating, it’s not ideal.

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Capacity and costs

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2021/05/20 9:22 AM


Lowering shipping carbon emissions It’s a long and winding road to decarbonisation, as TREVOR CRIGHTON reports

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nternational Energy Agency research shows that road transport accounts for 15 per cent of total CO2 emissions. That’s as the International Maritime Organisation (IMO) reports sea freight is responsible for 2.5 per cent of global emissions. This makes decarbonisation – the process of lowering the amount of greenhouse gas (GHG) emissions produced by the burning of fossil fuels – high on the green agenda, with the IMO aiming to reduce shipping carbon emissions by at least 40 per cent by 2030 compared to 2008 levels. By 2050, the aim is less 70 per cent, compared to 2008. As Nikol Hearn, CFA, analyst at Marine Capital, says the IMO’s current strategy involves multiple steps. “The IMO has adopted mandatory measures to reduce emissions of greenhouse gases from international shipping under International Convention for the Prevention of Pollution from Ships (MARPOL) – the Energy Efficiency Design Index mandatory for new ships, and the Ship Energy Efficiency Management Plan,” she says.

“In January 2020, the IMO established a global sulphur cap of 0.5 per cent, forcing the use of low-sulphur fuel or the installation of scrubbers to ‘clean’ higher-sulphur fuels.” Nikol The IMO has also Hearn established a series of baselines for the amount of fuel each type of ship burns for a certain cargo capacity. “Ships built in the future will have to beat that baseline by a set amount, which will get progressively tougher over time,” says Hearn. “By 2025, all new ships will be 30 per cent more energy efficient than those built in 2014.” She adds that South Africa has appeared to signal participation in the IMO’s strategies by joining in the

“By 2025, all new ships will be 30 per cent more energy efficient than those built in 2014.” – Nikol Hearn

organisation’s GreenVoyage2050 Project, which seeks to speed up implementation of shipping decarbonisation measures.

Charting a greener course The Sea Cargo Charter, meanwhile, was developed in 2020 with the goal of reducing shipping’s total annual GHG emissions by at least 50 per cent by 2050. “The SCC enables consumer pressure on charterers to utilise low carbon emission ships, as signatories will measure the GHG emission intensity and total GHG emissions of their chartering activities on an annual basis, and will assess their climate alignment relative to established decarbonisation trajectories,” says Hearn. Cost remains a barrier to reducing emissions in the industry, with Hearn citing the lack of initiatives in enacting change as tied to the way shipping experiences split incentives: the perennial problem being the pass-through of cost versus benefits.

SHIPPING FACTS • 90 per cent of the world’s goods are transported via a ship at some stage of their production cycle. Per tonne of cargo moved, it remains by far the most efficient mode of transport. • The UN estimates the total cost of decarbonising sea freight to be R23.6-trillion by 2050. Source: ec.europa.eu, smithsonianmag.com

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2021/05/20 10:01 AM


SUS TA IN A BIL I T Y

ROAD FREIGHT FACTS • Road freight produces 16 800 kilotonnes of carbon emissions in South Africa each year, out of a total of 43 000 kilotonnes of annual transport emissions. • Of the total road transport loads in South Africa: - 58 per cent comes from bulk carriers - 13 per cent comprises retail/ FMCG goods - 11 per cent food and beverage products - 8 per cent abnormal loads - 5 per cent fuel carriers - 3 per Sustainable cent couriers transport - 2 per cent refrigeration Source: ec.europa.eu, smithsonianmag.com

“In certain shipping sectors, the roles of owner, operator or service provider may be carried out by a single entity. In other sectors, such as dry bulk, this is not the case. The owner must make the investment in a new asset, or a fuel-saving technology, but the compensation they receive for making that investment is dependent on overall market conditions, the intended trade and fuel prices. “A combination of regulatory change, market-based mechanisms, technological developments and broader market forces will all have to play a role, as one or two in isolation will not be sufficient.”

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GREENER LOGISTICS Dr Lee-Anne Terblanche of Distell says that countries like Sweden have introduced electric trucks for road freight and DHL has deployed electric delivery vehicles in New York, but those remain “first world” solutions. “Bringing that tech to South Africa is challenging in the face of the need for plentiful, reliable charging points – the infrastructure just isn’t available,” she says. “There’s not enough capital gains in buying a long-distance electric truck for transporting goods here yet.”

The road to worthy

RTMS across its Electricity Fleet Maintenance and Maintenance Services Department’s vehicles and saw numerous improvements, including reducing fuel consumption from 17 to 13 litres per 100km, saving R5.7-million over the period 2008-2016, improving their carbon footprint by 24 per cent and saving R4.2-million on repairs and maintenance,” she says.

In the road freight space, Dr Lee-Anne Terblanche, supply chain project manager at Distell, says that the only current legislation in place to incentivise decarbonisation is the carbon tax, which forms part of the fuel price. “There’s no direct law in South Africa that seeks to reduce emissions for trucks,” she says. “There are ISO standards and emissions play a role in roadworthiness tests, but there are still plenty of unroadworthy trucks on our roads.” New Zealand, Australia, the UK and Sweden are currently leading the way in terms of legislation governing emission reduction targets and requirements. “Sweden’s laws say the country needs to be carbon neutral by 2045 and the UK by 2050, and companies are being actively pushed to comply,” says Terblanche. “Carbon neutrality has only been achieved by two small countries so far: Suriname and Bhutan.” Terblanche’s believes that road freight emissions concerns aren’t particularly high on the agenda in South Africa. “Electricity generation is responsible for by far the most carbon emissions, followed by road freight, so a lot of focus is on reducing GHG emissions from electricity generation, because there are a lot more decarbonisation options in the space.” The Road Transport Management System (RTMS) is a self-regulation initiative that supports the Department of Transport’s National Overload Control Strategy. Terblanche says that numerous transport companies have signed up for the RTMS, for which they should be commended. “The City of Cape Town implemented the

However, she believes that electric innovations can play a huge role in greening last-mile delivery. “E-bikes and drones can definitely play a role in solving part of the e-commerce problem statement, but I still think we’re far from seeing drone deliveries here.” Marine Capital’s Nikol Hearn says that innovations like electric vehicles and drones will have a minimal impact on shipping, since shipping carries about 90 per cent of the world’s goods, and very much more so internationally rather than domestically. “The use of cargo bikes in the UK has helped in lowering emissions in the supply chain, but the international shipping of goods is still a more significant element on a mass scale. Going green is critical for the shipping industry as it creates 2.5 per cent of global CO2 emissions.”

Global green lockdowns The pandemic has shown what’s possible if emissions are reduced – though that was only achieved by global lockdowns, according to Terblanche. “There was a massive decrease in emissions when production slowed and people stopped driving to work; it was a real ‘aha’ moment for industry in terms of the potential,” she says. “New technology came into play including something as simple as a grocery delivery app like Checkers’ Sixty60, which meant a lower carbon impact by virtue of one courier delivering to 20 doors, taking 20 cars off the road.” In the sea freight space, Hearn says that the pandemic has highlighted humanity’s interdependence on the natural environment and has raised public pressure on governments to address the targets set at the 2019 United Nations Climate Change Conference to ensure a global temperature rise this century well below 2C°, above pre-industrial levels. “We see this is in the record number of green bonds issued in 2020 as well as the large number of initial public offerings in the green equity space, particularly on the Oslo Stock Exchange,” she says.

DHL has deployed electric delivery vans in New York.

“There’s not enough capital gains in buying a long-distance electric truck for transporting goods here yet.” – Dr Lee-Anne Terblanche

Dr Lee-Anne Terblanche

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2021/05/20 10:00 AM


CUS T OMS

COVID-19 and customs: breaking the bottlenecks Restrictions on non-essential goods, reduced staff numbers and new protocols have all played a part in creating bottlenecks across the supply chain, says LISA WITEPSKI

to prioritise. “For example, because system constraints are a reality, reliable shippers should be subject to random inspections only, unless they make an error. It may also be a good idea to set up special teams to handle new products like the vaccine, using private labs on site to speed up clearance.”

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Risky business

he panic buying that set in at the beginning of the pandemic included the very real prospect of shops running out of imported products. That’s because, as Dr Ayanda Nteta, supply chain executive at Pula Research and Consulting, says “the supply chain simply isn’t agile enough”. The pandemic also shed a “cruel” light on the industry’s shortcomings, especially when it came to leveraging data and all the paperwork that needs to be completed. Nteta maintains little has changed 12 months on. “The status quo is likely to remain Dr Ayanda in place until entrants to the Nteta industry are trained in a way that inculcates an agile mindset.” Doug Hunter of Syspro also believes there’s a need for new ways of thinking and recommends matching differently skilled crews for different goods, both essential and non-essential. He says it’s vital that players call on predictive analytics (or their past experience) to learn how

Denys Hobson, logistics and pricing analyst for Investec Business, believes that “systems also play a role, especially in terms of automation”. Manual data capturing may be affected by human error, which can lead to delayed custom clearance or the application of incorrect tariffs. He says a reliable tracking system is equally important because it affords customs agents the visibility to prioritise workflow and workloads. That’s as Kearney’s Sujeet Morar insists that South Africa needs to apply a deliberate green lane approach, so that preapproved and supplied data can speed up flow. But what about risk? Hunter says that in crisis conditions, an element of risk is unavoidable, and the best that management can do is try to mitigate it. “Public-private partnerships are necessary here, because crime is a reality. If scanning or comparison checking equipment is available, it should be used; if not, and the cargo is high priority, it is important to arrange and

The supply chain crisis has impacted industries to a varying degree – but none are exempt. Siya Ngcukana, chief supply chain officer at KFC South Africa, says that the company has secured capacity with overseas manufacturers, and reliance on forecasts has been replaced by actual purchase order placement. However, this impacts payment, which in turn affects cash flow cycles. To alleviate financial pressures, KFC has partnered more extensively throughout Siya Ngcukana the supply chain.

coordinate plans for it to arrive at a port where equipment can be organised. “Non-intrusive methods should be used unless the shipper is new or unknown, or suppliers are sending a product with no previous history or with a sudden change to tariff codes. We cannot slow entire supply chains because we overcheck.”

“Reliable shippers should be subject to random inspections only, unless they make an error.” – Doug Hunter

RECOVERY ON THE HORIZON Hervé Perron, Bollore Logistics’ MD of international freight forwarding and contract logistics: South Africa, says that challenges notwithstanding, he anticipates a recovery for the industry. “The logistics sector is very resilient and goes from crisis to peaks in activity in a very short period of time. We also believe that to a certain extent, some of the sourcing might be more regional than global – particularly with the Far East – and this will support the development of local and regional industries.”

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CHECKING CHICKEN

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CUS T OMS

According to Nico Nel, customs manager at Ziegler South Africa, it should take no more than five minutes for a company using customs clearance software to receive a response from SARS once they have submitted a clearance declaration.

Physically unfit

While electronic processes help delays in custom clearance, it’s not all smooth sailing, says LISA WITEPSKI

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s the gatekeeper of our borders, customs clearance plays a critical role in securing revenue, ensuring compliance with domestic laws and ultimately protecting society, says Zama Mgwedli, customs and excise consultant at CMS South Africa.

CUSTOMS CLEARANCE IN A POST-COVID-19 WORLD Clifford Evans of SAAF says that no new documentation or certificates have been necessitated by the pandemic, as all requirements are based on the classification of goods by HS Codes. “Goods which require specific permits or certificates are specified in the Prohibited and Restricted Goods Index, along with the detailed requirement,” he explains.

“It should take no more than five minutes for a company using customs clearance software to receive a response from SARS.”– NICO NEL Although some importers, such as those bringing PPE into the country, were issued additional documents negating the need for duties or VAT, Nico Nel of Ziegler South Africa notes that the relevant permits were valid for a limited time only. These rebates have been removed since lockdown restrictions have been eased and goods are able to move freely across borders. Requirements regarding fumigation and sanitary certifications for bulk cargoes haven’t changed either. “These certificates

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are based on the commodity, not the type of shipment, so the same certificate is required whether the commodity is shipped as air freight, sea freight in containers or as bulk cargo,” explains Evans. “These certificates would be required based on the classification by Tariff Heading and, in turn, the requirements stipulated in the Prohibited and Restricted Goods Index.” Nel says that this index is updated on a weekly basis, and may be viewed on SARS’ website.

IMAGES: ISTOCK.COM, SUPPLIED

Technology and the evolution of customs clearance

“This is made possible by through the implementation of effective controls – effective being the operative word here – as the efficiency of customs procedures can influence a nation’s economic competitiveness, as well as the growth of international trade and the development of the global marketplace.” That’s why human error, as one of the biggest contributors to customs delays, is particularly concerning, points out Ridwaan Mohammed of ACS – and also why many previously manual processes have become electronic. Clifford Evans, who holds the public relations portfolio for South African Association Freight Forwarders (SAAFF) Western Cape, says that this change was kickstarted by the introduction of the Customs Modernisation Programme in 2009, “which led to the implementation of, for example, the Electronic Data Interchange, a paperless releasing system, as well as Zama electronic refund applications Mgwedli and e-filing”.

But, while these systems boost efficiency – or, at least, intend to – they are far from foolproof. “The biggest concern is that other government agencies involved in the import and export of goods have not followed suit,” says Evans. “Port Health, the Department of Agriculture and Forestry, the State Veterinary Service and the National Regulator for Compulsory Specifications are just a few of the agencies that still use manual application processes, and require physical visits to obtain the release of goods.” The disconnect is exacerbated further by the fact that these agencies act independently, not only of customs, but of each other, too – which often leads to the duplication of physical inspections and other processes. This, in turn, says Evans, may result in delays to release and delivery, financial losses to the owners of goods, and the creation of a false economy. Mgwedli says that custom delays may be managed by “doing the homework regarding the import or export of products” – in other words, making sure that you have the relevant permits, certificates and letters of authority to hand. It’s also important to ensure that the goods have been correctly classified, and that the correct import taxes have been declared and paid.

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2021/05/20 3:22 PM


SOUTH AFRICA’S PREFERRED CUSTOMS CLEARING, FORWARDING AND ACCOUNTING SOFTWARE PROVIDER

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Bordering on SMART

South Africa’s current border post infrastructure is under growing pressure to get smart. THANDO PATO speaks to the various stakeholders

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he current infrastructure and processing procedures at South Africa’s land borders are resulting in higher freight costs says Gavin Kelly, CEO of the Road Freight Association. Kelly says the biggest challenge the industry faces is the inability to move goods seamlessly and efficiently. “This results in the costs of transport being higher than they should be because the delays and processes need to be included into the trip to ensure the transporter can cover all the costs. “This can be up to R5 000 a day when factoring wages, parking, financing and other operational expenses,” he explains.

LE FRENCH SMART BORDER

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IMAGES: SUPPLIED

BORDERS

With Brexit completed, the French government has plans to introduce a smart border between the UK and France by 2022. Currently, 10 000 trucks move between the UK and France daily. The new SMART border was devised to keep goods moving smoothly along the world’s busiest shipping route. Trucks leaving the UK will present customs officials with customs documents containing a barcode, which the agents can scan and forward, along with the truck’s registration number, to officials on the other side of the channel. The barcode will allow French authorities to identify the truck’s contents and quickly determine, before the driver arrives in France, whether or not the vehicle needs to be inspected upon arrival. France is estimated to be spending R684-million and hiring 700 extra customs, immigration and veterinary staff to staff the border. Source: www.thelocal.fr

• Sibulele Dyodo

Kelly says delays and procedures that need to be factored in include the waiting time around customs, immigration, cargo health requirements, anti-smuggling activities, theft control, possible security issues relating to protests or unrest, COVID-19 procedures and, of course, corruption by some of the authorities who make processes inconsistent.

What is a SMART border? “The concept of Secure, Measurable, Automated, Risk Management-based and Technology-driven (SMART) borders holds the promise to transform border environments, and unlock regional and intra-Africa trade flow – particularly for landlocked countries reliant on cross-border road transport for trade and access to international markets,” says Sibulele Dyodo, executive manager of stakeholder engagements at the Cross-Border Road Transport Agency. “This is one intervention which will have a significant contribution towards the achievement of the objectives of the African Continental Free Trade Area, the Tripartite Free Trade Area and many regional trade and transport related protocols, agreements and memoranda of understanding.”

No silver bullet Areta Holdings CEO Zane Cleophas is cautious about the introduction of SMART borders. “There is no silver bullet when it comes to cross-border Zane movement of people Cleophas and goods, as a solution is made up by people, technology and processes.” SMART border systems for ports of entry can definitely assist with an overburdened environment, but they need clearly defined processes supported by the correct physical infrastructure and a trained staff complement, he says. “The only way to attain this ideal end state would be collaboration between government and the private sector, especially the defence industry as first consideration, as both the expertise and technology exist within their realm.”

“The concept of SMART borders holds the promise to transform border ENVIRONMENTS, AND unlock regional and intra-Africa trade flow.” – Sibulele Dyodo 51

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Dyodo says that the advantages of SMART borders include: Simplified, standardised and harmonised border procedures that bring predictability to traders and transport operators. Ultimately, this will reduce transit time and eliminate delays and congestion. Optimising technology and big data to improve effectiveness and efficiency, which improves productivity. The deployment of effective systems and business processes that reduce risks associated with cross-border movements. Improved internal controls, risk identification and mitigation strategies by and between border management stakeholders. Improved coordination and transparency, and reduction of human intervention in the cross-border value chain.

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A DV ER T ORI A L

EFFICIENCY IS EVERYTHING Efficiency is the single most important factor in achieving operational success for suppliers of material handling and industrial equipment. “One of the greatest challenges in our industry is equipment flow,” says Chantell Malherbe. “By adopting a logistics management system – in our case, the Toyota Lean Logistics Management system – the flow of equipment can be streamlined from 60-plus days to a maximum of 21 days.

PAPERLESS PROCESSES Introducing paperless processes in the business helps to streamline operations. This allows everything to be driven via apps – from Capex approval and human capital appointments to procurement. Requests can be uploaded to the apps and run by the executive team for approval. The apps can also be used in conjunction with a business information (BI) tool to generate statistics and information, which can be stored in the cloud, allowing for easier, more accurate audits and more informed decision-making. “Choosing the paperless route means reducing the number of files and documents of the past, cutting down on printing and saving time – all important considerations in a world where we need to be spending less time in the office and more time with our customers to help their businesses become more efficient,” adds Malherbe.

IN PURSUIT OF OPERATIONAL SUCCESS Chantell Malherbe, operations director for EIE Group, identifies several trends that players in the material handling and industrial equipment industry should consider embracing if they want to remain relevant in an increasingly competitive 21st century

CUSTOMER CARE

ENHANCE OFFERINGS

The longer it takes to get equipment from the port (with its shipping and customs delays) to the distribution facility for the predelivery inspection, the longer and more frustrating the wait for the customer. “The focus on customers should never wane. When customers need new machines, they don’t want to wait several months for a new machine to be delivered,” says Malherbe.

Providing clients with a one-stop shop for material handling and industrial equipment means they don’t have to look to several different providers to meet their needs. Malherbe says EIE Group’s acquisition of Uni-Cape Equipment allows the business to bolster its offerings with cranes, lifts, docking equipment and pallet trucks in the Western Cape. “We are no longer merely a forklift supplier, we are becoming warehousing and logistics specialists in the industrial space too.”

RELIABLE EQUIPMENT Efficient warehouses are hubs of high productivity. “The reliability of equipment plays a critical role in ensuring efficiencies in these types of operations. Good material handling equipment allows the user to move more stock around faster and with a greater degree of accuracy,” Malherbe explains.“ Choosing to partner with suppliers who manufacture state-of-the-art and reliable equipment means less risk of downtime and greater safety for our customers. It also means less risk for us because we know we have supplied a quality product that will operate optimally, ensure the safety of users and require less maintenance,” she adds.

DIGITAL TRANSFORMATION

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Chantell Malherbe

The introduction of apps to help manage administrative tasks and enable customers to book services or report breakdowns, as well as BI tools to optimise data, are some of the ways material handling and industrial equipment can innovate. Malherbe says another way is by introducing bespoke fleet management systems. “All of our forklifts are equipped with Toyota’s patented I-site Fleet Management System, which enables fleet managers to optimise overall productivity by monitoring parameters such as truck performance, truck and driver utilisation and battery status. “Other features include pre-operational checks, which ensure the truck is reliable and safe to use. Notably, fleet managers have access to the Toyota I-Site from anywhere, via a mobile app and web portal.”

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EMBRACE INNOVATION Today, most operators in the industry have introduced lithium-ion batteries, which are rechargeable and offer better power efficiency. “However, other possibilities such as solar battery charging and hydrogen fuel engines are being explored. These are important developments to follow as operations around the world focus on reducing their carbon footprints. Toyota SA and Sasol have collaborated to establish a hydrogen mobility corridor as hydrogen fuel cell vehicles gain traction globally,” adds Malherbe.

THE RIGHT PEOPLE An operation’s success is underpinned by a dedicated and focused workforce. “In our industry, teamwork, strong leadership and an engaged workforce are key to operational success. When everyone focuses on the same vision, everything else follows,” Malherbe concludes.

For more information: 011 395 0600 info@eiegroup.co.za www.eiegroup.co.za

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Chain of command F

ar from the stuffy repository of goods of old, today’s warehouses are evolving, connected spaces where a warehouse management system (WMS) is used to manage warehousing, inventory and picking, to efficiently process goods in high-volume and quick-moving sectors. A variety of industries use it, says Tom Villet, owner of The Inventory Optimization Zone, an end-to-end supply chain consultancy that assists companies with selection, design and implementation of appropriate technologies and processes, to improve their warehouse competitiveness. “Each warehouse and company is unique in terms of their product mix – fashion isn’t frozen food – transaction mix and volumes,” he says. “Add to this the different levels of maturity and legacy systems that may be employed by companies, and we see a multitude of solutions being developed, some for broad industry use such as optimising product slotting and pick paths, with others only for a specific customer or warehouse.” In an average warehouse, a “pick” is done to collect goods from a “pick face” – the designated area from where the user picks. In most southern African warehouses, forklifts,

Software and data management connect for improved supply chain capacity and operational efficiency, delivering better goods warehouse processing and business efficiencies. By KIM MAXWELL baskets or trolleys move into an area, use scanners and pick stock. A WMS uses machine learning to adapt to changing warehouse conditions and pick orders more efficiently.

This instruction is automatic “Our respective warehouse software partners are continuously developing and keeping abreast of latest developments,” says Forte Supply Chain Consulting COO Renko Bergh. “For example, one of our cold store retail clients, Econo Foods, uses automatic replenishment, which happens as they pick, to ensure the pick face has enough stock to fulfil orders.” He says automatic replenishment is a feature within the WMS that triggers an instruction to replenish and reorder. It ensures a pick face always carries sufficient stock, plus backup stock.

Team Forte Inventory Solutions at PnP warehouse in Windhoek.

Forte serves as a bridge consultancy, partnering with specialised WMS providers, and is responsible for the implementation of and utilisation of these software systems for warehouse operators across South Africa, Namibia and Botswana. Bergh says Forte doesn’t just “drop a box” when implementing warehouse software, but instead takes into account best practices and tries to understand each client’s needs before mapping requirements to the software abilities.

Value chain insights According to Bergh, insights fed up and down the supply chain can be used to improve product visibility and guide business strategy, using WMS software that adapts to user behaviour, to improve distribution time slots and delays at dispatching level.

FAST FACT Efficiencies achieved through scale, competence in logistics and supply chain management contributed significantly last year (FY 2020) to Shoprite’s achievement of its industry-leading food retail gross margin of 23.9 per cent. Source: Shoprite Holdings Limited Integrated Annual Report 2020

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Wa rehousing

A Shoprite Distribution Centre.

How WMS improves the supply chain bottom line A leverage situation sometimes applies for a supply chain project, where implementing multiple solutions can provide significantly greater value than a single one. • Inventory optimisation and a new WMS was implemented for a food distributor. Inventory solution outcome: reducing inventory by approximately 20 per cent, availability improved by 5 per cent. The WMS outcome: almost 20 per cent productivity improvement. This led to an increase in sales (and margin – no unnecessary specials/markdowns), shortened delivery times and a 25 per cent staff saving, mostly through no overtime payments. In addition, the lifespan of the existing warehouse facility was extended by three years. • New storage facilities and a new WMS were implemented for a hybrid wholesaler/retailer, to support new storage and picking methodologies. Outcome: an average of one-day improvement in turnaround times, and a 10 per cent improvement in productivity. images: istock.com, SUPPLIED

Source: The Inventory Optimization Zone

“Automatic replenishment is a feature within the WMS that triggers an instruction to replenish and reorder.” – Renko Bergh

Villet notes the trend of more data points being collected in the total value chain, from internal and external sources. “An example is a company that started tracking the market prices of key raw materials. This allows them not only to impact the future cost price of a product but also to predict possible consumer trends based on these cost price drivers and trends. It ultimately feeds back into detailed operational planning at the warehouse. “Another company is collecting detailed manufacturing statistics from the various sensors in their plant. They use this to predict future maintenance requirements to schedule these in off-peak periods,” he says. Harnessing these sorts of insights can help optimise a company’s focus on cost prices, profitable customers, and category and product performance.

Data-wise departments Data analytics are crucial to the future competitiveness of companies, says Villet. “We’re seeing a seamless integration of these tools with enterprise resource planning (ERP) systems as well as WMSes. A starting point would typically be optimising the product mix and levels, often the most overlooked element of a successful warehouse.”

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It’s also important to align the various data-intensive cycles within a warehouse such as receiving, picking and dispatch with those of procurement (ordering) and sales departments. But Villet says the success of these data-intensive cycles also hinges on greater cross-departmental collaboration happening within a company. “The Shoprite Group has embedded sustainability metrics into its world-class reporting system to enable us to capture and use real-time data to influence decision-making and to make our operations more efficient, responsive and environmentally responsible,” says Shoprite Holdings CEO Pieter Engelbrecht. Africa’s largest retailer and private sector employer, the business declared an annual turnover of R156.9-billion in the 2020 financial year. Says Engelbrecht: “At R48.5-billion in sales, our Checkers and Checkers Hyper businesses have become a formidable presence in the South African food retail market.” In Shoprite Holdings Limited Integrated Annual Report 2020, the group attributes its “investment in digital transformation and specifically our integrated ERP system” as directly contributing to improved efficiency, by consolidating all critical information into a single database. The group says its centralised supply chain – controlling the majority of local imports and cross-border export movements – is fully merged with the group’s ERP system. “This allows for greater collaboration across all supply chain aspects, creating benefits in planning, procurement, warehouse logistics and distribution, and enables us to manage efficiencies to keep costs to a minimum,” explains Engelbrecht.

Online shift Online shopping is a growing sector with different requirements to those of a typical warehouse. Villet says often these are “switching points” where large volumes are received, split and then sent to either stores, customers or other warehouses in relatively large volumes. “Online retailing requires the fulfilment of small volumes (often single units) in a relatively short space of time,” he explains. “Volumes are hard to predict and tend to be ‘spiky’, supported by promotion activity.” Solutions might include building separate online warehouses, outsourcing or allocating specialised online space within an existing warehouse with its own unique WMS. The Shoprite Group annual report notes that when consumer shopping behaviour “changed drastically” during COVID-19, data analytics systems and a centralised supply chain saved the day: “With real-time data and flexibility in our supply chain, we could immediately react to reallocate and redistribute stock appropriately,” says Engelbrecht. “Efficiencies were improved, as we could give suppliers real-time information of stock status across the supply chain with associated rate of sale information.”

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ParcelNinja e-commerce warehouse.

DID YOU KNOW?

The evolution of packaging The e-commerce boom has meant a scramble for packaging. By JAMES FRANCIS

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here is overwhelming evidence that e-commerce enjoyed an enormous boost during the pandemic. That’s according to the Global Ecommerce Update 2021 report, which shows that while global physical retail contracted by 3 per cent, e-commerce retail grew by 27.6 per cent. The habit appears to have stuck and independent research company Insider Intelligence predicts a further 16.5 per cent growth rate for 2021. The surge caused an unprecedented scramble for packaging, leading to a cardboard shortage as major e-commerce companies bought up stock to meet demand. Though demand has balanced out, the packaging industry is playing catch-up to new market demands. According to ThePackHub’s Global Packaging Trends Compendium 2021, there are nine new packaging trends – mostly fuelled by the e-commerce market. These include presentation sleeves for cans and hygienic cardboard layers.

Secondary packaging And while a purchase arrives in a box and is not displayed on a shelf, for example, in a carton of cigarettes, experts believe the need remains for secondary packaging: the branded packaging that contains the packaged products.

These may seem less relevant if the goods arrive in a courier box, but says Niel Burg, creative director at branding and packaging design agency Burg Design, secondary packaging plays a significant role in creating new retail experiences for customers. “We believe that secondary packaging is even more important in the e-commerce space, which has become retail therapy during this pandemic. Secondary packaging evokes an emotion of excitement, similar to unwrapping a birthday gift. It gives a brand a certain degree of quality and assurance. This is what turns a customer into repeat business.” Branding is key, but so is ensuring a customer gets their order in one piece. As Burg says, “There is no greater disappointment than when you receive your parcel and your purchased product is damaged. It’s important to take the

“It’s important to take the necessary steps to ensure the packaging arrives in the same condition that it left the warehouse.” – Niel Burg

necessary steps to ensure the packaging arrives in the same condition that it left the warehouse.”

New demands According to Justin Drennan, CEO of logistics-as-a-service-provider Parcelninja, e-commerce places new demands on packaging. “Products need to be packaged correctly for e-commerce, which differs considerably from traditional retail. We adhere to drop tests, package requirements and a stringent on-boarding process. We find most packaging is inadequate and have a process to improve product packaging or repack products correctly.” Many retailers rely on their logistics partners – couriers and warehousing – to put the proper measures in place. These include parcel tracking and security, supported through technology service platforms. “We are working together with customers to improve this further upstream, and if not possible we offer services to help improve the quality of the packaging, in adherence to our packaging standards,” says Drennan. “In order to ensure quality of delivery, we need to make sure products are packaged appropriately for e-commerce.”

FAST FACT Packaging is divided into three classes: primary; secondary and tertiary. 1. Primary packaging is branded “retail” packaging and how you’d encounter a product on a retail shelf. 2. Secondary packaging is branded exterior packaging that surrounds primary packaged products, such as a six pack of drinks, and sometimes acts as a display stand. 3. Tertiary packaging consists of the nondescript boxes that freight products, though these are also increasingly branded.

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• In 2019, the global packaging market reached R13-trillion and is anticipated to reach R23.5-trillion by 2027 according to Research and Markets. • Plastic still leads the market, valued at R4.9-trillion in 2020 (Grand View Research), but cardboard is not far behind. • The corrugated board packaging market was valued at R3.7-trillion in 2019, and is projected to reach R4.8-trillion by 2025 according to Research and Markets.

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PACK AGING A ND CR AT ING

Going full circle

IMAGES: ISTOCK.COM, SUPPLIED

Most packaging ends up in landfills. Can we make it more sustainable? JAMES FRANCIS investigates

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hile demand from e-commerce has driven the global packaging industry to new heights, its potential for waste has also increased. As the Center for International Environmental Law reports, packaging accounts for 40 per cent of global plastics while 91 per cent of packaging is reported to land up in landfills. Plastics are used for protective laminates, internal cushions and wrapping films. But research shows consumers are seeking sustainable solutions, according to Pyrotec packaging

Timothy Beattie, general manager of PackMedia. “Research reveals climate change and higher social consciousness among consumers as well as relevant legislation are driving forces behind many product manufacturers’ packaging and product choices to replace plastics with biodegradable alternatives,” he says. “Packaging that is designed for recycling or reuse, made from mono-materials, or otherwise lends itself to circularity is now the norm and is likely to endure.”

Empty spaces

IMAGES: ISTOCK.COM, SUPPLIED

Sustainability also relates to wasted space inside the packaging.

The Sustainable Packaging Coalition’s design guidelines document defines sustainable packaging as: • Beneficial, safe and healthy throughout its life cycle • Meets market criteria for performance and cost • Sourced, manufactured, transported and recycled using renewable energy • Maximises use of renewable or recycled source materials • Manufactured using clean production technologies and best practices • Made from materials healthy in all probable end-of-life scenarios • Physically designed to optimise materials and energy • Effectively recovered and utilised in biological or industrial cradle-to-cradle cycles

In a poll of 1 000 adults in November 2020, packaging firm D.S. Smith revealed that 93 per cent of recipients reported receiving packages with wasted space, and 73 per cent said they received boxes twice or larger the size than what was needed. Biodegradable plastics are increasingly gaining favour. As Frank McDouall, director of plastics alternatives company Bonnie Bio says, “Mother Nature can then take care of it.” “China plans to phase out single-use plastics by between 2022 and 2025, prompting significant investment in producing raw materials for biodegradable alternatives. McDouall, who considers recycling unreliable, believes it’s critical we invest in materials that can go “full circle” rather than hoping they will be reclaimed through recycling or efficient packaging. “Don’t try and make a broken thing work,” he says. “Rather, revisit the whole journey and make things out of materials that can go full circle so that even if it falls out of the recycling matrix, nature can sort it in its own time and it’s not going to be toxic to the environment. That’s the key thing.

FAST FACT In 2017, more than 50 per cent of consumers rated the sustainability of paper-based packaging as very high according to APP Paper & Packaging Consumer Trends. A 2021 poll from Ranpak among US consumers found that 78 per cent wish more brands used paper packaging, and 68 per cent would favour retailers that offer plastic-free packaging choices.

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Timothy Beattie

PACKAGING DESIGN

F R E I G H T, L O G I S T I C S & W A R E H O U S I N G

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