Dec 11, 2024 The Ctrack Transport and Freight Index, (Ctrack TFI), Ctrack.
The logistics sector falters notably in H2 2024
The Ctrack Transport and Freight Index (Ctrack TFI) declined for five consecutive months to reach an index level of 117.2 in October, the lowest since February 2023 and the longest declining streak since early 2018. At this level the index is a notable 7.1% below the May print of 126.2, suggesting a notable mid-year U-turn. The weakness in the logistics sector has been quite broad-based with four of the six sub-sectors declining notably and only the rail freight and air freight sectors providing some offset.
On an annual basis, the Ctrack TFI moved into contractionary territory since July and is in October 2024 3.6% lower compared to a year earlier. This disappointing performance of the transport and logistics sector is in sharp contrast to the expectation of higher GDP growth in the second half of the year. While the transport sector has often in the past outperformed the broader economy, that trend has recently changed, and the sector underperformed relative to overall GDP growth in Q3.
Graph 1: Annual growth rate in Ctrack TFI
Given the weakness evident in the past five months, the year-to-date performance of most sub-sectors have subsided, with both the heavy-weighted road freight and pipeline transport sub-sectors contracting, see graph 2. While the rest are still positive, only the air freight and rail freight sectors advanced in the past three months, whereas the other sectors’ performances have disappointed.
Graph 2: Y/Y growth rate in different sub-sectors of Ctrack TFI year to date (Jan- Oct 24) vs corresponding period in 2023 (Jan – Oct 23)
The heavily weighted Road Freight sub-sector, which has grown notably in recent years and currently accounts for 83.3% of all freight payload in South Africa, contracted notably in 2024 – see graph 3. Following on growth of 1.5% in 2023, road freight payload in South Africa plummeted in 2024, with a drop of 7.1% year-to-date (Jan-Sep 2024). This compares to growth of 21.7% and 8.9% in 2022 and 2021 (full year growth), respectively. While the weakness in the South African economy has been a factor in this disappointing performance of the road freight sector (though economic growth on average was at similar levels compared to 2023), other challenges have probably played a bigger role. These include the redirection of cargo ships towards other ports in Africa such as the port of Maputo, especially in time periods when Durban’s ports are plagued by inefficiencies. This has probably resulted in less demand for heavy vehicle transport in South Africa. The efficiency of our maritime gateways is paramount to the success of not just the freight industry, but the entire supply chain. Ongoing challenges at our ports have highlighted the urgent need for modernisation, increased capacity, and improved management.
Graph 3: Annual growth rate: road vs rail freight payload
While early days, the recovery in the Rail Freight sector is likely to also see some cargoes moving from road to rail in coming years. However, this is a very slow-moving trend and not the main driver of slack in road freight sector in 2024. Rail freight payload in South Africa increased only marginally so far in 2024, with an increase of 0.4% year-to-date (Jan-Sep 2024) vs 2.4% in 2023. From reaching a rock-bottom low of only 10.3% of total freight payload been transport via rail in November 2022, the performance of rail has improved to 16.7% in September 2024 (YTD also 16.7% and comparing to 15.6% for 2023 as a whole), though still notably lower than the 10-year average of 25.9% (rail freight to total payload in 2008-2017) prior to the onset of the significant deterioration. On the contrary, after booming in recent years (rising from 75.1% in 2017), road freight as ratio of total freight payload subsided from 84.4% in 2023 to 83.3% year-to-date in 2024. Government’s structural reform initiatives, as outlined in the Freight Logistics Roadmap, aim at restoring and growing rail capacity in South Africa, to ultimately reduce trucks on the roads in the medium term and to reset to a more sustainable road/rail freight balance. However, the task at hand is dauntingly big and it will take some years before a notable trend reversal will be evident – see graph 4.
Graph 4: Performance of road vs rail freight since 2008
Zooming back to October 2024, the road freight index declined by 1.0% on a monthly basis, a notable 4.9% lower than a year earlier. However, some of the underlying data have increased in October, specifically heavy vehicle traffic on both the N3 and N4 routes.
The Air Freight sector has been a star performer among the sub-sectors since the start of 2024, aligning with global trends. According to the International Air Transport Association (IATA), Global Cargo Tonne-Kilometres (CTK) increased by 9.4% year-on-year in September, delivering the 14th consecutive month of demand growth. International routes have experienced exceptional cargo demand for the fifth month, with a 10.5% annual increase in September. Airlines are benefiting from rising e-commerce demand in the US and Europe amid ongoing capacity limits in ocean shipping. Carriers from all regions have seen growth in international traffic for most of the year compared to the previous year, and September continues this trend. In South Africa, the air freight index increased by a notable 16.9% y/y in October, with all underlying components of the index rising strongly. Unscheduled flights, that are normally associated with cargo loads, increased by a notable 13.3% in October, compared to the previous month.
October turned out to be a challenging month for the Sea Freight sub-component, which remains the logistics sector’s Achilles heel. The sea freight index declined by 0.7% on a monthly basis, while remaining 4.2% above year ago levels. Overall, for all ports in South Africa, the number of containers that landed and were shipped in October declined by 29.4% m/m (vs +15% in September), while other cargo handled (excluding vehicles) also dropped notably by 15.6% in October (vs 8.4% in September). Despite a few dismal months during the course of the year, year-to-date sea freight is still up by 3.3% on the corresponding period in 2023 – see graph 2. Sea freight remains one of the main focus areas of South Africa’s structural reform efforts and given the importance of this sector in the supply chain of South Africa, the focus is indeed critically important.
The Storage and Handling sub-sector of the Ctrack Transport and Freight Index increased by 0.5% on a monthly basis in October, but remained 4.7% below year-ago levels. Inventory indicators were mixed in October, while total transhipments, both landed and shipped containers notably lower, but other indicators suggested rising inventory levels. Lastly, the transport of liquid fuels via Transnet Pipelines (TPL) declined by 0.7% m/m in October, and remained 6.3% below year ago levels, partly reflecting the sluggishness of the economy.
The Ctrack TFI signalled correctly that the transport sector will be a negative contributor to Q3 2024 GDP
The broad-based weakness evident in the Ctrack TFI over the past few months strongly suggested that the transport sector will be a negative contributor to overall GDP in Q3 and that is exactly what transpired in the Q3 GDP release on 3 December – see graph 5. The transport & communication sector has frequently been an outperformer among the other economic sectors in the past, like in 2023 when the transport sector grew by 4.1% vs. overall GDP growth of a mere 0.7%. However, in 2024 that trend has reversed with the transport & communication sector under-performing the broader economy in each of the first three quarters. In Q3 the transport & communication sector contracted by 1.6% q/q seasonally adjusted vs a contraction in overall GDP growth of 0.3%. A disappointing performance indeed.
Graph 5: Growth in total freight payload vs real GDP growth
“The weakness evident in the critical logistics sector is concerning and a stark reminder that structural reform is a lengthy process, and that change does not happen overnight. The sharp focus on the sector, especially the rail and sea freight sub-sectors, as part of government’s structural reform initiatives to revive the economy with the much-needed help of the private sector remains of critical importance,” says Hein Jordt, Chief Executive Officer of Ctrack.
Summary of results
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Dec 19, 2024 0
Dec 17, 2024 0
Dec 16, 2024 0
Dec 13, 2024 0
Dec 11, 2024 0