South African trade is moving away from air freight as ocean rates fall

South Africa is expected to see a shift away from air freight as importers and exporters eye falling sea freight rates and improved ocean reliability.

The automotive industry in particular will be less reliant on the air, delegates heard at the Air Cargo Africa event in Johannesburg last week.

“The market has been very volatile,” said Renaj Moothilal, Executive Director of the South African Component Manufacturers’ Association, NAACAM. “The components market relies on a globally integrated value chain. You can’t have 99% of the components, you need 100%.

“In the past we have mainly moved by sea freight, but over the (pandemic) years we have made tremendous demand for air. Sea had problems. We’ve seen a 60-70% increase in the use of air freight over the last three or four years.”

But he added: “The components sector is cost-sensitive and cost will always be a major decision-making factor. But in order not to be the cause of an assembly line standstill, the use of airplanes became much more common.”

Jacques Mellet, head of logistics at Indian automaker Mahindra & Mahindra, said his company has also turned to air freight.

“We do just-in-time logistics, so sea freight is always a challenge. Covid had a huge impact and we had to turn to the air. Normally we do 80% sea freight, now it’s more like 60:40 or 50:50. We have to make sure the systems are running smoothly.”

But he said air capacity has been hard to find. He explained: “There weren’t many airlines available, especially from India where we only had Emirates.”

Nhlamo Mashimbye, Head Parts & Sales at Daimler Truck Southern Africa said he needed speed and reliability.

“Those are the most important things to us. We started enforcing the services we needed – we have penalty clauses. That forces you to resort to air or you end up paying more (by getting fines for late deliveries).”

According to the latest data from research consultancy Trade Data Service (TDS), air transport accounted for about 20% of the value of South Africa’s trade last year, with maritime and road transport accounting for 67% and 12% respectively. Total air travel fell 1.2% last year, but exports edged up 0.5% and much of the fall in imports was linked to a drop in Covid vaccines shipped.

But the air volumes will decrease this year, the car companies said. Mr Mellet said: “Sea freight rates are falling and are cheaper now than four years ago, so we won’t be moving much by air if we can ship it.

“We will always use air, it will always be in the background. But the sea is cheaper.”

All shippers were scarred by last year’s Transnet strike by dockers and railroad workers.

“The role of labor and productivity in ports is becoming even more important as a global competitive factor,” explained Mr. Moothilal. He said the South African government has added fiscal support in the form of grants and incentives to the growing auto sector to encourage more exports.

Mahindra is also evaluating regions for manufacturing, Mr. Mellet said. “China plays a big role, but more and more companies are looking to other regions, such as South Africa.”

Kenya Airways Cargo, meanwhile, suggested manufacturers should consider sea air and get the best of both worlds.

“We have seen companies restructure and move to a multi-modal approach,” said Peter Musola, Cargo Commercial Manager. “Sea-to-air is a good option for Africa, it lowers costs for many landlocked countries. It makes sense that imports would come to Mombasa by sea and then go by air.”

He added that the airline is in talks with CMA CGM to set up a multi-modal solution.

TDS announced that annual air cargo traffic in South Africa was approximately 350,000 tons, while container throughput in the main ports was approximately 4 million TEUs per year.

“Economically, South Africa has had a bumpy ride over the past ten years, which is also reflected in the international trade figures. However, performance in 2022 was good, with trade value up 9.5% overall. Expectations for this year point to further growth, although the current power crisis (load shedding) could derail this.”

About two-thirds of Africa’s air freight volume goes through four airports, it said: Nairobi, Johannesburg, Addis Ababa and Lagos. I The loading star

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