The opportunistic mass looting in KwaZulu-Natal and Gauteng and the wanton destruction of trucks and goods has spread to the wholesale and retail sectors and distribution centres in these areas – and there is a real and imminent danger this will spread to other provinces, says Gavin Kelly, chief executive of the Road Freight Association.
What started as sporadic incidents on one or two routes, has now spread to the total supply chain, affecting the transport legs, as well as destinations and originations, he said.
“With the total supply chain now being impacted, the economic effects are far-reaching – but the collapse of the supply of all goods will be the immediate result.
“Short-term losses already run into billions of rands; the long-term impact is yet to be fully realised.”
Kelly said that some of the notable costs include:
- Depending on the category of vehicle, the type and value of the cargo, and the specialised equipment required for the cargo: this can be anywhere between R3 to R10 million per vehicle.
- A simple calculation of capital losses (assets and cargoes at an average of R5-million per vehicle) of the 40 trucks destroyed to date amounts to around R250 to R300 million. Kelly said that trucks are still being destroyed at this moment.
- The cost of loss of income through business closing is far greater: There are instances where small businesses have lost their only truck or trucks. This means loss of earnings/revenue for the business, loss of salaries paid to staff who would no longer have jobs, loss of revenue through the services and support the business uses such as fuel, storage, maintenance, tolls, staff requirements, licencing, etc.
- The inability of employees who lose their jobs to support their families and the retail businesses they frequent in supporting their families’ needs;
- The potential closure of businesses means fewer transporters available to perform work. Some companies might feel the industry is not a safe/secure environment and so their owners could decide to simply close their business;
- Freight travelling through South African ports (especially the Port of Natal and along the corridors that have been targeted): cargo owners/customers will choose to move cargo through neighbouring countries. This has already been happening as South African ports become inefficient and the surrounding ports develop, improve and drive efficiencies up.
- Costs relating to insurance will increase, as the risk to insurers has increased over the last three years, partly as a result of the constant attacks on freight. The evidence is clear that road freight is attacked as it is an easy target and the looting prospects are huge in terms of the quantity and the variety of goods that can be looted.
- Security costs will increase, as logistics companies are forced to employ guarding services. Routing will change to safer (but perhaps far longer) routes, where control is easier.
Advisory group Aon echoed the warnings, saying that the riots and looting are rubbing salt in the wounds for businesses already decimated by the Covid-19 pandemic and lockdown – and the situation now presents a tipping point for many as to whether they survive or not.
The group said that the violence and destruction over the last few days have thrown supply chains into chaos and businesses are now scrambling to secure the weak links in their supply chains while trying to safeguard lives and property – all in a bid to reduce the risks to business continuity as far as possible.
Echoing the freight association, the group said the key issue for businesses and supply chains lies in the closure of routes and damage to transport vehicles and infrastructure.
“With major highways in and out of KZN blocked, it means that tens and thousands of fleet vehicles are unable to deliver goods across the country from South Africa’s busiest port, not to mention delays caused in Gauteng, the country’s economic hub.
“Goods will be late in reaching destinations, if at all, as transport operators run the risk of having trucks and cargo damaged, burnt or looted by rioting crowds,” it said.
Consumer to foot the bill
Kelly said that ultimately the consumer will foot the bill for what has happened.
This will come through both indirect charges relating to the cost of logistics, the need to build reserves to repair damaged infrastructure, and the scarcity of goods.
Supply and demand will dictate cost and if supply cannot meet demand, demand will drive prices up, he said.
“The looting and destruction of retail points will force closures, whilst damages are ascertained, repairs are done and stock levels are replenished. There will be shortages.”
Some companies have already noted they will not reopen and the direct job losses and the indirect job losses will be huge. The cycle of unemployment will continue to spiral upwards, he said.
“What cost are we looking at? The cost to operational assets such as vehicles and infrastructure is just the tip of the iceberg – and as reports come in, this will grow exponentially.
“We are already looking at billions of rands in the total logistics supply chain – without factoring in the damages to commercial retail space.”
The costs to commercial retail and other related damage will be phenomenal – and the impact on the investors and owners of these facilities has not been factored in, as yet, he said.
“The cost to families and communities where jobs will be lost will be crippling. Millions will be lost in salaries and wages – but more importantly millions of people will become destitute. The long term implications of this have not been factored in yet.”
Ramaphosa must declare a state of emergency
Kelly said that the damage to the South African economy will run into billions of rands, as business confidence drops, foreign investments plummet or are withdrawn, and those who use South Africa as a transit hub, turn away from the country and move to other countries that are safer and more efficient.
“A state of emergency needs to be declared – immediately. The time has come for the gloves to be taken off. Law and order need to be restored and the perpetrators/instigators inciters of the violence and destruction of our economy must be harshly dealt with.
“The minister of police previously referred to such activity as economic sabotage. Then the government needs to treat it as such and deal with it appropriately.”
Kelly said that the country’s infrastructure, people’s lives and livelihoods and the right for all citizens to live in a safe environment have all been trampled upon by those who wish to have their will imposed.
“This must stop. Now. Mr President – do what is necessary to protect the People of South Africa. We need direct, focused, firm and resilient control by you to stop what is happening.”