THE DEFINITIVE TRUCKING SITE

August 2008

• “This is the hardest year I have ever experienced in the 15 years I have been in business.” 

• “I pay and  I pray.”

• “I don’t know where this industry is going.”

• “We are under pressure, margins are down and the situation is not getting any better.”

• “It cannot carry on like this, something is going to boomerang.”

THESE ARE JUST some of the comments picked up by FleetWatch from transport company managers around the country when asked how the ongoing increases in the price of fuel were affecting their businesses. 

Mutch Transport
Anton Landman, director of the Mutch Group of Companies, which includes Mutch Transport, says the price hikes have dramatically eaten into the company’s margins. Landman says the company is not in a position to pass the increases in their entirety onto its customers and the company has therefore been absorbing as much as its can internally. “In effect, we have increased rates by around six percent,” he says, adding that the current situation is a “sad state of affairs for the local road transport industry”. 

“The traditional transport companies - those transporting for reward only - are in a serious predicament,” he says. “Fortunately, Mutch is a more diversified company and undertakes a variety of functions, including the procurement and haulage of bulk goods for the building industry. The company has a dedicated sales arm and offer a variety of services which means it is able to cross subsidise the cost of the actual transport operations.” 

Terblanche Transport 
Based in the Vaal triangle, Mokkie Fourie of Terblanche Transport says the situation is “difficult.” The company, he adds, is also absorbing as much of the increases as possible. “It is impossible for us to pass the entire increase over to the customers month after month,” he says. “Even when we are able to pass on some of the increase, we get a very negative reaction in the marketplace and are definitely losing business.” 

Fourie says transport companies all over South Africa have their backs against the wall. “Everybody is losing. It can’t carry on like this indefinitely. At some stage something is going to boomerang.” 

He notes that downsizing, or reducing the number of vehicles in the fleet, is an increasing phenomenon among road transport companies. “We have 40 trucks on the road and are trying our best to keep them busy. It is a very difficult situation but you can’t just roll over and lie down. What will happen to the economy then?” 

BAC Transport
Jan Kotze of BAC Transport describes the impact of the fuel price increases as: “An absolute killer!” 

A general haulier with 17 trucks on the road, he says BAC Transport is also not in a position to pass the increases on to its customers. “At this moment I cannot say what is going to happen. We will have to see. I do not see any real solutions. In the 13 years I have been in business, this is the hardest it has ever been. But I must also tell you that we will survive - there is no other choice.” 

Chahana Logistics 
Also determined to survive is Suren Bhugwat, director of Pietermaritzburgbased Chahana Logistics who says that as the pressure of ever-increasing costs begin to bite, there is growing panic among transport companies as to how they are going to cope.

“It is bad out there at the moment,” he says. “We have tried to absorb the increases as best as possible but it is very difficult. The prices we are currently charging are not realistic when compared against our costs.” 

“While there are those customers who do understand, there is little loyalty left among customers. They try playing one haulier off against another and are going for the cheapest rate they can find.” On this point, he says the days of cutting rates to suit customers are over. “People cutting rates will not survive beyond the end of the year. Those days are gone,” he declares emphatically. 

Stating that he feels “ashamed” to keep going back to his customers with further rate increases, Bhugwat says it is going to take months to settle down. “No one realised the diesel price would increase as much as it has. It has caught everyone unprepared. One thing is for sure though and that is that this crisis will sort out the men from the boys in the transport industry. Those who hold on and are patient will survive. This situation has to turn around sometime.” 

On a more ominous note, Bhugwat says the next few months will be critical for many players in the transport industry. He foresees downsizing, closures, retrenchments and job losses across the board. “I also expect banks to start calling in loans, restricting credit and vehicle repossessions to increase.” 

According to Bhugwat a more serious and immediate problem for hauliers is the insistence by fuel companies for cash payment on fuel deliveries. “You cannot get diesel on credit anymore and while we pay cash up-front, we have to wait two or three months and even longer for our customers to pay us.” 

Double B Transport 
“I pay, close my eyes and pray,” says Bridgette Alves, MD of Double B Transport who, with 15 years transport experience in the national and international removals business, says profits are markedly down as the company absorbs as much of increased operating expenses as possible. 

Like Bhugwat, she too sees rate cutting as being a problem. “We increase our rates and we lose the job. We keep the rates down and we lose money. I cannot see an end to this.” 

Alves reports that Double B has already sold its larger rig and is operating on five and eight ton trucks as well as its fleet of bakkies for small loads. A devout Christian, Alves says: “I ask God for guidance and the means to carry on.” 

Restructuring 
A director of another removals company based in Centurion, Gauteng - and who prefers to stay anonymous - says the company has moved from buying fuel at the pump to buying at wholesale prices. “This has helped us enormously. We have also restructured our operating costs as far as possible but in spite of this, we cannot honestly say we are going to stay in business for long. We are now actually looking at relocating overseas.”

FullMarx Freight Solutions 
Desiré Weaver, office manager at FullMarx Freight Solutions in Cape Town, says while the company outsources its transport requirements, it has managed to negotiate the best fuel rates it can from suppliers which are then passed onto its customers. Weaver says the company, which handles air, sea and road freight, courier services, freight forwarding and the like, has been fortunate in that most of its clients have been very understanding.  

Kodav Logistic Solutions 
In a similar vein, Corné Pretorius, MD of Kodav Logistic Solutions, says many of his customers understand the ongoing rate increases. 

Fuel, oil, grease and tyres, the price of transport consumables is going through the roof placing unprecedented pressure on the bottom line.

“Some of the customers actually phone us toward the end of the month and ask what the new rates are,” he says, adding though that the market is really tough at the moment. “Scary in fact.” 

Kodav, who is primarily involved in cross border transport, says fuel is even more expensive in neighbouring states, particularly in Zambia and Malawi. “Coupled to this, the exchange rates have also been negatively affected in recent months,” he says. 

Echoing what many hauliers expressed to FleetWatch, Pretorius says it is not just fuel prices that have gone up. “Tyre prices as well as lubricating oil have also gone up dramatically. On top of this, steel prices have also shot up impacting on the cost of truck bodies and trailers. It has been a very tough year so far.” 

Interestingly enough, Pretorius says Kodav has a major contract to transport fertiliser into Malawi. “Fertiliser prices have gone crazy in the last year,” he says. “What we have seen

is that in spite of the fuel hikes, the cost of transport is around 10% of the value of the fertiliser compared to between 30% and 40% a year ago - which obviously make it viable for the customer to stick with road transport.” 

Pretorius says general cargo hauliers are suffering the most. “Just a year ago, fuel ranged between 30% and 35% of operating costs. Now it is around 50%. I expect fleet downscaling and company closures in the foreseeable future. I was actually looking at putting additional vehicles into the business but with the current rates crisis, it simply is not worth it.” 
 

Corné Pretorius... many customers do understand the ongoing rate increase.

Satawu
Expecting nothing less than fire and brimstone FleetWatch contacted the South African Transport and Allied Workers Union (Satawu) and spoke to Vuyo Skaal, a Gauteng regional centre official. 

Skaal’s approach to the question as to how fuel price increases were affecting the road transport industry - and in particular the workers within it - was both pragmatic and candid. 

“These increases are affecting everyone in a very negative way,” he says, “While the larger transport companies have levies (escalation clauses) in their contracts to cover fuel price increases, many of the smaller companies do not. Obviously these smaller companies are under pressure. We understand some companies are reducing the size of their fleets or simply parking them as they can’t make enough money to keep them on the road. 

“The drivers are affected because they are often paid for the hours they work behind the wheel. If they don’t put in the hours they don’t get paid. The employer’s attitude is that they can only pay the drivers when the wheels of the trucks are turning.” 

Adding to this, Skaal says fuel price increases have also impacted on the cost of workers travelling to and from work. “They are feeling the pinch from all sides. It is a very awkward situation.” 

Heading into the unknown
While Vuyo says he does not foresee anything as dramatic as the collapse of the road transport industry, he notes that if fuel prices keep on going up the industry is heading into the unknown. “There does not appear to be a solution to this problem of increased fuel prices,” he says. 

In line with what some of thoughts expressed by the operators, Vuyo says transport companies must diversify and adapt to the prevailing circumstances in the market. In this vein, he cites taxi operators as being innovative on this front. 

“We have observed a trend in the taxi industry, for example, where some operators have pulled taxis off the road during off-peak hours and are negotiating contracts to pick up commuters directly from their place of work. So, instead of having a taxi cruising up and down picking up a few passengers here and there, they will approach one of the supermarkets, for example, and say, look here is a vehicle for your staff, we can pick them up at the proper time and transport them to where they need to be.” 

While we have highlighted some of the impact on our local transporters, the problem is global.