THE DEFINITIVE TRUCKING SITE

March 2008

INDUSTRY OBSERVATION

This Year’s Risky Issues

High roads and low roads

One of the horror smashes which occurred over the last Christmas period involved a head-on collision between a luxury coach and an old bakkie traveling on the Vryheid-Richards Bay road. There was a strong likelihood the bakkie owner had no insurance, given the statistics on how few vehicles on South Africa’s roads are insured. 

The repair bill for the luxury coach was big and somebody had to pay for it, be it insurer, fund or combination of both. At the end of the day, it really doesn’t matter if an insured party is self insured, partially or comprehensively insured. When the vehicle at fault is uninsured, the ‘innocent’ party’s insurance will have to foot the bill. 

The problem here is that on that particular road, and others like it, uninsured vehicles will continue to operate. This poses serious risk for operators with routes traversing the whole country, where some roads are safer than others as far as risk profile is concerned. I would suggest any of the routes like Richards Bay inland will be a greater risk than the conventional toll roads for example. 

This raises a couple of interesting questions. Do you now isolate or select against insurers and insure comprehensively just for this particular operational route? Or do you buy cover with a larger catastrophe layer given the fact that the risk profile is higher? 

Whatever your viewpoint, insurance risks are now far more varied and require a great deal of aptitude to deal with the task at hand. This is a good thing because aptitude and application will lead to a more to a more professional process.

Toll too far

I read the recent toll tariff increase announcements with concern. These increases were declared with the empathy of a cat playing with a mouse. Straight up, toll roads are extortion. A harsh comment perhaps but where are all the new roads being promised? My experience is one of a whole series of ‘upgrades’. 

Converting shoulders into lanes is hardly new roads! 

Maintenance work doesn’t qualify in my book as ‘new roads’ either. In essence, if road transporters think toll roads are for their benefit, I would suggest they swallow a hefty reality pill. 

Eskom’s coal farce

In 2007, we were frequently asked to finance operators entering into sub contracting arrangements for the supply of coal to various power stations. Our powers of persuasion came to naught. Not a single contract was signed with either Eskom or legitimate contract providers. All we saw were various ‘entities’ one might call ‘brokers’ who seemed to be adding no value whatsoever. Curiously, these meetings with contract providers always ended with patent assurances that contracts would be forthcoming. The offers still stand but I personally am yet to see the proverbial ink on paper. 

The perennial plagues 

The lack of government support for the transport industry is staggering. While the public is led to believe that Transnet is getting its act together, the number of fuel tankers on our roads increases month on month. There are huge risks here which do present financial opportunities because they have to be insured. The question is: In South Africa, are all these risks given the proper diligence and professional application they deserve? 

There also seems to be a lack of realistic goal setting, where targets are achievable. The Dangerous Goods legislation requirements spring to mind here. They are way too ambitious and have not been thought through with any thoroughness. We all know that the talk is just not translating into effective application. Over-ambitious projects result in big collapses and their failure cripples morale. 

As always, margin pressure, operational pressures and diesel price pressures will separate the wheat from the chaff in the road freight industry. The sharp operators will continue to thrive but those who fail to heed the obvious warnings are really going to struggle. It’s going to be all about recognizing and capitalising on narrow windows of opportunity. 

Good luck.