Page 34 - Logistics News - September October 2023

R O A D F R E I GHT

The unforgiving march upwards

in the price of diesel

By Gavin Kelly, Chief Executive Officer, The Road Freight Association

What the fuel price increases mean for South African road freight logistics.

oad freight transporters use both petrol and other costs and still needs to operate a business, whilst
diesel, but diesel is the main fuel in most others just don’t have any cash to carry themselves for
R road operations. Once fuel prices increase, 90 days.
transporters will need to increase their pricing to cover
the increased cost of diesel. Whilst this sounds like Whether we like it or not, the continuous increases in
an ‘easy’ or simple process, there will be transporters the price of diesel inevitably drive the cost of transport
who will not be able to increase costs (either they are and logistics up, step by step. And, with roughly 85
contractually bound or they just price themselves out of percent of all goods moved through and around the
the market). country having a road leg at some part in the journey,
there will be increases to consumers as the cost to
One of the biggest challenges faced by transporters transport goods increases.
is the need to fund operations whilst only being paid
months after the work has been done – in some cases, Fuel breached the 50 percent mark in daily operating
up to three months afterward. In the meantime, the costs during the third quarter of the year. Now, as we
next load needs to be moved, and so on, and that all head into the final months of 2023, with this increase,
needs fuel for the vehicles. There just aren’t limitless the sector is heading towards the 60 percent level seen
reserves of cash to continue the high level of fuel during the last months of 2022. That’s a huge increase
expenditure against the delayed payment for work in cost to company (any company or business that
already done. requires goods to be transported to manufacturing/
processing/packaging/staging/distribution or retail
The Road Freight Association (RFA) is hearing from operations) that simply cannot be borne by the
more and more of its members how the fuel cost strain company.
is affecting survival – with more and more businesses
in stress/business rescue, whilst customers reduce That cost will, in most cases, be borne by the
volumes that need to be transported or even curtail consumer. You and I will pay more for, well, everything
stock movement (depending on consumer consumption – from food to fuel, from clothing to electronic goods
levels). and everything in-between. Prices will rise, some
immediately, but more so, a domino effect will ensue –
Transporters will feel this impact on their the next in a long line of such domino effects that we
businesses. Many transporters will not be able to have seen too often in the last few months. Transport
muster the guarantees required for purchasing fuel on costs will rise. There is no alternative for transporters –
credit (this is required as customers take up to 90 days and those that cannot afford to carry loads at the rates
to pay after the transport has been provided) – and the or prices customers are prepared to pay will simply
transporter has paid for fuel, paid the driver, covered close down. •

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