The rise of logistics : A trend boosting South Africa's economy

The logistics industry is one that has shown immense growth over the past several years and with the industry predicted to be worth USD 750 billion globally, it seems this trend is here to stay. According to the South African Annual Property Index, over the past 12 months, despite the woes of Covid-19, industrial property was the best performing sector in the property market. Evidentially, what was further noted was the fact that logistics warehousing was the best performing component in the industrial division - proof that the logistics industry is cementing itself as a major player in the South African Economy.

Considered the 'brain' of the supply chain, logistics operations essentially deal with the convoluted network of ensuring that goods get to the end user in the most efficient and cost-effective method. This is a huge undertaking which has led to the introduction of 3PL, or Third-Party Logistics. Third-party logistics involves an organisation outsourcing its warehousing, distribution and fulfilment needs. A 3PL provider may provide a single service, such as transportation of goods, to multiple services, which could include the fulfilment of orders, inventory, packaging and more. Internationally, 40% of organisations now use 3PL providers, thus the demand for more warehousing and fulfilment centres is ever increasing. This is no different in South Africa, particularly with the introduction of new trade agreements and routes.

The commencement of new trade contracts is set to further propel the logistics industry and 3PL in particular. The African Continental Free Trade Area Agreement (ACFTA) took affect at the beginning of the year, with the intention to boost intra-African trade. This free trade agreement was signed by 54 African countries and is set to revolutionise commerce across the continent, with trade volume and hence the economy of the continent, expected to grow significantly. Additionally, the restoration and improvement of the Maputo Corridor has successfully advanced bilateral trade flow between South Africa and Mozambique, leading to more than USD 5 billion worth of development pertaining to new industry and logistics operations.

Moreover, 3PL and individual logistics operations will see further expansion, due to the negotiations between South Africa, Nigeria and France respectively. The collective African government is currently in collaborative discussions to improve and develop roads, railway and maritime connectivity between Nigeria and South Africa - the biggest economies on the continent. This will see an increase in South Africa's production and logistics capabilities, further strengthening the industry and landscape. Secondly, France has been investing in the country's railway structures in collaboration with local companies. The French-South African partnership is proving particularly successful, with Alstom, a French-based multinational transport company, modernising a rail factory in Ekurhuleni in 2019. Alstom has further plans to continue similar ventures within the country. With constant investment and improvement to our transport sector, it's no wonder our trade and logistics industries continue to thrive.

Covid-19 has demonstrated just how critical supply chains are, prompting more businesses to think about bringing operations closer to home. This will predictably actuate logistics growth across all sectors, further establishing its presence in the South African economy. The need for local, energy-efficient warehousing is paramount for the continual progression of the industry.

For any inquiries regarding warehousing specifically suited for logistics operations, please contact Ryan ryan@dealcore.co.za or 083 607 8128.