Once again Air Cargo becomes second choice in South Africa, shippers move towards the ocean

The pandemic saw shippers and manufacturers shift towards air cargo, globally, in light of the various disruptions causing low ocean reliability. Strikes, labour shortage and container shortage were the biggest setbacks for maritime shipping as manufacturers looked for stable and continuous supply of components. That’s when air cargo came into the picture to save the day for all as a fast and reliable option for freight movement, even though it was costlier.

However, during last week’s Air Cargo Africa event in Johannesburg, South Africa, it was conferred that the country will see a shift from air to ocean on the back of better reliability and lesser cost of transportation involved. The change will be particularly evident in the automotive industry, considering that the component market depends on a globally integrated value chain.

When in comes to the components market, the manufacturers can end up paying in access due to penalty clauses imbibed in legal agreements. This is the reason they look for speed and reliability at the major factors in deciding the mode of transportation, however, price of the components still remains the key driver.

In South Africa, the demand for air cargo has increased by 60-70% post the pandemic’s initial strike. In light of millions of containers stuck at various ports and at sea, to avoid being the cause of an assembly line shutting down, the use of aircraft became a lot more prevalent. However the market has been pretty volatile. As a result, the proportion of using sea to air changed from 80:20 to 60:40 or even 50:50 at some point of time.

Another factor for shippers moving towards ocean freight again is the unavailability of air cargo capacity. As a result the cost of air cargo increased and turned even bitter with low supply, which added on to the costs. With sea freight simmering down in comparison to early-COVID or pre-COVID levels, it is once again becoming a viable solution for shippers. Not that frieght movement by air will cease to exist in the country, but may see a sharp decline in demand emerging from the country.

According to the latest data from research consultancy Trade Data Service (TDS), last year air accounted for about 20% of the value of South African trade, with sea and road accounting for 67% and 12%, respectively. Overall trade by air declined by 1.2% last year.

In what can be called the ‘holy grail’ of global supply chains in present day, it is advisable for organisations to use multi-modal approach for inbound and outbound transportation. Not only does it reduce time and increase reliability, but also proves to be cost effective. For South Africa, sea to air is a good option as it brings costs down for a lot of landlocked countries. It makes sense that imports come by sea to Mombasa and then go by air. About two-thirds of Africa’s air cargo volumes go through four airports: Nairobi, Johannesburg, Addis Ababa and Lagos.

On the other hand, the South African government has added fiscal support to the growing automotive sector in the form of grants and incentives to encourage more exports. At a time when the world is looking for alternatives to move their production units out of China, these support initiatives from the South African government can highlight the country’s potential.

TDS revealed that annual air cargo traffic in South Africa was about 350,000 tonnes, while container throughput at main ports had been some 4m teu a year. So economically, South Africa has had a bumpy ride over the past decade, which is also reflected in international trade figures. However, 2022 performance was good, with trade value growing at 9.5% overall.”

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