This year, South Africans bear witness to an increase in civil unrest, from passive to violent strikes, hitting industry sectors across the board. The most recent being the unrestrained attacks on the Road Freight sector, which have all but destroyed over 20 trucks to date, with an estimated cost to the economy being anything between R18m and R60m.
These attacks call for concern over the safety of the trucking industry and the impact it is having on the country’s already turbulent and fragile economy. With the attacks threatening to compromise South Africa’s role as Africa’s gateway, the nation braces itself for the far-reaching consequences of these attacks.
Let us take a closer look:
Increase in the number of targeted truck attacks
Since the initial attacks in July, more than 21 trucks have been set ablaze, spanning over multiple regions including KwaZulu-Natal, Mpumalanga, and Gauteng. The arson attacks have been attributed to a variety of factors, including industry disputes regarding the hiring of foreign drivers, labour unrest, and economic sabotage according to industry experts.
The impact on the Road Freight sector
South Africa’s Road Feight sector is considered the backbone of the local economy, handling roughly 80% of all goods transportation, ensuring a steady flow of goods both domestically and into neighbouring African countries. According to Gavin Kelly, CEO of the Road Freight Association (RFA), any disruptions or damage to the logistics supply chain carries significant consequences, stressing that the long-term effects of these attacks would result in widespread destruction of employment levels, leading to further job losses as businesses shrink and trade migrates away from South Africa.
The impact on the economy
The financial ramifications of these attacks can be devastating on the economy in a variety of ways. Let us take a look at how these attacks affect the economy:
Insurance price hikes
The cost of the trucks and cargo destroyed during these attacks can cost anywhere between R3m and R10m in insurance claims. This costing is based on factors such as vehicle category, cargo type, and specialised equipment.
As these attacks show no signs of slowing down, insurance companies need to limit their liability. Insurers can manage their liability by not insuring trucks at all, increasing insurance premium rates for trucks or cargo-type vehicles, or excluding liability for routes that are regarded as “high-risk”.
Cargo transportation rate adjustments
With the arson attacks forcing certain businesses to close temporarily, this unexpected downtime translates to lost earnings, salaries, and revenue, all of which can impact the need for rate adjustments and price hikes.
Increase in consumer good prices and stock shortages
The continual increases in cost up the supply chain inevitably means that the cost in consumer goods will also be affected. This increase contributes to the inflationary pressures felt by the South African citizens in an economy in recovery over the pandemic-induced downturn. Not to mention the loss of cargo as a result of the attacks, means companies and consumers have to wait longer for certain products which are rippling into the retail sector as customer satisfaction takes a turn for the worst.
Investment in Africa
These attacks are negatively impacting investor confidence, as the risk to the supply chain increases. This means, businesses wanting to invest in the flourishing African markets are taking note of potential security threats around South Africa’s trade routes, and may redirect their freight away from South Africa, further stifling economic growth.
Business closures and increased unemployment
Businesses of all sizes are feeling the financial impact of the recent truck attacks and economic inflation. With South African buying at an all-time low, some companies have opted to close indefinitely, causing a rapid increase in the unemployment rate which further adds pressure to a fragile economy and the South African citizens.
What is the government doing?
According to IOL the government and police are taking these attacks on trucks very seriously, with the government having deployed the South African National Defence Force (SANDF) to secure key arterial routes and aid people in quelling the attacks.
However, critics and industry experts have argued that the government needs to do more to resolve these attacks and promptly before it escalates further.
The relentless and violent truck attacks pose a severe threat to South Africa’s economy, particularly its road freight sector. The untold destruction not only affects the financial stability of businesses operating in the freight and logistics sector, but also affects their ability to cover costs, resulting in increased unemployment and business closures.
If the government and police force can act with swift and decisive action needed to address this ongoing crisis, they can possibly prevent the irreversible damage to South Africa’s position in the global trade landscape.