Samiksha Jaiswal (Editor)

Road Logistics Costing in South Africa

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Road Logistics Costing in South Africa

Road logistics costing in South Africa amounts to anything between 7.4% and 12.8% of the South African gross domestic product (GDP) depending on the fluctuations in the annual fuel price. Road logistics consist of any road freight transported on South African primary and secondary roads. Most imports and local freight are carried on primary and secondary roads while most freight carried in the agriculture markets are done on non paved roads.

Contents

Road logistics cost in South Africa account for 50.4% of total logistics cost and is very sensitive to the crude oil price as this influences the South African fuel price. The cost of fuel as a percentage of total road logistics cost amounts to 30% of total cost. Road logistics costing consists of fixed cost and variable cost.

Fixed Cost

Fixed cost can be defined as the part of the total logistics cost which will not fluctuate depending on kilometres travelled or payload carried. The split between fixed and variable cost as an industry standard normally have a 53% fixed portion and a 47% variable portion. Fixed cost consists mainly of capital cost, admin overheads, insurance, depreciation, license fees and driver wages.

Variable Cost

Variable cost can be defined as the part of the total cost which will fluctuate depending on kilometres travelled or payload carried. Variable cost consists mainly of fuel, tyres, lubricants, maintenance, washing of tankers (chemical and fuel transport), toll fees and cross border permits (freight carried outside South Africa’s borders to near Africa countries)

Unforeseen Cost

A certain percentage of total annual cost is normally allowed to cover unexpected or unforeseen expenses. This amount will differ from company to company depending on the size of the annual cost.

Cost contributors

Poorly maintained road infrastructure can lead to higher tyre and maintenance cost resulting in higher total cost for road logistics. Driver abuse and improper driver training normally have two effects on total cost. The first being increased breakdowns and standing time and secondly leads to more road accidents resulting in damage, injuries and unfortunately, fatalities.

Fuel price compilation

Economic factors affecting the unit over/under-recoveries for the period 27 February 2009 to 26 March 2009.

During the period under review, the average international product prices of Petrol, Diesel and Illuminating Paraffin decreased. The average Rand/US Dollar exchange rate weakened when compared to the previous period. The average Rand/US Dollar exchange rate for the period 27 February 2009 to 26 March 2009 was 10,0655 compared to 10,0602 during the previous period.

The Minister of Minerals and Energy has approved the implementation of a Single Maximum National Retail Price for Illuminating Paraffin with effect from 2 April 2003. The Single Maximum National Retail Price for Illuminating Paraffin will change on a monthly basis from the first Wednesday of each month and will also be promulgated in the Government Gazette. The Single Maximum National Retail Price with effect from 1 April 2009 to 5 May 2009 will be 581,0 c/l compared to 588,0 c/l from 4 March 2009 to 31 March 2009, that is a decrease of 7,00c/l.

The Minister of Finance, in his Budget Speech on 11 February 2009, announced an increase of 23,0 c/l and 24,0 c/l in the fuel tax on petrol and diesel respectively with effect from 1 April 2009 and an increase of 17,5 c/l in the Road Accident Fund levy on petrol and diesel with effect from 1 April 2009.

The maximum refinery gate price will be R4 738,06 per metric ton (262,96 c/l) for the period 1 April 2009 to 5 May 2009. Price changes are adjusted in such a manner that the over-or under-recovery during the prior month will be corrected in the following month. The unit over- or under-recoveries are rounded up or down to the nearest full cent so that the effect of rounding contributes to the clearing of the cumulative balance of the individual products on the slate.

In order to manage a negative balance in the cumulative over/(under) recovery account (the slate), a Self-Adjusting Slate Levy Mechanism (SLM) has been implemented with effect from 7 January 2009 (the SLM is available on the website of the Department of Minerals and Energy (DME)). A Slate levy will only be applicable on all petrol and diesel grades if the slate balance is negative (cumulative under recovery) by more than R250,0 million.

References

Road Logistics Costing in South Africa Wikipedia


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