SA’s transport sector in the age of Covid: A roadmap to economic recovery

The South African transport sector entered the age of Covid already beset by several major challenges. Ageing infrastructure; a lack of impartial regulatory bodies; an unfriendly environment for private sector collaboration; over-reliance on roads for both public transport and freight; and a skewered subsidy model are a few of the structural obstacles that were present.

Covid-19 has both highlighted and exacerbated these hurdles and must force the industry out of complacency.  The challenges it faces must be viewed as opportunities with the problem areas providing a guide as to the solutions that can be delivered with maximum impact, where they’re most needed.

A study conducted in partnership by Business for SA and global management consultancy firm, Kearney found that the already beleaguered transport industry has been further imperiled in 2020, and in the absence of any interventions, would likely plunge into an L-shaped curve, in terms of both GDP generated and employment levels, from which it would take at least five years to emerge.

However, Sujeet Morar, Principal at global management consultancy Kearney, believes that the challenges are not insurmountable and that there are solutions in the form of interventions that have the potential to deliver up to R223 billion and create up to 168 000 formal sector jobs, figures which far exceed the potential losses incurred by the Covid-19 pandemic. But for these to be effective government will have to act swiftly, delegating efficient, accountable teams, and galvanizing private-public collaboration.

Pre-Covid studies had positioned transport among the high impact, high potential growth sectors that have been earmarked for priority interventions (along with sectors like financing, petroleum-products, metals, and construction). All of these have the potential to induce cascading benefits that ripple throughout the broader economy, but perhaps none more so than transport.

“Inasmuch as it enables the movement of people and goods, the transport industry is a necessary facilitator and catalyst of every other industry at the macro-economic level. It is a crucial determinant of development metrics like GDP, and also prefigures a nation’s overall competitiveness in the global economic arena. Just as other industries rely on transport, transport itself is reliant on a functional, well-maintained infrastructure of roads, railways and ports; both air and sea”, explains Morar.

The role of transport in an economy is double-edged: it at once serves the demand of other sectors, and drives national and industrial competitiveness at the regional, national and global levels, through enhanced process efficiencies and cost improvements.

Within the land-based road- and rail- subsectors, the freight industry is the primary contributor to income, approximately 55% of which is derived from 3 key industries – mining, manufacture, and agriculture.

“Re-energising transport starts with sound governance. We advocate for a Single Transport Economic Regulator (STER), as well as a standalone ports authority and an independent rail regulator. Such structures would provide transparency, impartial oversight, and enhanced competition. In addition to this, we recommend a strong government-enabled model for collaborative networking amongst SMME’s, private companies, and academies or associations”, Morar elaborates.

A seismic shift in economic history, the covid-19 pandemic and its after-effects are ushering in a veritable fourth industrial revolution for the SA transport sector. “We anticipate many more Private-Public Partnerships (PPPs) including collaborations with logistics partners to overcome traditional obstacles, and start to forge more cost-effective, multi-modal transport solutions”, says Morar.

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Golden Arrow Bus Services drives energy efficiency

Cape Town-based Golden Arrow Bus Services (GABS) saved R1.8 million in one financial year thanks to robust energy-efficient practices such as optimized maintenance and fuel efficiency through driver training and a modernized fleet.

This was a result of the company’s energy efficiency practices that led to a saving of 6 767 153 kWh (energy equivalent) for the year which qualifies it for the 12L Tax Incentive (Section 12L).

The Section 12L application process which is implemented by SANEDI (South African National Energy and Development Institute) applies to all energy carriers (not just electricity) with the exception of renewable energy sources. To claim for the deductions, an organizations’ savings measurements must be kWh equivalent.

“Golden Arrow Bus Services is an excellent example of an organization that doesn’t necessarily spring to mind when one thinks of qualifying Section 12L businesses.  The company has shown tremendous commitment to saving on energy through efficient processes that consistently deliver results year-on-year and is a worthy recipient of the tax incentive’s various benefits,”

arry Bredenkamp, General Manager at SANEDI

GABS is a scheduled passenger transport operator for the City of Cape Town and operates over 1 000 buses during peak hours, serving 1 300 routes. To improve fuel efficiency, the company consistently introduces modern and optimised buses to its fleet. 

The MAN LION EXPLORER buses – added to the GABS fleet – feature DO8 and D20 common rail engines which operate at improved fuel efficiency. Additionally, these modern buses use lightweight components that further reduce fuel consumption (per kilometre) and also have optimised passenger-carrying capacity, again saving on fuel and subsequent energy.

To assess GABS’ energy savings and subsequent eligibility for the Section 12L Tax Incentive, Catalyst Energy Solutions (CES), a division of Catalyst Incentive Solutions, performed the requisite measurement and verification of the energy efficiency savings.

It was found that GABS’ modernised fleet and other energy efficiency practices led to a reduction of 2.5 percent energy consumption per year and mitigated 2 014 tCO2e (Tonnes of carbon dioxide equivalent) GHG (Greenhouse Gas Emissions) annually. This all led to savings of 6 767 153 kWh (energy equivalent) and R1.8 million after tax benefit.

The Section 12L tax incentive has since its inception in March 2015 Section 12L has delivered more 24.747 terawatt-hours (TWh) in energy savings which equates to a total gross rebate of R19 903 billion to local organisations. 

The regulations for Section 12L set out the process and methodology for claiming an allowance for energy savings, a baseline (benchmarking) model and reports must then be compiled and submitted SANEDI for approval. 

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