Logistical failures threaten strategic interests

If anything, the jet fuel shortages at OR Tambo International Airport in Johannesburg last week served to remind South Africa that it should step up efficiency in its strategic supply chains - an area where one simple glitch can cost the country billions and pose a serious threat to South Africa's strategic interests.

As has been the case with coal supplies relating to state power utility Eskom's electricity crisis, there appears to be a serious lack of synchronisation between the various role-players in the strategic supply chain.

And, in both instances, the name of Transnet Freight Rail crops up as part of the problem rather than the solution, despite Transnet's ambitious R78 billion capital investment programme to upgrade and modernise its services and systems.

Last week, Airports Company of South Africa (Acsa) announced that airlines using OR Tambo International, Africa's busiest airport, had been asked to voluntarily cut back their jet fuel use by 30% as the airport's normal 5-6 day reserves level had dwindled to a dangerously low 2-day level. This led to denials and finger-pointing by the major role players involved in ensuring that South African airports have sufficient jet fuel supplies to keep aircraft flying, causing Energy Minister Dipuo Peters to appoint a task team to get to the bottom of the problem.

Not only are South Africa's strategic supply chains that drive vital sectors such as electricity, transport and mining affected by such logistical failures, but fears have now also been expressed that South Africa's multi-billion rand 2010 Fifa Soccer World Cup tournament showcase could be adversely affected by thousands of foreign visitors being stranded by transport breakdowns.

Because of the exemplary voluntary co-operation of airlines using OR Tambo, most airlines were not affected. But airline executives are believed to be concerned that it could happen again - perhaps with worse consequences - as it was not the first time the airport has been affected by fuel shortages. It therefore cannot be dismissed as an isolated or one-off incident.

About 70% of OR Tambo's jet fuel supplies are moved by Transnet Pipelines (TPL) from the Natref refinery in Sasolburg - which is jointly owned and operated by Sasol Limited and Total South Africa - to the airport. The other 30% is moved by Transnet Freight Rail (TFR).

Reuters news agency has quoted Sasol spokesperson Nothemba Noruwana as saying that while the Natref refinery did experience a three-day technical problem in mid-July, that had no connection with OR Tambo's current fuel supplies problem.

However, with most of the fingers pointed at Transnet, the company countered with a statement through spokesman John Dludlu, saying that "issues behind the shortage" had nothing to do with TPL, but were part of "a process between an inland refinery" (indicating Natref) and OR Tambo. "Transnet Pipelines is, therefore, in no way responsible for any of these supply issues," said Dludlu.

Dludlu maintained that there were no problems on the pipeline system, saying TPL did temporarily shut down the pipeline between Natref and OR Tambo last week Tuesday, but said that was because there was insufficient supply from the refinery. Dludlu said this had been a "planned shutdown" to allow stocks to be built up at the Natref refinery, after which pipeline delivery was resumed.

Dludlu went on to admit that TFR's rail service from the coast - along which the remaining 30% of OR Tambo's supplies are delivered - was also temporarily interrupted in the last few weeks by "some operational issues which have since been addressed" and that "consequently, the rail service has been normalised and TFR is now delivering to weekly orders".

So Natref, TFR and TPL have experienced problems and/or interruptions recently, but both Transnet and Natref deny responsibility, pointing fingers at each other. Which leaves the question, why Acsa did not insist on emergency road tanker transport when it saw its reserves starting to drop?

All of this suggests a glaring lack of transparency, accountability and co-operation by stakeholders on all sides which poses a serious threat to South Africa's strategic interests - apart from the risk of South Africans being made to look like fools during next year's soccer spectacle.

While OR Tambo's general manager Chris Hlekane may be correct in pointing out that a supply line's weaknesses only become apparent when things do not go according to plan, South African airports have had previous fuel shortages from which Acsa and the other stakeholders could have learnt.

And similar logistical problems surfaced during Eskom's power crisis last year when coal supplies ran dangerously low. Most of it was blamed on weather conditions causing coal to be wet, but these nonetheless had much to do with the overall logistical picture. At the same time, while most of Eskom's coal-fired power stations receive their coal supplies directly by conveyor belt from nearby dedicated coal mines, some do rely on rail and road freight.

Two major Eskom power stations, namely Majuba Power Station near Amersfoort and Tutuka Power Station near Standerton are two such exceptions to the rule. Both operated below full capacity before 2002, but spiralling electricity demand thereafter necessitated increased capacity from both power stations, which in turn necessitated increased coal supplies.

Some 30% of Majuba's coal is delivered by rail, but due to a lack of rolling stock from TFR and the fact that the existing railway line cannot handle larger trains, the balance has to be brought in by road. Rail deliveries to Tutuka were not possible due to inadequate rail infrastructure. With trucks being brought in, the increased heavy transport loads damaging roads that had not been designed for the purpose. At the same time, badly maintained roads in Mpumalanga were taking their toll from trucking companies.

Both supplies and costs were being affected. The net result was also that this situation contributed, among a number of other factors, to South Africa's serious power crisis last year which temporarily almost shut down the important mining sector and adversely affected many other economic sectors.

Transnet has embarked on an ambitious R78 billion capital investment programme to upgrade and modernise its services and systems. The bulk would go towards modernising its rail unit's ageing infrastructure in order to improve its service delivery and efficiency to its customers.

At present, only 60% of the trains of its rail freight subsidiary, TFR (formerly known as Spoornet), arrive on time. Many lines are inoperative and rolling stock is depleted and ageing.

The rail sector has been battling to win market share during the past decade or more with freight increasingly having moved onto the roads.

A survey published by the Council for Scientific and Industrial Research last year found that all of the companies surveyed used road as their main means of transport, despite the fact that for some goods it would be cheaper to use rail transport.

Industry experts like Gavin Kelly, technical and operations manager for the Road Freight Association (RFA), point out that there has been substantial growth in road-freight transport over the past two years - much of it related to the 2010 build-up. However, some 85% of the freight is transported by road for lack of a decent rail system. While there is support for resolving the road-rail freight issue, Kelly and others have expressed concern that government's plans for spending on rail infrastructure is aimed at the rehabilitation of existing networks, rather than expanding them.

Without a proper rail system, they point out, the congestion on the roads will get worse; costs will be affected by fuel prices as they rise; more toll roads will force freight onto subsidiary roads with damage to those roads and more as a result.