_Source: World Bank Development Indicators (2014)_ <!-- Start of picture text --> Box 1: Demonstrating the impact of transport costs: The export fruit sector<br>The fruit industry makes a significant contribution to the South African economy; including R19.8bn in exports<br>to 36 ports, 165,000 direct employment positions at a total cost of R5.3bn and important downstream<br>linkages. Transport availability and cost is a major constraint to the fruit industry due to high port tariffs and<br>a reliance on road transport. The cost of road transport depends on distances to the port, levies and toll fees,<br>type of transport (i.e. refrigerated or conventional), cultivar weight, and payload (i.e. standard vs. high‐cube<br>pallets). 4 The export fruit industry spends R970m annually in road transport costs.<br>The below example of an orange producer in the Olifants River valley of the Western Cape gives an indication<br>of the extent to which transport and related costs can erode the margins of a fruit exporter. It shows that 54<br>percent of the export value goes towards logistics costs. The bulk of logistics costs goes to shipping and<br>insurance (R2,935), which reflects our distance from major markets as well as the concentration of market<br>power with a few shipping lines. However, around 8 percent of the total logistics costs is incurred to get the<br>oranges to the Cape Town port (it is much higher for citrus farmers in Tzaneen) and 23 percent for port costs<br>in South Africa.<br>Figure 3: Cost breakdown for an exporter of oranges based in Olifants River, Western Cape<br>R 7,840<br>R 8,000<br>R 7,000<br>R 6,000 R ‐1 507<br>R 5,000<br>R ‐1 455 R 952<br>Port costs<br>R 4,000<br>R 3,000<br>R 2 935 Distribution costs<br>R 2,000 (shipping + insurance)<br>R 1,000 Packhouse to port (SA) R 330 R 661<br>R ‐4 217<br>R 0<br>Export value (non‐ Production cost Packaging cost Logistics Profit<br>USA market)<br>Source: “A Socio Economic Impact Study of the South African Fruit Export Industry (Fruit SA, 2015)<br><!-- End of picture text -->

# <u>A unique transport landscape and set of institutional arrangements</u>

South Africa has an extensive transport network. It is well served by transport corridors, connecting the main production centers by road and rail to the leading trade ports. The corridors also connect South Africa to overland routes (road and rail) into the region.

## **Box 2: The role of Transnet in the port and rail system**

The major player in the transport sector is Transnet, which is a 100 percent state‐owned entity in charge of South Africa’s railways, ports and pipelines. Transnet is unique: in no other country does a single company control the railways, ports and pipelines (OECD, 2008). The Department of Public Enterprises (DPE) is the sole shareholder of Transnet on behalf of the government. Transnet consists of five divisions.

> 4 In the past, fruit were predominantly exported in specialised reefer ships (a refrigerated cargo ship) and the height in the decks of these vessels only permitted a pallet height of two meters (standard pallets). The recent development of high‐ cube integral containers, with a height of 2.4 meters, has allowed the height of stacks on pallets could be increased by one or two layers of cartons depending on the carton type (Fruit SA, 2015).

_5_