Importers' Connect

In importing, timing matters, delays matter, currency moves matter. This is Importers' Connect, your weekly briefing on the logistics, freight and forex trends shaping South African trade. From port congestion and customs updates to shipping costs and market movements, we bring you the insight behind the headlines so your business can plan with greater certainty.

Vernon: Hello, welcome to another episode of Importers Connect, brought to you by Investec. I'm Vernon Sinden.

Dylan: And I'm Dylan Govender.

Vernon: Jumping straight into it. Regionally, SADC continues to push better transport connectivity, one of the topics that we're going to touch on today. Locally, we're watching the recovery from the protest disruptions.

Dylan: We also have the implementation of Durban ports' new driver requirements and South Africa being the largest exporter of citrus in the world.

Vernon: Let's unpack the citrus conversation. It's quite high in the media at the moment in terms of South Africa being the major export producer of citrus. So, let's unpack that a little bit.

Dylan: Recently announced by the Citrus Growers Association of South Africa, South Africa has overtaken Spain to become the world's largest exporter of citrus by volume. Last year we saw 204 million cartons moving through South African ports.

Vernon: And is most of those exports, are they going to Asia or is it going to Europe?

Dylan: I feel that the China Free Trade Agreement that's recently opened up to South Africa is going to lead to much larger volumes in terms of exports. The EU is also a considerable destination for our citrus, and it just goes to show the quality of our products in South Africa.

Vernon: I think that's quite important, Dylan, if you're talking about our exports out of South Africa, because South Africa has signed an agreement with the African Export-Import Bank that can provide access to a proposed 14 billion US dollars funding to the program.

And what that means is that while it's not a lot of money immediately into the projects or into commodities, it does represent a significant potential of investment for our export market.

Dylan: As much as it's for our export markets, you have to think about the equipment and natural resources that will go into the manufacturing of these exports. It could lead to import of raw materials or importation of equipment that is required for manufacturing.

Vernon: But regional trade is also in the spotlight this week. The transport minister of South African Development Community, SADC, committed to providing cross-border transport into our SADC region. So, our road infrastructure, we've mentioned it a few times on the podcast, there has to be significant improvement and investment there. We've mentioned before, what that means for rail into the SADC region as well.

So, there's a lot of focus and development there and interest, I would say, to grow our economy by boosting investment in those different modes of transport.

Dylan: Certainly, and it's going to take time to see change Vernon. This investment requires development at our border posts to ensure free flow of goods. It requires road infrastructure to be upgraded. A lot of things need to be done before we see the outcomes of this.

Vernon: Let's move to imports and look at what's happening a little bit internationally. Shipping through the Strait of Hormuz has always been a hot topic and it's quite fluid, it's changing all the time. And I said that there have been recent disruptions in vessel traffic and congestion in the region. But with the opening of the Strait of Hormuz, we see that there has been some traffic moving through. Do we see any immediate impact, do you think, rather sooner than later?

Dylan: I think, Vernon, it's going to take some time for the situation to settle. The Strait may be open, but recovery time is going to be about three to four months. Shipping lines have to adjust their routing schedules. This takes time. As much as the strait is open, the oil price is coming down but it's still going to take us some time before we see the stability.

Vernon: I think the disruptions will be definitely on the fuel price because that does influence what we're paying on the rate levels per container. Marine insurance also becoming quite a hot topic because of what's happening in the market geopolitically, if you're looking locally as well. And there's a vessel availability; we mentioned that a few times. We have to have a lot of options or look at what options are available with the sailing schedule and timing.

Dylan: I think for the importer for goods coming out of China we're seeing those delays already because shipping lines have reduced capacity simply because of the issue around The Strait. The longer transit times from US, Europe to China. Vessel capacity is being taken up.

Vernon: And we are in peak at the moment, so the volume and capacity is a bit of an issue. We do see it in, in capacity with the shipping lines. We do see it in the rate levels increasing biweekly out of the Far East that we measure the whole market on at the moment. All the signs are there.

Dylan: What are we seeing on the air freight side, Vernon?

Vernon: That's very sporadic when it comes to air freight. It depends on supply and demand. We are seeing, from our perspective at least, that there was a lot of air freight inquiries coming through. But again, how that's impacted from the impact from the Middle East, still see a limitation in Middle Eastern airlines flying into South Africa.

So that capacity is still taken out of the market, and we still see that the rate levels are very sporadic, and we can only secure that on a spot level at the moment.

Vernon Sinden: Let's touch on Durban Port. The new Durban port driver requirements that's going to be taking effect in July now. And what that means for transporters, for Transnet and just a normal day-to-day importer.

Vernon: So, to wrap up this week's episode. Locally, we've been watching the recovery of last week's protests on the 30th of June and what disruptions that might have in your local supply chain. So, we're keeping a close eye on that.

Dylan: Fortunately, things were peaceful. We didn't see major disruptions. We did see a delay in terms of delivery of goods where transporters were closed for approximately two days, just from a security and safety perspective. The impact of that mainly was Durban-Jo'burg route in terms of deliveries. Two-day delay in deliveries and recovery has been quite good. I don't think there's much of a backlog that's been created, and we are back to normal.

Vernon: That’s positive. And I think regionally, SADC continues pushing for better transport connectivity while internationally, like we mentioned before The Strait of Hormuz remains an important area of focus and how that's developing because that's quite fluid and that can obviously mean a lot for global trade and your imports into South Africa when we're talking about rate levels and connectivity and space availability.

So, I think that's all for this week.

Dylan: As always, planning ahead, staying informed and maintaining close communication with your logistics partners remains the best way to minimise disruption and keep your supply chain moving.

Vernon: Thanks for listening. We'll see you next time.

Disclaimer: The views and opinions expressed in this podcast are for informational purposes only and should not be considered financial, investment, or other professional advice, guidance, or recommendations. Investec Business and Commercial Banking is a division of Investec Bank Limited, an authorized financial services provider. To learn more or get in touch, visit investec.com.

Investec Business and Commercial Banking, a division of Investec Bank Limited. Reg. No. 1969/004763/06. An authorised financial services provider (FSP No. 11750). Investec is committed to the Code of Banking Practice as regulated by the National Financial Ombud Scheme.