How BZM Transport views the current Transport Market/ Industry
Road Transport in South Africa is diverse and dynamic impacting daily on the lives of the nation and virtually every aspect of the economy.
The long distance flat deck/ taut liner transport is a sub-set of this industry but is more closely linked to dominant players like Unitrans, Freight Dynamics, Cargo Carriers and Imperial.
BZM Transport fully understands the requirements of BBBEE (Broad Based Black Economic Empowerment) and is in the process to address the matter.
Profile of the typical South African Transport Entrepreneur
BZM Transport fits into the category of the smaller enterprises where typically there is a range of characteristics and challenges that influence performance and viability as summarised below;
- Entrepreneurs mainly come from family operations, mechanical, driver, retrenched and now BBEE fraternity.
- They operate in their comfort zones.
- About 3% operates with adequate management information.
- Less than 2 % utilises transport focused software.
- About 3% can be classified as reputable, sustainable transport operators operating with a positive bank balance in excess of R1.0 million.
- Most entrepreneurs do not understand that transportation is a marginal business due to its capital intensive nature.
- Most entrepreneurs do not understand their main risk i.e. the driver and how to manage that risk.
- Very few operators have an asset replacement policy and many are still married to the asset.
- Very few operators understand or utilise cent per kilometre parameters although the total business is driven by kilometres.
- Very few entrepreneurs know their vehicle productivity.
- Almost no entrepreneurs monitor performance on a day to day basis – month end is a ‘lucky dip’.
- Very few operate with a budget or a plan not even talking of understanding what is achieved through such a plan.
Though the above is generalised and inclusive, BZM will face the same challenges and so must organise itself so as to minimize the business and financial risks involved.
HIV Aids and Road Safety
The long distance freight transport industry is of the worst affected by sexually transmitted infectious diseases. Similarly they do contribute significantly to the more than 13 000 people killed on the nation’s roads each year at an estimated cost of R 43 billion in health care and opportunity costs.
BZM Transport will comply with the provisions of the Road Traffic Act of 1989, regulation 253(2) (D) which require a medical certificate by any medical practitioner stating that, to the best of his/her knowledge, the driver does not suffer from certain conditions. This point is often neglected by transport operators to the detriment of their business as unnecessary accidents could be prevented by regular health checks and treatment since about 1 out 6 drivers tested by Medexec in 1996/7 were found not fit to drive while about 50 required treatment before they could continue to drive (i.e.: Hypertension, diabetes mellitus, etc).
Black Economic Empowerment
The transport industry in general has embarked on BEE initiatives on a large scale and major companies like Sasol, Eskom, Lonmin, Sappi and Mondi are pressing for visible signs of Black Economic Empowerment in their logistics operations among other spheres.
What is important though, is the need to ensure sustained viability of these noble initiatives. A research study conducted at Wits Business School as partial fulfillment of an MBA degree point to four key factors to be present for the successful implementation of an owner driver or small contractor in the transport industry. The most important factors are the existence of support systems, mentorship and business acumen. This will assist in the short term restoration of the lack of experience in managing the business aspects of a transport operation.
Equipment and Profitability
Quite a number of international suppliers compete for the South African Market. The main brands are MAN, Volvo, Mercedes Benz, Nissan, Scania, DAF, International, Freightliner and, Renault.
A trademark of the industry is high capital intensive equipment that requires a great deal of finance from financing institutions. In the case of Mercedes Benz and Scania they have their own in-house finance available.
Profitability is marginal and the product of the inherent profitability of the contract or work, tight variable cost control, lean overhead structure, optimised productivity of vehicles and drivers and the minimising of empty or unproductive kilometres. To ensure this, it requires sound administration and proper management information, which to a large extent is lacking with the smaller transport companies. Returns can be increased if sound preventative maintenance and replacement policies are adhered to.