October Transport Month: A Catalyst for Change in South Africa's Economic Landscape
South Africa’s transport sector remains a critical component of the national economy, contributing around 8% of GDP, according to Stats SA. This sector includes logistics, freight, road, air, and sea transport, with efficiency impacting the movement of goods, economic activities, tourism, and employment.
However, significant challenges such as tax inefficiencies, road accidents, traffic congestion, and regulatory hurdles inhibit its full potential. A targeted approach to reform, risk management, tax adjustments, and government collaboration is needed to unlock growth and improve economic outcomes, particularly for tourism and related sectors.
Tourism, a key growth driver, directly contributes about 3.7% to South Africa's GDP and supports nearly 4.5% of the country’s total employment, according to Stats SA’s latest report. The transport sector plays a pivotal role in facilitating the movement of tourists across the country, from airports to local tourist attractions, which enhances visitor experiences and boosts the economy. According to the International Air Transport Association (IATA), air transport alone supports over 250,000 jobs and contributes R129 billion to South Africa’s economy. Efficient air transport services, improved road conditions, and better connectivity with tourist destinations are essential to sustaining and growing the tourism sector.
To leverage this, government investment in upgrading airports and expanding flight routes, particularly to underserved areas such as smaller cities or nature reserves, could significantly boost local tourism. Stats SA data from 2023 shows that international tourism to South Africa increased by 22% in July compared to the previous year, highlighting the post-pandemic recovery. However, the sector's full potential can be realised with improved transport infrastructure. For instance, better road networks to key tourism hotspots like Kruger National Park and iSimangaliso Wetland Park would make these attractions more accessible, encouraging longer stays and higher spending from international tourists.
The logistics and freight subsectors are equally important. They contribute roughly 10.2% of South Africa’s GDP, employing more than 1.2 million people, as reported by the CSIR. These subsectors are critical for transporting goods to international markets, making the economy globally competitive. Inefficient transport networks, high fuel costs, and regulatory hurdles raise operational costs, reducing the sector’s potential to create jobs and increase output. Addressing these inefficiencies is vital. For example, improving road conditions on high-risk freight corridors such as the N3 between Durban and Johannesburg, a key route for goods to and from the Durban port, can reduce road accidents and delays, lowering costs and increasing efficiency. According to the RTMC, road accidents cost the economy R164 billion annually, of which freight delays are a substantial part.
Government efforts should also focus on tax reforms in the transport sector. High fuel levies, toll fees, and vehicle import duties place heavy burdens on logistics and transport operators. Tax incentives could be introduced for operators investing in green technologies such as electric or hybrid vehicles, which would lower costs while promoting sustainability. For instance, companies that install telematics and fuel-efficient systems could receive tax breaks, encouraging more players to adopt risk-reducing technologies.
The e-hailing sector, such as Uber and Bolt, offers another opportunity for growth. However, it remains riddled with regulatory and tax challenges. Many e-hailing drivers operate in an unregulated space, leading to underreporting of income and tax evasion, which diminishes government revenue. According to a 2023 study by SACCI, the ride-hailing industry has grown by 12% year-on-year, yet much of this growth remains outside the formal tax net. Countries such as the United Kingdom have introduced stricter regulations for e-hailing services, categorising drivers as employees, which has improved tax collection and driver welfare. South Africa could adopt similar reforms, ensuring a fair and transparent tax system for both traditional taxis and e-hailing operators. Another challenge in the transportation sector is conflicts within operators. The ongoing taxi strikes, often triggered by competition between traditional taxi operators and e-hailing services, have had a negative economic impact. In August 2023, the Cape Town taxi strike cost the local economy an estimated R5 billion due to disruptions in the transport of goods and loss of productivity.
Traffic congestion, particularly in urban centres such as Johannesburg and Cape Town, adds another layer of complexity. It is estimated that traffic congestion costs the South African economy R1.3 billion annually in lost productivity, with heavy delays in the movement of goods and services. Remote working solutions, popularised during the COVID-19 pandemic, could be further encouraged, especially for non-essential services. Reducing the volume of cars on the roads during peak hours would not only improve traffic flow but also reduce road maintenance costs, fuel consumption, and emissions. For businesses, this translates into operational savings and fewer delays in delivery schedules.
Tax evasion within the transport and logistics sectors also poses significant challenges. In the logistics sector, some operators underreport revenues or classify business expenses incorrectly to reduce tax obligations, a practice that weakens government revenue collection. To tackle this, South Africa could take inspiration from countries such as Estonia, which has implemented a digital invoicing system to track all business transactions in real-time, reducing the possibility of evasion. Introducing a similar system in the local transport industry could enhance compliance and boost tax revenue. Stricter auditing of e-hailing platforms, combined with better tracking mechanisms, could curb tax evasion in that space.
The government also plays a pivotal role in SMMEs within the transport sector. These businesses, which often face high operational costs due to fluctuating fuel prices and lack of access to affordable financing, could benefit from targeted support. The Department of Transport, in collaboration with the Department of Small Business Development, could offer grants or low-interest loans for SMMEs to invest in more fuel-efficient vehicles or technology that improves fleet management. This would lower operating costs, improve safety, and allow small businesses to scale up, thus creating more jobs. According to the Department of Transport’s 2022 data, SMMEs in transport employed over 300,000 people, with the potential to increase this figure significantly through government intervention.
International trade also hinges on the efficiency of South Africa’s transport infrastructure. Poor port management and inefficiencies at customs slow down trade and make South African products less competitive in the global market. The World Bank’s Logistics Performance Index (LPI) ranked South Africa 33rd globally in 2023, showing room for improvement, particularly in the clearance of goods at customs. Investment in port upgrades and streamlining customs procedures could facilitate faster trade, benefitting sectors such as mining, agriculture, and manufacturing.
