Alarm over business closures and job losses after fuel price spike

Added: 2026-05-16

[00:00:00]The Road Freight Association has sounded the alarm that the logistics sector is facing a wave of business closures and significant job losses following a massive spike in fuel prices. The association describes the current situation as a battle for survival for many operators who are already in a precarious financial position after the previous month's increases. Well, let's get more from CEO at the Road Freight Association, Gavin Kelly. Gavin, appreciate your time this afternoon.

[00:00:24]Now, when diesel jumps by 6 rand 19 a liter, what does that mean in real terms for a medium-sized freight operator running trucks every day?

[00:00:35]Well, good afternoon, Hugo. Good afternoon to your viewers. So, what have we seen over the last couple of months?

[00:00:40]And I think that's the first thing that we need to do to put it into perspective. So, the price of diesel or the price of fuel has risen in the country over the last 3 months. It's been rising here and there as we go along, but let's just look at the last 3 months. So, we had more or less an 11% increase in the month of March. We had round about a 47% increase in the month of April, and about a 21% call it 20% increase in the month of May. So, that's bringing you very close to 76, 77% increase in the cost of your daily operation.

[00:01:14]Any business that is running where their fuel bill, which is what fuel is in terms of daily operation, is somewhere between 33% and 60%, you can imagine what sort of effect that's going to have on the business. If you cannot recoup that, and the only way to recoup that really is to go to your customer and say to your customer, "Listen, it's got more expensive. I need to charge you more per ton kilometer." If you cannot recoup that, or if your customer is saying, "I'm I can't afford that." So, there's also that side of the story. "I can only give you 10% of the 67 odd percent where we are now."

[00:01:53]There's no other option than either to go and look for reserves, to go and borrow money, or to close your business. And what we found in the three months now is we've had a number of our members coming to us and saying to us, "We can't continue. We just there is no more cash reserve.

[00:02:09]We're not getting loans. We going to have to close." And with that, unfortunately, brings job losses.

[00:02:16]So, how significant is this number of businesses that have come to you, Gavin, speaking about possible or imminent closure?

[00:02:25]Well, we've had a lot of businesses talking to us definitely here in the middle of April already. A lot have said they're really, really tight. And they were really appreciative of the three rand that government gave in terms of a sort of a discount to fuel. But a lot have been chatting around that. I think everybody has really got a concern. In this last month now, when we had the last raise, and once again, one understands this comes from external factors, you know, due to the war in the Middle East, we've already had at least 11 members telling us they're closing down. Now, that's the members who tell us. There might be a lot more out there who are already there, who might have closed that we don't know about.

[00:03:07]Can Can freight operators absorb any of this increase, or is is the scale simply too large for them? For So, so maybe let's talk about the the small to medium enterprises versus the the larger operators. Is there a difference in how they deal with this or their ability to to move on despite these increases?

[00:03:26]Hugo, yes, there are a couple of differences. Everyone thinks a large company's got mountains of cash, and then they can just ride through this.

[00:03:34]That's not always true. So, there are a number of things that an operator can do. You can change the way in which you operate on a daily basis. So, the secret is to try and reduce your fuel consumption, obviously. The less you burn or you consume, the less you have to buy.

[00:03:50]So, you can do that through a number of ways. They're not always available to an operator or to the type of load they're running, but for example, you can shorten routes if you can. You can change the route direction that you drive. So, quite often early in the morning you'll find guys will drive out to the furthest point and then come back, but when they leave early in the morning, they're sitting in in congestion, in road queues, in traffic jams. So, you try and work out how do I minimize the amount of idling my vehicles will do or standing and not getting from point A to point B. You can look at the types of vehicles you have.

[00:04:28]So, for example, are they well maintained? Are my tires at correct pressures, etc., etc. So, they are those little things. They might help. If you've got really bad vehicles, it might help quite a lot. You can look at alternative fuels, although there you need money because these are not cheap.

[00:04:46]So, you can look at, you know, your routes and your vehicles, or you might have cash reserves, and I think a lot of operators have tried to use that as best they can. So, if you've built up a cash reserve, you try and subsidize, but definitely there's going to be a point where you have to go to your clients and say, "I need to be paid more, or I can no longer do this part of transport or this leg for you."

[00:05:12]All right. I I am going to come back in a moment to the sort of reaction that you've been getting from from some of your clients and the possibility of of them absorbing some of that cost. But you've you've also warned about me you've In fact, let's touch on insurance. That's something that I wanted to touch on.

[00:05:28]There's there's a certain amount of insurance that's got to be paid, obviously, to to protect the the goods in transit or the goods that you that you're moving. Right now, when when fuel goes up by by 6 rand, the the value of what you've got in that truck is is pretty it's pretty significant.

[00:05:46]Is insurance a factor? Is security in in protecting these these vehicles? I mean, we we've heard countless issues where some of these trucks laden with diesel are are being hijacked.

[00:06:00]Well, Hugo, it's not just vehicles carrying fuel. So So, to answer the first part of your question, yes, insurance is really an important thing, and you've got probably two types of insurances rather loosely. The first is going to be for what you're carrying cuz it's somebody else's goods. Yeah. And generally, when you carry somebody else's goods, they're going to want some sort of surety or some sort of peace of mind that if they get damaged or stolen or destroyed, that there would be some compensation. a contractual agreement between the transporter and the customer. The other piece of insurance, of course, is on your own vehicle, your own driver, your own good your own bits of equipment. So, there's two bits of insurance that that play a role here.

[00:06:44]Then there's a third bit of insurance which comes into play, especially if you're transporting fuel, which is around if there's an incident and there's a spill, that you're responsible for cleaning up the environment, the immediate area, etc., etc. So, it's very very important that you have these sorts of insurances in place.

[00:07:03]Now, getting to the second part, obviously, when you start having shortages of any sort of commodity, and a lot of people think that fuel is the number one product that is that is attacked and hijacked, it's not food is.

[00:07:16]Because food is what everybody needs.

[00:07:19]You know, if you don't have a car, that's fine or a vehicle, you don't need the fuel, but I do need to eat. So, protecting vulnerable cargoes, and and there are various types. There's high electronic goods, there's fuel, there's food, you name it. That's also a crucial part of the transport and logistics game. You normally have outsiders that do that for you, But, what happens when a part of your daily expense, your your daily every rand that you spend suddenly starts to go out of kilter or out of proportion to the rest, then you start finding that transport isn't anybody in any sort of game will start saying, "Well, I need to put fuel in the vehicle. How do I Do I cut on maintenance? Do I cut on tires? Do I cut on insurance?" So, there's a huge danger there that people in desperation will cut some things out and then be exposed.

[00:08:16]Now, you've warned, Gavin, that this could lead to to job losses. So, where would those losses come first? Is it Is it the drivers? Is it support staff? Subcontractors? Smaller operators? If uh indeed many of these companies are going to shut shop.

[00:08:33]Uh good question, Hugo, and it all depends on the type of operation that this road freight transporter would be involved in and what sort of support structures he or she has. So, if one took an operator that didn't have warehouses, that really just operated, you know, day-to-day for a customer, at night went back to the depot, the first thing you would see when a when a business like that closes down is you're going to see a number of types of job categories that will be lost. So, there will be the driver, obviously, or drivers. There's going to be those who are responsible for ensuring the vehicle is in good mechanical way, condition.

[00:09:13]So, all of your mechanics. You're going to have those that are in the in the office who sell the services, who who book loads, who do the insurance, who ensure all those sorts of admin things happen. So, there's quite a broad spectrum of people who would lose their jobs. Then, if that transporter uh has warehouses and has subcontracts, obviously you have that ripple going out. So, now you'd start finding people who work in warehouses and deal with that starting to have problems in terms of employment and those who work for the transporters. So, it it can be quite a small number of people depending on the transporter or it could, you know, ripple out to a whole number of support type services.

[00:10:00]So, you you've talked about the gratitude from the transporters for that three-round uh subsidy, if you if you will. Should government be doing more? Can it do more?

[00:10:10]Well, I think I've been on record to say government should have been should have done more and it isn't necessarily around the price of fuel. I think that we need to understand that first of all, it's not going to be just the price of fuel. It is going to be around other things and what we've said and definitely I've articulated is that we've seen what this sort of process can do in terms of our logistics framework and there are a number of other things.

[00:10:36]It isn't only in road freight that this sort of fuel hike and and struggle to get fuel has become a problem. So, what government needs to do, I think right now, it needs to start putting in place either industries or structures or processes that will insulate us from this. So, Sasol is a very good example.

[00:10:57]We've got enough coal to make our own fuel. We need to look at biofuels. The sugar industry is in a tight spot. This is probably the prime time to start bringing online things called biofuels.

[00:11:09]So, we need to build those sorts of capacities. We might not also have been in this sort of predicament if the rand was so weak, but that's a discussion for a different day. So, there are a number of things that government both through its policies and through development within the country itself it could have done, but definitely needs to do in in the medium to long term to ensure we don't have this sort of vulnerability going forward. My final question, Gavin, and I don't know if you're the best person to to give the most objective response to this, but South Africa has spoken for years about shifting more freight from road to rail.

[00:11:48]Has the failure to fix rail now become a a direct problem, a direct consequence to some of the challenges that we're facing as far as moving goods and products on the on the roads of South Africa?

[00:12:01]I think we still got a long way to go.

[00:12:03]There there are a couple of things we've started to get right, so we've started to fix some of the bottlenecks at ports.

[00:12:10]We've started to fix one or two bottlenecks on on one or two of the major lines of the major oil lines. But we've got a long way to go in terms of getting that right, and and when we do get it right, it's going to be around the sustainability. It's not going to really be the end of road freight. There's always going to be work for road freight, but the types of commodities and the types of trucks we see will probably change, but we've got a lot of work to do [clears throat] there yet.

[00:12:38]Gavin Kelly, always good to speak to you. See at the Road Freight Association and packing for us the numerous challenges that bedevil transporters as a result of the increases in diesel and other fuels in the last few weeks.