Supply chain bottlenecks here to stay for 2022

MEDIA RELEASE

6 APRIL 2022

Supply chain bottlenecks here to stay for 2022; goods prices to rise sharply in SA says Cargo Compass SA CEO

Radio interview: CEO Sebastiano Iorio in conversation with 702's Bruce Whitfield on The Money Show. Cargo Compass SA is an RMB Ventures private equity portfolio company - a partnership which has resulted in access to capital for Cargo Compass SA, and for the company to achieve 51% black ownership.

Media release:

Global supply chain backlogs are showing no signs of easing and are likely to worsen for the rest of 2022, leading to even higher prices of consumer and commercial goods in South Africa.

Sebastiano Iorio, CEO of Cargo Compass SA, a 23-year-old leading South African freight, logistics and warehousing company that operates worldwide, says: “At the start of this year we were hopeful that trade bottlenecks would ease this year, but they seem to be getting even more severe.”

Cargo Compass SA is an RMB Ventures private equity portfolio company - a partnership which has resulted in access to capital for Cargo Compass SA, and for the company to achieve 51% black ownership.

“Prices of consumer goods like electronics and clothing, including imported basic food products, are certainly going to keep rising while commercial goods such as imported machinery, hydraulic pumps and computer chips, to name just a few, are not yet in short supply in South Africa, but could well be later this year,” Iorio added.

“Shortages will have a significant impact on an already fast rising inflation rate.”

He noted that it’s not only shortages that present a problem, but rapidly rising freight charges are adding to dramatic price rises in shipped goods.

“So far, South Africa has been much luckier than other countries. We have good stock levels for now, but we note that importers are holding more stock, avoiding out of stock scenarios. The commodity cycle upswing has also created a strong rand which has dampened the price of imported goods, so we have yet to experience all the inflationary price spikes seen elsewhere in the world. But our luck won’t last forever.”

He said freight rates of South Africa’s three biggest trading blocs - China, the US and the Eurozone are rising rapidly.

“Two years ago, freight rates for a standard 12-meter container from China were $2000 to transport via sea to South Africa. Today it costs $14 000, an increase of over 500%

South Africa imports large volumes of consumer goods from China such as consumer electronics, white goods, clothing and food stuffs.

Shipping freight rates from Europe, from which South Africa imports industrial machinery, cars, basic foods as well as fashion and technology, have risen about 33% over the past two years and show no signs of slowing down.

Imports from the US, such as specialised machinery as well as healthcare and household goods for companies in the sector, such as FMCG Goods, razor blades, nappies and laundry detergent are likely to cost more in South Africa this year. Shipping rates for the US have risen between 35% - 40% over the past two years, which were traditionally higher than Europe and Asia rates prior to COVID-19.  

Freight costs have risen sharply because of higher oil prices in part driven by the Russian invasion of the Ukraine as well as the broadly synchronised reopening demand ‘shock’ to global economies. 

Iorio also said trucker shortages, the world over and particularly in Europe are putting pressure on supply of goods as well.

“Brexit has created extra red tape for UK truckers, slowing the movement of goods in Europe. And many of Germany’s truckers are Ukrainian and have now left their jobs to fight for their country.”

There are also several Chinese ports, stretching from Shenzhen to Shanghai, that were recently shut down reportedly due to the reemergence of COVID-19. This has added to the goods gridlock of the global economy.

He noted that crude petroleum is South Africa’s biggest import and that higher oil prices would be felt by South African consumers as it is an input cost not only for getting goods to South Africa, but also transporting them once landed.

End

Contact:

Joandra Griesel l RMB l joandra.griesel@rmb.co.za