CEO of Linebooker, Naude Rademan, discloses that in some sectors the rail crisis at Transnet has led to a trebling in transporting of goods by road. This has had a severe impact on border posts, hubs like Richard’s Bay, ports generally and South Africa’s road infrastructure – with many red flags now being vigorously waved across the economy. Rademan spoke to BizNews editor Alec Hogg.
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Edited transcript of the Interview between Alec Hogg and Naude Rademan
Alec Hogg: Transnet is the new Eskom. There’s no doubting that the country’s biggest problem, the biggest challenge that we have as taxpayers and through us, the government, is the mess that is Transnet. We have seen the decline in rail traffic. And in a way, you’d think it’s a good thing for those who are focused on road freight, but not necessarily. We’re gonna find out from Naude Rademan from Linebooker.
Exactly what’s going on that side and how this has been affecting the road freight industry. Naude, really good to be talking with you again. It’s been too long. Maybe let’s just do a quick catch up. Linebooker, the Uber of the freight industry, as we’ve described you in the past, are you guys seeing big increases in demand for your services?
Naude Rademan: Thanks Alec. Yeah, I think our growth rate has maintained and I think the Linebooker business model has matured a bit and added additional services so I think the Uber of freight still relevant, but I think we’ve matured into running procurement for major corporations. So we partner with the transport procurement teams because we specialise in that and we’ve got a large network of transporters and post the procurement events. We also manage the full transport operations on behalf of those customers. And that will be on fixed contract, and the Uber freight side is filled up with Ad-hoc transport as well. But then you get the full stack of services through that process, and that, yeah, the network allows us to give better pricing and secure supply to customers in a nutshell. So that’s pretty good.
Alec Hogg: And that’s the important part is the network. You’re using the connections that you have with companies that have trucks or freight services and then putting them together with those who need freight to be delivered around the country.
Naude Rademan: Correct. So the network reach, if we talk procurement, our reach is a bit bigger. So we normally get a bit better results out of that because the reach is more. And post attendee events, the technology and our operations teams, the coordination is much quicker. So that also allows for other efficiencies for businesses and naturally reduces their risk of ever having an issue with truck supply when they need it. So that combination delivers it.
Alec Hogg: So the penny’s dropped for companies that they can actually use your services, reduce the risk, get a better price. I know we’ve spoken about this a few times in the past and kind of everybody wins because the trucks that would have been standing empty are now being used, but obviously at a better rate for those who are booking them.
Naude Rademan: Yes, and I think as I mentioned, as our credibility and our size grew in the market, and we’ve now had track records of three to four years of running major listed businesses, their full transport operations from start to finish. So I think that’s given the credibility, especially for larger corporations that, with Linebooker, has the capability to handle their full transport operations and deliver secured supply plus savings versus their pre-Linebooker of cost. So that has helped us for sure.
Alec Hogg: Mm-hmm. I was sitting in the, well, I suppose we, I call it the mini budget. I’m not supposed, you’re not really supposed to call it, you’re supposed to call it something like the medium term budget presentation speech, but kind of still know it as the mini budget. But I was sitting there in the lockup and there were a couple of tables, images that were in the packs that were given to us by Treasury And both of those, I wish you’d, I’d wished at the time that you’d been with us or been with me because I could have actually asked somebody who understood what all this was about, i.e. you, to explain it to me. But anyway, rather late than never. No, dear, here is one of the quite scary images that was provided to us by Treasury. And what it shows there is the decline in the freight that’s being managed on the railway system in South Africa. Now this is something that you’d know a lot about because clearly when the freight is not on the rail it’s on the road and as you can see here they’ve broken it down into the two into three categories general freight actual coal and actual iron ore and even coal and iron ore Transnet’s not managing to move in the degree that it was just as recently as 2017. But maybe we can focus on that red line there, which is the general freight that the millions of tons that Transnet is moving. In 2018, you can see there was more than 90 million tons of volume that was railed in that year. In 2022, it was down to 60. That’s an implosion of catastrophic proportions. Are your numbers of what’s gone on to the roads, telling with this.
Naude Rademan: Yeah, I think we see it in two areas. So obviously you see in certain sectors an increase in road transport. But we also speak to several customers or businesses in that sectors. And some of them, the economics doesn’t make sense anymore for to export their products or sell it wherever they need to because of, I mean, road transport is significantly more expensive. So the total volume will decline, which is a negative for everybody. That’s actually the bigger issue, because a lot of the economics suddenly doesn’t make sense. That mine or that trader that exports, it just doesn’t make sense. So there you have total volume decline for the country, which is not a good thing. And on the other side, as we… the increase in the trucks on the road. is also becoming an issue. I mean, at Richards Bay now, they’re struggling to handle the congestion. A lot of the mining sector is sending trucks cross-border, but now the borders are becoming clogged up. So the thing is kind of expanding a bit to other areas and becoming, don’t want to sound too negative, but it’s becoming more difficult for those businesses to find other solutions. They’re also getting stuck.
Alec Hogg: Have a look at this graph as well, which is talking about the number of containers. It doesn’t look quite as bad because here we’ve got the export of manganese and coal and that went down in twenty three. Have you seen these huge big trucks that well, that transport all of this also moving on to the road as well?
Naude Rademan: Yeah, for sure. As I was saying, some of the mining operators are trying to reach other ports, so that means going cross-border and reaching those ports, and now the border posts aren’t handled. So yeah, all of that, the effect you see in many different places. So it is a serious issue for sure.
Alec Hogg: Why Naude? What’s happening from what you can see as an insider in this whole field?
Naude Rademan: I think, well, let’s say first off is the total volume declining in the country. So some businesses, the economics doesn’t make sense. That’s one big thing. And the other thing is a significant increase in the amount of trucks specifically trying to reach ports. And the port or the border infrastructure, they’ve not been used to these type of volumes. They are not prepared to deal with these amounts of volume, so there’s now the delays at border posts and other ports are just increasing. So I don’t have the answer, but that’s definitely what we can see.
Alec Hogg: And it’s all about inefficiencies, incompetence.
Naude Rademan: Yeah, well, as I said, I’m not a specialist in Transnet and their operations, but it’s fairly obvious that the majority of the issues start there. That means the rail infrastructure can’t handle it, and added to that, handling trucks into ports is also an issue. It’s also not a rock-solid solution, even if it’s more expensive. Can’t get it all done.
Alec Hogg: So right now, what is happening with your clients in delivering to the port of Durban, say, because we understand that there are literally hundreds of ships that are waiting outside of the port that can’t come in to get the freight offloaded there or the containers offloaded and new containers put back in. How does that impact on your customers?
Naude Rademan: I think 80% of our business now is lucky for us at this stage is more in-country, so not necessarily if directly affected, but the other 20% is you can see in those customers, either mean their cost will increase because the transporters will have standing times and loads that get rejected. So that’s an immediate massive cost increase if the economics still make sense. We can definitely see and as I said a whole host of people we speak to that just the economics doesn’t make sense so they’re either I mean mothball and stand still for the commodities they’re trying to export.
Alec Hogg: What happens when those commodities can’t stand still? You think about fruit and flowers and perishable goods.
Naude Rademan: Yeah, I think that’s special specifically probably in the agricultural industry. That’s a write off that the farmer must take. That is there’s no specific recourse in that worst case scenario, which will also happen at times.
Alec Hogg: I’m quite interested as well to find out how the differentiation is happening within your sector when with, with Transnet being in such a mess and so much of the freight then moving onto, onto roads, your, your advantage is that you can get high quality, low cost, uh, product in moving goods from A to B. But if there’s such a huge demand for a product, then potentially that differentiator is not that valuable. Are you seeing that happening within the sector?
Naude Rademan: I think what we see is that, meaning because every situation changes so quickly and every producer on the fly needs to make plans, either they’re sending it cross-border to other port or they’re switching it from Durban port to Cape Town port or wherever. I think our benefit is that our supply chain or with our reach and our coordination speed, we can quickly execute any change in terms of a route or country you need to go to, if you’ve got a set standard that you deal with transport companies that run to Durban port. It’s not as easy for a business now to within a day say okay divert everything to Cape Town or to Mozambique or wherever you want to go. Then you need to procure quickly, find the transporters, put the deals quickly and execute the loads to get to a different destination. So I think that we can provide to customers to quickly be able to do that.
Alec Hogg: From a broader perspective, Naude, we had a chat with Francois Nortje a few times. He’s a real focused guy when it comes to Transnet, and he reckons Transnet should be put into business rescue. You made a point a little earlier that when your volumes go down, that it becomes too expensive and uneconomic, and we know that from any other business. You need a certain scale to make things economic. Have you examined that from your side? And would you agree? If you have that with the kind of line that Francois is taking, i.e. that Transnistria is in such trouble that something it’s, it’s in crisis and something dramatic needs to be done.
Naude Rademan: Yeah, so, you know, I wouldn’t venture an opinion there. I’m not that deep into Transnet and what the solutions are there. But what I can say is a definite something, something needs to change significantly because the issues are big enough. What that is, I think the experts on that side, I can really focus on the road transport. So I’m going to talk out of turn here if I want to make opinions on what’s the right solution for Transnet.
Alec Hogg: but something needs to be done. And what about the growth rates on road transport? Just give us some, clearly, line book, because you’re innovative, because you’re doing something different and new has been growing faster than the sector, but the sector as a whole.
Naude Rademan: Yeah, I think the in-country, let’s say, that’s not necessarily affected on the ports, I think grows steadily, not massively, but steadily. And naturally, I think in the mining sector, from moving from rail to trucks, I think that over the last three or four years has more than doubled, tripled, I think, the amount of trucks on certain corridors there. as I think the last count was probably five times in, grew five times in three years on certain corridors. So you can imagine what that does to everything. The roads, whoever needs to handle that at receiving, the infrastructure is not prepared for that type of growth in a short time.
Alec Hogg: And so what’s going to happen to that infrastructure if it’s not built for those kind of volumes?
Naude Rademan: I look, I don’t know. That’s what I was saying. You see little signs of things falling apart all over the place. Border posts, Richards Bay now, starting to struggle with congestion of trucks, not even at the port, that’s before the port. So you see the little red flags coming up all over the place. And it’s probably easy to relate that to the rail volumes moving on road.
Alec Hogg: Is anyone paying attention?
Naude Rademan: I think the mining businesses that are, that’s the, and the businesses that’s their core business to export via ports, I can promise you that’s all they think about.
Alec Hogg: Can they do anything about it? I guess that’s the real thing.
Naude Rademan: Yeah, I said I wouldn’t want to be in that position because I don’t know. If you have a medium size, any business, what do you do? It’s a country-wide government size issue to resolve. I think you can try and influence wherever you can and talk about it and give ideas and get involved to try and influence, but I don’t see, yeah, I wouldn’t know what to do if I was in that position.
Alec Hogg: Sure. A bit of a hair pulling art stuff, but just looking at Linebooker itself from your perspective, have you guys been looking elsewhere in the world, maybe to replicate your very innovative business model that you have seemed to have perfected here in South Africa?
Naude Rademan: Yeah, I think we’re looking, we’re having a couple of discussions. So there is good progress there, not something I can give you detail about now, but it seems to have significant interest in some other countries. And, yeah, I think that the model that kind of Linebooker grew into seems to be in its complete process, was saying different in terms of starting at procurement, having a significant procurement reach. handling the operations through, if you want to call it a control tower, that’s kind of the industry word, central point to coordinate it all. And then filled in by the bidding or the Uber of truck ad hoc thing, a volume spike significantly, that kind of closes the loop so you can quickly bring in extra supply. And that whole kind of system seems to be something different. You get parts of it for other businesses but I think we’ve now put the whole process together and it seems to be delivering the results which most businesses in South Africa, it’s secure drug supply and a lower cost base. That’s the South African ask. That’s what the businesses want.
Alec Hogg: Naude Rademan, the co-founder and chief executive of Linebooker, and I’m Alec Hogg from BizNews.com.
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