2009-11-11 17:00:22 - Recently published research from Business Monitor International, "South Africa Freight Transport Report Q4 2009", is now available at Fast Market Research

South Africa-based shipping company Grindrod has stated that it expects earnings to fall in 2009. However, the company announced a profit increase in 2008, and we believe that it is well placed to weather the current economic downturn. Grindrod has diversified interests and, in spite of the current climate, is pressing forward with expansion initiatives. Financial results released in February

2009 show that net income for the company was up US$217mn in 2008 on 2007's figure of US$120mn. The company's revenue has also risen. In 2007, revenue was US$1.8bn and this rose to US$3.4bn in 2008. Despite this growth, Grindrod is cautious about celebrating, with Engineering News reporting that the company's CEO, Alan Olivier had warned that difficult times lie ahead in all markets including shipping. BMI echoes this fear and notes that all shipping companies have been struggling in the current economic downturn, which has seen trade volumes plummet.

In this latest South Africa Freight Transport Report, BMI concludes that freight carried across all modes in South Africa is set to increase at an annual average rate of 2.7% over the next five years, just behind the general rate of GDP growth. Various factors support this prediction. The global recession is taking its toll, with the economy due to contract by 0.3% this year and recover slowly after that. We now expect the economy will grow at an annual average rate of 2.8% across the 2009-2013 forecast period, with foreign trade rising by 13.7% a year in value terms. Government policy favours resumed investment port development, but this is taking time to feed through. Before the downturn started in the second half of 2008 (H208), South Africa's rate of economic expansion had been spurred by domestic consumption, investment growth, and international demand for commodities. These resulted in strong demand for transport services. Export shipments of gold, platinum group metals, chrome, manganese, and coal necessitated increased freight services. Looking forward these forces will take some time to re-asserts themselves. South Africa's plans to foster regional expansion in southern Africa, which entails improving and extending the transport network, is also a potential plus factor.

BMI believes the global slowdown and domestic problems, such as power shortages, are feeding through and having a negative impact on the transport sector on the short term. The overall freight volume shipped by road is forecast to increase by an annual 2.7% for the rest of the review period. We assume that adequate dockside facilities and port throughput will not constrain the growth of container trade, with volumes weaker on the short term as a result of the recession. BMI expects maritime freight carried to grow by an annual average of 2.9% in 2009-2013. We expect airfreight to edge ahead of both these two key modes, with growth of 3.4%, while pipeline throughput at 2.7% a year and rail at 2.6% will bring up the rear. South Africa's overall freight rating, at 59.9 out of 100, is above the average for the Middle East and Africa (MEA) region. It scores well in terms economic factors and in its regulatory background, but its record in relation to historic and forecast growth in foreign trade and in transport remains relatively weak. By the very nature of the industry, many of the problems associated with reforming transport network, facilities, and services have to be considered over a medium-term time frame. According to our latest estimates, the total value of transport and communications GDP will rise to US$35.3bn in nominal terms by 2013, representing 8.2% of South Africa's GDP.

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