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Three factors that will drive the post-pandemic recovery of logistics companies in South Africa

Like so many other industries, the logistics services sector experienced mixed fortunes during the Covid-19 pandemic. Despite the challenges, there is light at the end of the tunnel for transport and logistics companies in South Africa, says Hendrik Barnard, COO of SG Freight, a business unit of logistics company Super Group.

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He believes three aspects – diversification, cash flow management, and the prudent use of technology - will drive the post-Covid recovery of the transport sector. “The post-pandemic environment in which we’ll operate will look markedly different from that of 2020. While transport patterns and volumes will largely revert to business as usual, we expect a sectoral shift to take place.  

Online shopping is flourishing and will continue to do so, which will see packaging companies and last-mile delivery services entering a robust growth period. With more people continuing to work from home, spending patterns will also change”, explains Hendrik.

As part of diversification, logistics companies will need to align themselves with customers operating in this environment if they want to thrive in a post-Covid era. The fallout from the pandemic means credit risk will still be high, so it is important to build a robust and diverse customer base.

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On the other hand, supplier relationships will not see any major shifts to maintain business continuity, Hendrik contends. “Volumes still need to be moved by road, and even though SG Freight has experienced a drop in volumes due to the pandemic, we believe these will recover over time but in a different guise.

“For instance, we have a well-established relationship with Astron Energy, our core petroleum supplier. This ensured open and transparent communication, and both parties were fully aware of the challenges each faced due to the pandemic. Astron Energy assisted us with additional volumes where possible, which allowed us to operate at reasonable levels during the various lockdown stages.”

Screenshot 2021-05-06 at 10.43.04Cash flow management

“Cash is king” might be a trite expression, but it remains the cornerstone of business health. Cash flow is often misunderstood as a simple matter of being ‘in the red’ or ‘in the black.’ In reality, it is far more complicated, and that is why logistics companies need a comprehensive strategy to become cash flow generative. 

In short, it is about managing ebbs and flows: making sure you have enough staff to make the most of spike periods and knowing how to upsell customers, bring them back, and get by during downtimes. As part of your managing strategy, you should use metrics to keep track of your company’s cash flow and manage all your bills and expense, making this a daily task. 

“Another reason for managing cash flow is that, over the next number of years, logistics companies will have to invest heavily in systems development to accommodate changing market and customer spending patterns,” says Hendrik. 

Matching technology with local conditions

As a logistics and supply chain management supplier, we have a mandate to create sustainable business processes, both internally and for our clients,” explains Hendrik. “It is, therefore, essential to invest in technology that is suited to the South African context. While it may be possible to invest in Europe’s latest technology, it comes at a massive cost that will not make you competitive in the local environment. 

For Hendrik, the biggest challenge for logistics services would be economic growth. “Getting the country back on a growth trajectory will automatically create the need to employ more people. I believe this growth will come from sentiment. The world will soon enter a phase where a positive sentiment will fuel economic recovery, which will be good for the world and good for South Africa.”

Being able to adapt to the changing needs of our customers to ensure that they still meet their obligations is key. Astron Energy’s expertise, agility and customer-centric approach mean we are able to customise solutions that ensure the continuity of our customers’ operations.

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