Reducing logistics costs to improve the competitiveness of an industry - the case of the horticulture sector in KwaZulu-Natal.

Abstract

Moving products is a costly exercise for most companies in South Africa. These high logistics costs impede the country from achieving some developmental goals such as creating more jobs and growing the economy. The horticulture sector is particularly ham-strung by this. Small business is more severely affected than big business. There are numerous, multi-faceted reasons for these high costs. The analysis and potential solutions are drawn from New Institutional Economics theory, political economy thinking, business process applications and economic geography thinking. It is clear that the solution goes beyond what is normally advocated by institutions that have done work in this area, e.g. the World Bank, which tends to focus on infrastructure investment. Issues typically overlooked that need greater attention include improving competition in the logistics sector and firm collaboration. Policy choices would have to be based on an understanding of the cyclical nature of some cost drivers (e.g. fuel costs) and the structural nature of some cost drivers (e.g. infrastructure)