Andrew Marsay Transport Economist"Aligning financial cost with real economic value"

“Is a 20% reduction in land transport costs achievable?”

Shell Rimula launch event; Maslow Hotel, Sandton29th June 2016

Shell’s R & D commitment . . . We’ve just heard that Shell spends $1.5bn p.a. on R & D alone. Why? To keep ahead of their competitors, of course. But How?

By always making products that increase client’s commercial productivity AND decrease their environmental externalities:

– ‘cleaner’, gas-based hydrocarbon product + cleaner engines – +/- 50% reduction in oil costs– 5% reduction in VOCs via mechanical & combustion efficiency– 2.5% (??) reduction of all-in fleet operating costs

Apply these savings to the commercial automotive sector in South Africa and we are talking big savings R500m

Understanding sustainability . . . What Shell is doing is applying principles of sustainability to their design of lubricants. A good defintion of sustainability is:

– Increasing commercial productivity– Reducing environmental impacts, and– Improving socio-economic opportunities

But, I’m a transport economist, not a commercial lubricants specialist like Anton. My work is about transport infrastructure

Although I share Shell’s interest in sustainability principles; my big question is: what is sustainable transport infrastructure?

A short history of transport infrastructure . . .

To understand how sustainability principles can be applied to transport infrastructure some historical perspective is needed

Before the wheel, we had subsistence economies

Subsistence economy: Economic score = ‘1’

The ox wagon facilitated settled agriculture( . . in South Africa, say, 1675 – 1875)

Ox wagon based economy: Economic score = ‘10’

Railways then opened up mining, forestry & industry(the dominant mode in SA from 1875 – +/- 1955)

Railway based economy: Economic score = ‘100’

And then came the ‘big bad wolf’ - road transport!

Road based economy: Economic score = ‘1000’

Lessons from this historical review . . .

New transport technologies allow new types of economic activity to take place develop that weren’t possible before

Manufacturing & commercial revolutions follow transport revolutions, leading to social and economic development

But, these ‘positive social and economic externalities’ need to be balanced against often increased environmental impact

Sustainable transport infrastructure is about optimising the balance between the positive impacts and negative impacts

How to optimise road freight transport . . .Identify its strengths:

– Any where, any time, (almost!) any size service– Continuous control of consignee / agent– Distributional flexibility / minimal depot dwell time

Identify its weaknesses:

– Inflicts more damage on the road than it pays for– Leads to 4-5 times more harmful emissions/tkm than rail– Danger to other traffic on the road, especially passengers

A sustainable road freight transport solution will seek to retain these strengths and mitigate these weaknesses

Precedents? . . .

‘Bus Rapid Transit’ is being marketed throughout South Africa as ‘trains on rubber wheels’ because ‘BRT’ combines:

– train-like capacity– road-based flexibility– much lower infrastructure costs– enhanced road safety via traffic segregation

And the key to realising the efficiency of the concept is dedicated infrastructure

What about ‘Truck Rapid Transit? . . .

Isn’t it time for similar technological innovation in the freight sector? I call it ‘Truck Rapid Transit’ or…‘TRT’, combining:

– lower aggregate infrastructure costs [if rail investment is curbed]– greater economic viability via higher payloads– scheduling reliability and distributional flexibility– enhanced road safety via traffic segregation

And the key to realising the efficiency of the concept is dedicated infrastructure for road freight

Lower infrastructure costs . . .

At present huge investment is going into rail; the majority is focused on winning container market share from roads

This is only fundable because of cross subsidisation from our very high priced container / automotive sectors in our ports

If rail investment focused more on dry and liquid bulks, rail could increase rail its volumes rapidly, at much lower cost

Leaving higher value / container freights to an optimised road transport infrastructure, at potentially lower costs than now

Greater efficiency via higher payloads . . .

At present road transport operating costs are very sensitive to the payload carried. (This is why so much overloading happens)

Payload is limited by truck configuration regulations that assume shared freight & passenger use of the infrastructure

Regulatory / safety considerations prevent optimisation of truck design, with trucking costs higher than they could otherwise be

Separate freight roads with larger rigs and higher payloads could reduce operating costs AND allow funding via tolling

Op’ cost savings – even at higher tolls . . .

Implementation could be in stages . . .

Develop (20km shorter) De Beers Pass between Warden and Ladysmith, bypassing van Reenens with easier grades for trucks

Extend this northwards to Heidelberg either by upgrading ‘old N3’ to dual-2 standard or add freight lanes parallel to main N3

Commit to an already proposed new, mandatory freight route from Cato Ridge, grade separated, directly into Durban Port

Town Hill (PMB) bypass; Tambo Springs freight centre to cater for interchange from double interlinks to distribution vehicles

Fundable at not unreasonable tolls . . .

Current N3TC tolls, @ R1.50/km, generate R1.25bn p.a. for the maintenance and upgrade of the N3, including ‘De Beers Pass’

With tolls of R3.00/km for trucks, it would be possible to fund a dedicated freight roadway without recourse to the fiscus

Benefits would include:– Much improved safety on segregated passenger carriageway– Reduced maintenance costs on passenger carriageway– Environmental savings via more efficient driving patterns– Big capex and opex savings to Transnet - if it revises its MDS

Conclusions

Shell is showing how to innovate with regard to its lubricant products for the automotive and other transport sectors

leading to economic gain for Shell and its customers, social gain via higher economic and jobs growth; and environmental gain.

Applying the same mindset to the transport industry at large could lead to order of magnitude greater savings than Rimula!

A dedicated freight road between Gauteng and Durban is both fundable and could yield a 20% reduction in land transport costs