EIT intermodal terminal model supports recovery in small towns and rural economies
The establishment of intermodal terminals or inland freight villages is a revolutionary way for South Africa to improve cargo movement whilst also developing logistics hubs that will completely transform the economies of small inland towns, believes Wessel Jacobs, CEO of the EIT Group.
Located in Estcourt, the group’s fully operational freight village is a first for South Africa. Goods trucked from Gauteng to the small KwaZulu-Natal town are transferred to rail to complete the 180km journey to the busy port of Durban. The opposite takes place for imports.
This small stretch of the freight journey, which is characterized by steep inclines and high fuel costs, accidents, delays and days-long congestion at the port, accounts for 50% of the already inflated transport costs along South Africa’s busiest road freight corridor.
According to EIT Group Chief Financial Officer, Manka Sebastian, South Africa’s freight costs make companies uncompetitive: “In Europe, transport costs make up 10% of imports and 8% of exports. In Asia, logistics accounts for 19% of imports and 16% of exports. In Africa, 45% of import costs come from transport and 35% of export costs are transport related.”
Location is key and intermodal terminals must be located at a place that is most economically efficient along the entire route.
“When I run a truck from Johannesburg into Durban to offload cargo which can be containerized, I can do eight to 12 loads a month. But, if that truck comes via Estcourt, it can do 25 to 30 loads. That makes an almost 50% difference in the running cost of the truck if it is not travelling that last 180 kilometers,” Jacobs says.
He adds that, at present, the majority of containers filled with imports that reach Gauteng are returned to the port empty at considerable cost. The EIT model allows for empty containers to be stacked in Estcourt and then refilled with exports and railed to the port at far cheaper rates.
The synergies achieved within the Estcourt freight village which began operating in March 2024 have already demonstrated that considerable savings can be achieved by logistics companies and their clients as well as tenants operating within the freight village.
Jacobs explains that the EIT Group model is similar to that used in Eastern Europe where companies with high logistics costs group together to benefit from economies of scale.
Different types of European terminals include extended gate terminals which are within a 50km radius of ports and provide dedicated access into and out of the port for trains and trucks collecting cargo for delivery, last mile terminals such as City Deep to which cargo is railed directly from a major port such as Durban before being dispersed using a hub and spokes model, and intermediary terminals such as the one in Estcourt.
“The biggest cost for any small business is equipment. If you are working within a freight village, this is shared within the community. You might be packing popcorn and need a forklift, labour and other auxiliary equipment that has nothing to do with your core business. A freight village essentially takes a lot of that weight off you.”
For both tenants and those utilizing services provided through the freight village, there is an accumulation of related, relevant services: “This becomes a large ecosystem with different service providers handling imports and exports. Intermodal ports such as this one work well for cross border trade too. We have a bond store on site so all the cross-border cargo can come in and out of our sites without payment of duties and taxes. The entire ecosystem is secured by one security system which is shared between the tenants.”
Sebastian adds that, already, new businesses are appearing in Estcourt. This supports the recovery of small town and rural economies which is central to government’s economic recovery plan.
She recalls how, when she visited the site for the first time, very few businesses were operating. Since the freight village has been running, mechanics, fast food outlets and even medical facilities have appeared.
She adds that the Estcourt model is extremely collaborative and includes both the public and private sectors. The Estcourt municipality is a key stakeholder as it is the supplier of essential services such as power. EIT Group has agreements with security companies on the line to provide armed responses if a train breaks down and is also working with communities to assist with safety and security on the line.