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What were your first thoughts when you sat down to draw on experience to set your preliminary 2014/15 budget? Where is the SA economy heading, especially in terms of the current highly volatile labour arena, must surely have headed the list. For the first time in the past 20 years, the political climate is being severely challenged as expectations have not materialised and roughly seven million South Africans, mostly the young, face unemployment, with little chance of the situation changing before the next wave of school leavers populate the job market. How will large scale disinvestment in the mining sector affect investor confidence following the longest strike action in SA’s labour history? Furthermore, where will funding come from to support the Government’s much publicised NG&DP: more direct and indirect Taxes?These are just a few of the realities challenging your budget predictions. More serious though, where is the Rand headed in all this? Moreover, where are interest rates going? Then there is Transnet Rail building a whole lot of new locomotives and getting ready to challenge the road freight industry, once again, in intercity traffic: while most of the listed-Carrier competitors are already standing in queue waiting their turn to get a piece of the intermodal action!Ok, well you might think I am reading too much into the daily news broadcasts, but these are only some of the realities facing the road freight industry. As the demand for freight services are geared to the economy, we all know transport is a derived demand business, so where does this leave you with setting a sensible budget?For a start, what is your thinking on Capex for vehicle replacements next year? Although NAAMSA sales for June contradict the doom-and-gloom scenario I have just painted, one has to take into account the industry’s fear of what is happing to truck prices with a volatile Rand? But what will it take to set it off towards the R11.00/US$ by year end? My bet is that fuel could see close to R16.00/l by this time next year, if not sooner, as the threat of all-out war escalates in the Middle East, and demand for fuel grows as a result of US initiatives to get their economy going. These are only a few challenges facing the Freight Carrier industry. One thing is certain it’s not going to get any easier.As there are limitations to accuracy in forecasting, it will help to construct strategies around minimising the effect of worst-case situations by understanding the drivers in any competitive trading situation. In this respect, I believe there are four Key Drivers in building and maintaining Shareholder Value, these are: Price Profit Performance SustainabilityThe QUAD Initiative forms a systemic structure and links together in a triangulation of interconnected nodal points distributing the relationship equally. In the following series we will describe its principal functions and relative interdependency in detail.
Driving Shareholder Value in Freight Haulage
There is an old adage: "What goes up must come down" and this is certainly happening right now. Costs are rising and revenues set to tumble as growth remains gloomy and heads towards recessionary levels. Not a comfortable situation for SA Fleet Operators struggling to find opportunities for cost savings in their budget forecasts.While no company ever fails on a spread sheet, it will take a miracle to prevent this in the 2014/15 context.
Author: Hugh Sutherland2014/07/23
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