Rail renaissance based on strategic market segmentation principles

Abstract

South Africa’s annual State of Logistics survey indicates that the
majority of dense, long-distance surface freight is transported by
road, placing severe constraints on the country’s freight logistics
infrastructure and posing a significant exogenous risk to the
growth aspirations of the country. This risk is attributable to the
excessive demand for road freight transport, which is dependent
on imported fuel at highly unstable prices and is more damaging
to the environment – leading to uncertain future offset charges. A
rail solution can utilise locally generated electricity (currently coalbased,
but partially switchable to renewable energy in the future). The critical requirement, however, is to determine exactly how much freight, and specifically which freight, can switch to rail. In order to identify the freight flows that will exploit rail’s economic fundamentals, a market segmentation model was developed. A feasible target market was identified that enables key stakeholders (government, the national railroad and major road service providers) to engage in ensuring that the urgent planned R300 billion infrastructure spending by the public and private sectors is invested in suitable freight logistics infrastructure to support the country’s growth ideals sustainably.

Key words: rail renaissance, market segmentation, South Africa, state of logistics, modal shift, freight flows