By Teboho Mokoena

This column is meant to share my general observations about the commodity transportation industry, with specific reference to the mining sector of the industry. That said, I shall keep the doors open for us to engage further on how we can improve the situation, going forward. Consider this for a moment, with your hard-earned savings, you have managed to acquire a good, used truck and trailer combo to the tune of, shall we say, R1.2 million. Those who are familiar with these types of transactions should be in a position to deduce the monthly costs associated with servicing this transition. It doesn’t end there. In addition to the cost of servicing this debt, add driver salary, which can range from anything between R10,000 to R20,000, as well as all other employee-related costs, a tracking device, maintenance/service costs, truck-and-trailer insurance, goods-in-transit insurance, the annual roadworthy tests, including licensing and registration, business registration costs, consumables such as tyres, etc.

My guess is that in your mind, you are starting to get a sense of the relentless costs that an owner/leaser (transporter) has to deal with on a monthly basis. Naturally, upon purchasing/leasing a truck, an owner starts to look for work for his truck. The first obstacle standing in the way will be trying to secure a direct contract with whichever entity that the owner wishes to operate as part of the often-complex organisational dynamic. I will confine my discussion to the mining sector, seeing that I have semblance of familiarity with the industry. Now, whether by design or default, this space is heavily populated with brokers and middle-men/women. These are men and women that a transporter needs to go through before they can be appointed to render services to the mine as service providers. The net result is that a transporter ends up, by design, having to sign a contract with a broker. Now, the pertinent question arises: what is the role of a broker in this entire milieu? Well, we know, indeed, as we have experienced, that a broker merely presents a contract which is heavily skewed in their favour of the transporter.

Let us sum up the role of a broker. In essence, a broker is there to communicate the combined requirements (including that of the mine) to the transporter, in terms of, among others, the number of loads required per week, various loading and offloading destinations, the processing of invoices, as well as other related administrative matters on hand. Beyond that, a broker plays no role at all. Do you remember the litany of costs that I outlined above? Well, a broker plays no part in assisting to discharge any of those costs. This falls on the lap of the transporter. He must settle costs arising from all those line items. In simple terms, a transporter assumes the responsibility, as well as the risks that come with transporting precious commodities on behalf on the mine. A broker merely assumes the role of an officious bystander in the entire process, nothing more, nothing less.

A broker is not involved, whatsoever, in the day-to-day running of a trucking operation. All of that falls squarely on the shoulder of the transporter. Cynically, one may even be tempted to say that the role of a broker is akin to that of the South American Cotton Fields Overseer. They are merely there to ensure that, come what may, the required number loads are delivered, regardless of how unrealistic those targets may be. What is missing from their arsenal is the proverbial whip. The latter has duly been replaced by a seemingly ironclad contract which is pulled out at the slightest provocation, should a transporter be deemed to have stepped out of line. History is littered with scores of up-and-coming trucking enterprises that have had to fold, simply because their said trucking enterprises could not meet the unrelenting and impossible demands. By now, you may have guessed where I am going with this, if not, let me spell it out to you: the commodity transportation business does not require middle-men/women or brokers.
Regardless of how much you try to shed light of the so-called role of brokers/middle-men/women in the commodity transportation value chain, it remains as opaque as ever. The value chain, I assert, can easily be managed by the mine logistics functionary and the transporter, together with his or her driver.
I have also observed that most, if not all, of these brokers/middle-men/women do not have trucks of their own. Why? One would have assumed, given their proximity to the towers of power within the mining industry, they would have jumped at the opportunity to have their own fleet of trucks. The answer lies at the prohibitive costs of running a trucking concern. It is far more profitable for these men and women to rather be overseers. A typical example: a mine might offer a rate of R1,400 per ton in the Northern Cape to Port Elizabeth. On a 34-ton side truck, this would amount to R47,600 per single trip. Diesel per litre comes out at R22,800 on a 1,200L tank. That is if we assume that diesel retails at R19 per litre. That leaves a transporter with R24,800. By the way, we have not taken out incidentals such as tyres repairs, mechanical breakdowns, toll fees, all of which can wipe out whatever profit that a transporter might has pencilled down. The above figures are illustrative, Google search indicates that 50PPM, retails at R21,51 per litre. This clearly alters the above scenario. In addition, the above rate is not a given. I will tell you why. This rate would be possible if the transporter was to engage directly with the mine, to the exclusion of the broker. But alas, that is not the world we live in. In reality, a transporter is usually offered a “generous” R780 per ton. If you work it out on a 34-ton truck, it works out to R26,520. Factor in the diesel cost at R19 per litre on a 1,200 litre tank (which amounts to R22,800), then a transporter is left with R3,720 per trip.
Remember, all other costs are still to be factored in. The irony is that a broker gets to pocket in excess of R21,080 for a largely minuscule role, if any at all. The above figures are illustrative and may prompt some of us to whip out our calculators and deal with the figures. That will not assist, I am afraid. We need to deal with principle. To do that, I will nail my colours to the mast, and state, without any equivocation, that brokers/middle-men and women in the commodity space are latter day labour brokers that.
Should we give brokers a once-off commission for securing a transporter a contract? Some may even refer to that, in colloquial terms, as a finder’s fee.

I have no qualms with that. Therefore, I say, yes, we should consider that as viable option. But a rolling monthly commission is not only unjustified, it is unethical and immoral, given the immense and relentless financial burden that transporters face on a daily basis, while brokers smile all the way to the bank.
We have a high employment rate in this country, and can we honestly say we sleep well at night knowing that brokers are essentially fleecing those who have poured the last resources into owning these trucks, as a last-gasp effort to keep the proverbial wolf from the door?