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Southern African Citrus Rail Status 2011

2 Foreword by the CEO

3 Introduction byLogistics Development Manager

4 Map of Southern African CitrusProduction and Export Ports

5 Graph of Regional Volume of Productionand Transport Distance to Export Ports

6 Overview of Conventional Citrus Break-bulk Rail Operations and Developments

7 Overview of Citrus Reefer Container RailOperations and Developments

8 Reefer Container Delivery Timeline andPrecooling Temperature TimelineComparison

9 Reefer Container Delivery Timeline andPrecooling Temperature TimelineComparison Process Flow Model

10 The Intermodal Transportation ConceptFlow Model

11 Citrus Rail Transportation SWOTAnalyses

13 MOU between Limpopo Department ofRoads and Transport (LDRT) and TransnetFreight Rail (TFR)

14 Map of Southern African CitrusProduction Regions Linked to Export Portsby Viable Rail Networks

ContentsJustin ChadwickChief Executive Officer

Foreword by CEO

2

Annually some 750 000 pallets of citrus ar etransported from citrus growing regions to theEast Coast port of Durban. The bulk of this fruitis transported by road – a reverse of the situationsome twenty years ago when mo st fruit wasrailed to the port.

South Africa’s road infrastructure has reachedbreaking-point; some of the national roads usedto transport citrus have been reduced from tarto dir t. Added t o this is the hug e dela yexperienced by transporters as they experiencecongestion in the Durban por t environment.Transporters faced with these challenges as wellas the v olatile fuel c osts ha ve r amped uptransport r ates. Unf ortunately thes e c ostincreases to the South African citrus gr owercannot be passed on to the consumer, as mostinternational citrus markets are under pressure,and prices have at the best remained static (andat the worst declined by up to 50%). Given this

cost price squeeze, many citrus f arms somedistance from the port are no longer sustainable.

Railing containers COULD be the solution. Railshould be able to provide a service that is reliable(not dependent on r oad c onditions, r oadcongestion, accidents etc.), cost effective andefficient. At present most growers are frustratedat the inability of r ail t o liv e up t o thes eexpectations.

What is needed is a true public-priv ate-partnership. Any one party alone cannot makethe dream of a slick, efficient, cost effective railservice come true; all parties working togetherin tandem can make it happen.

I first joined the citrus industry in the late 1990’sappointed in the oper ations department of thethen Outspan International, based at the DurbanExport Terminal (DET).

I remember the significant volume of rail wagonsthat were routed from the inland productionpoints back in tho se days, in t otal I w ouldestimated mor e than 80% of citrus w astransported to port by rail. In fact, back thenrail was received by port export terminals inCape Town, Port Elizabeth, Durban and Maputofor citrus to be loaded on Specialized Reef erShips. Prior t o the deregulation of the citrusindustry in 1998, ther e w as only OutspanInternational that represented the citrus growerbase and 90% of citrus w as expor ted b ySpecialized Reefer Ships from dedicated citrusterminals. This made railing citrus to ports muchmore favourable and simpler than the curr entstatus quo. Over the last 10 years there has beena significant increase in the v olume of citrusexported from Southern Africa which has grown

from roughly 60 million car tons to 96 millioncartons in 2010. Fr om 2005 there has been aprogressive decrease in the volume of rail utilizedto transport citrus to ports and by 2010 citruswas only transported to Durban and Maput obut in very small quantities and mainly from theLimpopo region. Coupled with the increase incitrus expor t volume and a decr ease of r ailutilization, the demands on the road transportsector has resulted in frequent bottlenecking ofroad trucks in por t during pe ak s eason. Tomitigate the extreme overutilization of road andport cold storage infrastructure, rail developmentis paramount to providing a seamless and tacticalmeans of mo ving citrus thr ough the por tnetworks.

There are many challenges facing the conventionalrail enterprise but there are niche areas wherethis transport mode can play a role in transportingcitrus to ports. The biggest challenges are thelack of port rail infrastructure at new loadingfacilities, the development of packing high cube

pallets a t pr oduction point ( one or tw oadditional layers on a conventional height pallet)which at present rail equipment cannot suitablyload, long rail transit times to port, rail vs roadpricing variances and the severity of fragmentationof the citrus supply chain; which is st eadilymoving from an Exporter conglomerate base togrower based exporters packing in-house brands.The future of citrus rail transportation lies stronglywith the railing of Integral Reefer Containerspacked at source or at inland hub facilities. Thisnot only offers a seamless and cost effectivemeans of transporting citrus but offers best coldchain and product integrity solutions throughthe supply chain.

Mitchell BrookeLogisticsDevelopmentManagermitchell@cga.co.za

Introduction by Logistics Development Manager

3

Map of Southern African Citrus Production and Export Ports

4

SWAZILAND

Limpopo Province

Free State

Northern Cape

North West

KwaZulu-Natal

Eastern Cape

Western Cape

ZIMBABWE

Gauteng

Mpumalanga

LESOTHO

Citrusdal

Boland

Patensie

Sundays River

Fort Beaufort

Orange River

Vaalharts

Marble Hall - Groblersdal

IxopoKZN Midlands

Nkwalini

Durban Port

Port Elizabeth (Coega)

Pongola

Nelspruit

South Swaziland

North Swaziland

Malelane

Karino

Maputo Port

Hazyview

Hoedspruit

Letsitele

TshipiseLouis Trichart

Weipe

Cape Town Port

BOTSWANA

SOUTH AFRICA

Rail transportation requires high v olumes of

homogeneous types of car go to be r ailed in

block units over great distances to be a viable

and feasible transport solution. Over short to

medium distances, road transportation in South

Africa has obtained a competitive edge over rail

transportation due to the cost and logistical

efficiencies achieved by road transportation.

When assessing the citrus production and export

transport demographics, it remains evident that

citrus produced in the north eastern regions of

Southern Africa namely; Mpumalanga, Limpopo

and Zimbabwe is deemed t o be a r ail viable

region. Transport distances in this citrus region

exceed 600km’s to the Durban port and exceed

300km’s to the Maputo port.

Calculating the production volume x transport

distance, the pallet kilometres can be calculated.

Based on this da ta it can be identified which

specific regions have the potential to consolidate

citrus to transport by Conventional and/or

Reefer Container rail modes.

1. Letsitele = 184million pallet kilometresto Durban.

2. Groblersdal = 123million pallet kilometresto Durban.

3. Northern Limpopo and Zimbabwe= 108million pallet kilometres to Durban.

4. Hoedspruit = 79million pallet kilometresto Durban.

Note: Although minimal export volumes are routedfrom Letsitele and Hoedspruit t o Maputo, theseareas can be considered rail viable to transportcitrus by rail to Maputo.

Graph of Regional Volume of Production and Transport Distance to Export Ports = Pallet Kilometres

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Overview of Citrus Conventional Break-bulk Rail Operations and Developments

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Historically the conventional practice of railingcitrus from production areas to port cold storefacilities has been utilized extensively. Prior tothe adoption by the industry to load citrus incontainers, citrus was railed to port terminalsand then loaded on break-bulk type SpecializedReefer ship s and expor ted globally . Theconventional ‘O’ type wagon was primarily usedfor this purpose where citrus was road truckedfrom production points to a local siding andthen transferred to rail wagons. There existed afew production points that were equipped withrail infr astructure link ed dir ectly t o thepackhouse where citrus could be loaded directlyand railed to ports. These wagons were thenaccumulated into block wagon loads at specificrail yards and then transported as bulk loads tothe ports. Until the mid 1990’s the South Africangovernment legislated the tr ansportation ofgoods by rail with permits required for the useof road transportation under condition. With

the abolition of this legislation, road transportationbegan to erode the services of general freightrail transportation by way of pricing and efficiency.Where once 80% of citrus was transported bythe conventional mode, currently less than 3% ofcitrus is transported to ports this way. Container-isation and the fragmentation of the supply chainarena post deregulation has made it difficult touse the conventional break-bulk rail mode.

The loading of containerization to export citrusto global markets represents 75% of v olumeshipped, and 85% of pr oduct packed is no wpacked as high cube pallets ( one or tw oadditional layers of cartons above a standardheight pallet) at production point. This mitigatesthe use of the conventional break-bulk rail modeusing the ‘O’ Type wagon which is limit ed toloading 24 standar d height pallets. T ransnetFreight Rail (TFR) converted 6m general purposehigh cube containers aimed at transporting citrushigh cube pallets to ports. The containers were

adapted to fit bath type container wagons, resultingin a protrusion on the inside of the c ontainerlimiting the ability to load 12 high cube pallets.At present only 10 high cube pallets per containerwith 2 x 6m containers per wagon can be loaded.

There still exists a niche r equirement for thismethod of rail transportation. 1) Citrus exports tothe Russian market are still shipped by way ofSpecialised Reefer vessels and all pr oduct ispacked as standard height pallets. 2) Consolidationof product packed within citrus regions targetedfor specific rail viable port cold stores. 3) Blocktrains targeted from Letsitele and Hoedspruitto Maputo for the Europe break-bulk service.

South Africa is well placed to be the leaders ofintermodal refrigerated container transportdevelopment, somehow the road-rail debatewithin the fruit arena continues with diminutiveprogress. Citrus r egions loca ted in clo serproximity t o por ts ha ve the adv antage ofcollecting empty containers from port and roadhaul to the farm to load and deliver directly tothe port container terminals for shipping globally.In fact, 80% of citrus produced in the Easternand Western Cape regions pack citrus directlyinto containers at the f arm or a t inland coldstores. At present this is not the case for citrusproduced in the north eastern regions. 95% ofcitrus from this region is road hauled on trucksto Durban port cold store facilities to be storedand then stuff the product into containers. Theseare then re-transported by road to the Durbancontainer terminal. The de velopment of theIntegral Reef er C ontainer plac es the citrusindustry at a huge advantage by offering reduced

shipping costs, reduced landside logistics costs,better cold chain and off ers better productintegrity by loading c ontainers inland a t theproduction source. The north eastern regionshave an added adv antage b y utilizing r ailinfrastructure to transport empty containersupstream and redeliver directly to containerterminals back downstream – bypassing hugelycongested road networks nationally and in ports.

The dominant but hug ely under-utilizedcontainer rail operations are set to continuefrom the Letsit ele citrus r egion – curr entlyfacilitated via the Tzaneen station. This operationneeds to be moved to Letsitele to reduce 40kmof r oad tr avel. Mor e oper ations ar e beingintroduced such as the Gr oblersdal r egionloading containers on f arm and trucking andrailing containers from Pretoria (Pretcon sidings).There are further developments in the pipelineto operate additional container rail services viaPolokwane in Limpopo and Nelspruit in

Mpumalanga. P olokwane is an oper ativeaccumulation point for Limpopo and Zimbabweregions to despatch reefer containers to farmsas well as offering an intermodal freight hub forcitrus to be tr ansported by road and cr oss-docked into containers for delivery to ports.

The limita tion of dir ect f arm loading ofcontainers is the ability for a single packhouseto consolidate a container load of citrus to meetmarket r equirements. Lar ger packhous eoperations produce quantities that overcomethis which permits on farm container loading,but t o ac celerate the r eefer c ontainer r ailoperations to its full potential, common-userconsolidation and cross-docking facilities aredeemed necessary. Letsitele and Polokwane areearmarked for this infrastructure to place theLimpopo and Zimbabwe regions at the forefrontof reefer container intermodal operations –giving the region where 40% of Southern Africancitrus is produced a globally competitive edge.

Overview of Citrus Reefer Container Rail Operations and Developments

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Reefer Container Delivery Timeline and Precooling Temperature Timeline Comparison

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1 Citrus Container Stuffed ex Port Facility

Description: citrus product packed at a packhouse andthen transported by road or r ail to a por t cold storefacility or ambient f acility wher e the pr oduct isconsolidated, stored and stuff ed into a c ontainer forexport. The empty container is collected ex Durban depotthen transported by road to the stuffing facility and thentransported by road from the stuffing facility to a portcontainer terminal and delivered to vessel stacks. Thisprocess creates an overutilization of port cold storageinfrastructure and increases the opportunity for productdamage due to high levels of handling during st orage.Over-utilization of r oad tr ansportation cr eatesbottlenecking in port - can be overcome by utilizing rail.

Container Delivery Timeline: during peak season, the roadtransporting of citrus may take up to two days for deliveryto a por t cold store facility in Durban. Onc e citrus isreceived it is quit e common that citrus will r emain instorage for a period of 7 – 10 days (average dwell time)prior to being stuffed into a container. The average processtimeline may take less than or equal t o 12 Days frompacking.

Precooling Temperature Timeline: from the time citrus ispacked and transported from packhouse to receipt inport, the average timeline is recorded at 3 days. A coldstore f acility c ommonly adopts sta tic air flow f orprecooling citrus, the timeline of precooling citrus fromambient to achieving a pulp t emperature of 4.5°C hasbeen recorded at less than or equal to 4 days. The averageprecooling timeline can be determined to be less than orequal to 8 Days from packing.

2 Citrus Container Stuffed ex Inland Hub Facility

Description: citrus product packed at a packhouse andthen transported by road to an inland stuffing f acility(hub) where the pr oduct is c onsolidated, stored andstuffed into a container for export. The empty containeris collected ex Port depot and transported by road to aport rail siding f acility where the c ontainer lots ar etransferred to rail and are transported by rail to an inlandrail siding facility (hub). The containers are transferred toroad and transported to the inland stuffing facility andreturned to the rail siding on completion of stuffing thecontainers with citrus. The containers are stored (underpower) and transferred back to rail when the containerlots are transported by rail directly to a port containerterminal rail siding and transferred to vessel stacks.

Container Delivery Timeline: road transporting of citrusfrom a packhouse to an inland hub f acility should notexceed a same day delivery. The inland hub facility conceptproposes that the facilities are located with 250km radiusof citrus pr oduction points. Citrus st ored in ambientconditions should not exceed a storage period of 4 daysprior to being stuffed into a container and railed to port.The average transit time for a container railed from aninland siding should not ex ceed 3 days. Therefore theaverage process timeline should take less than or equalto 7 Days from packing.

Precooling Temperature Timeline: citrus should be packedand transported to an inland stuffing f acility the sameday. Citrus should be stuffed within 4 days from ambientstorage. Research has shown that a container stuffed withcitrus can achieve an average pulp temperature of 4.5°Cwithin 3 days of applying constant electricity to the containerscooling unit. The a verage precooling timeline can bedetermined to be less than or equal to 7 Days from packing.

3 Citrus Container Stuffed ex Packhouse

Description: citrus product packed at a packhouse andthen product is consolidated at the packhouse and storedeither ambient or pre-cooled (where cold stores exist)and then stuffed into a container for export. The emptycontainer is collected ex Port depot and transported byroad to a port rail siding facility where the container lotsare transferred to rail and are transported by rail to aninland rail siding facility. The containers are transferredto road and transported to the packhouse and returnedto the rail siding on completion of stuffing the containerswith citrus. The containers are stored (under power) andtransferred back t o rail when the c ontainer lots ar etransported by rail directly to a port container terminalrail siding and transferred to vessel stacks.

Container Delivery Timeline: citrus that is packed andtargeting for ambient packhouse container stuffing shouldnot exceed a st orage period of 4 da ys prior t o beingstuffed into a container and railed to port. The averagetransit time for a container railed from an inland sidingshould not exceed 3 days. Therefore the average processtimeline should take less than or equal t o 3 Days frompacking.

Precooling Temperature Timeline: citrus should be packedand stuffed within 4 days from ambient storage. Researchhas shown that a container stuffed with citrus can achievean average pulp temperature of 4.5°C within 3 da ys ofapplying constant electricity to the containers coolingunit. The average precooling timeline can be determinedto be less than or equal to 7 Days from packing.

Reefer Container Delivery Timeline and Precooling Temperature Timeline Comparison Process Flow Model

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Less handling and storage charges

Better for product integrity dueto less handling

Better Carbon Footprint Factor

Better shipping time to markets

Medium/High Risk Logistics

PackhousePacking

Cold Store

Cold Rooms(Static airflow)

Pre-cooling Temp</= 8 DAYS

Container Terminal</= 12 DAYS

</= 3 DAYSTransport to Port

</= 1 DAYAmbient to ColdStorage

</= 4 DAYSPre-cooling

Note: This assumption isbased on research fromletsitele to Durbanaverage recording duringpeak season.

High handling and storage charges

Deterioration of product integritydue to excessive handling

Highest Carbon Footprint factor

Logistics Nightmare

</= 3 DAYSPre-cooling

PackhousePacking

InlandAmbient Store

ContainerStuffing

Pre-cooling Temp</= 7 DAYS

Container Terminal</= 7 DAYS

</= 4 DAYSStorage atAmbient

NIL DAYSTransport toHub

PackhousePacking

ContainerStuffing

Pre-cooling Temp</= 7 DAYS

Container Terminal</= 3 DAYS

</= 3 DAYSPre-cooling

</= 4 DAYSStorage

Zero handling and storage charges

Beset for fruit integrity

Best Carbon Footprint Factor

Best shipping time to markets

High Risk Logistics

The Intermodal Transportation Concept Flow Model

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Packhouse

Packhouse

Packhouse

Intermodal Freight HubDirect from Farm/Packed

at Inland Facility(Break-bulk & Containers)

Port Dispersion SidingWagons are routed directly

to Receiving Point

Port Cold Store

Fruit Terminal

Container Terminal

Rail Journey

3 Mode Approach

1. Conventional Ambient Break-bulk2. Reefer Containers Stuffed on Farm3. Reefer Container Stuffed at an Inland Freight Hub

Definition

Intermodal fr eight tr ansport inv olves thetransportation of fr eight in an int ermodalcontainer or vehicle, using multiple modes oftransportation (rail and truck ), without anyhandling of the fr eight itself when changing

modes. The method r educes cargo handling,and so improves security, reduces damages andlosses, and allo ws freight to be tr ansportedfaster. Reduced cost and increased efficiency isachieved by utilising this method of transportation.

Road Journey

Citrus Rail Transportation SWOT Analyses

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Strengths

• Seamless means of transportingcitrus to port.

• Rail receives priority at portfacilities.

• Offers better product transportintegrity to reduce damages.

• Offers a reliable means oftransport to producers.

• Overloading not a factor for railtransport.

• Rail functions optimally in blockunits.

Weaknesses

• Transit times to ports.

• Rail vs. Road pricing variation.

• Limited rail infrastructure inports.

• Transnet relies on third partylogistics providers to supply roadand rail services to Transnetclients.

• Limited rail rolling stock forcitrus transport – at present only200 x ‘O’ Type wagons and 240x ‘Pallet Friendly’ containerwagons exist to load citrus.

• Requires block trains of 40wagons routed point – point tobe viable.

Opportunities

• Railing block trains of Russiapacked fruit from Letsitele toFPT Durban.

• Railing block trains of high cubepallets from Limpopo to railviable Cold Stores in Durban.

• Railing block trains of Europe,MED and Russia break-bulkpacked fruit from Limpopo toMaputo.

• Citrus regions to formulate railspecific logistics providers -direct rail accounts with TFR andsuitable loading equipment inplace.

• Polokwane hub to consolidatecitrus.

Threats

• Pilferage of product.

• No suitable wagon fortransporting high cube pallets.

• Road haulage pricing flexibility.

• Electricity, steel and fuel priceincreases.

• Severe fragmentation of citruslogistics supply chain.

• Cable Theft.

Conventional Break-bulk Rail Operations

Citrus Rail Transportation SWOT Analyses

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Strengths

• Offers seamless means oftransporting containers frominland to port containerterminals.

• High level of cold chain andproduct integrity through thesupply chain – Door to Door.

• Shortest transit time to markets.

• Best cost chain structure.

Weaknesses

• Stack date integrity influencesdirect container delivery atcontainer terminals.

• Turnaround time of reefer trainsfrom Durban Container Terminal.

• Direct farm loading of containersprohibited by market requiringcontainer lots.

• Lack of consolidation facilities.

Opportunities

• Limpopo - Railing Reefercontainers from Letsitele andPolokwane hub to Durban,Ngqura, Port Elizabeth or CapeTown container terminals.

• Mpumalanga - Railing Reefercontainers from Pretoria(Pretcon) hub to Durban, Ngqura,Port Elizabeth or Cape Towncontainer terminals.

• Ngqura - world class railinfrastructure and underutilizedreefer capacity.

Threats

• Shipping Lines not allocatingempty containers to meet therequirements.

• Lack of cooperation betweenTransnet Freight Rail andTransnet Port Terminals.

• Cable Theft.

Reefer Container Intermodal Rail Operations

From an official r elease: La te in July 2011,Transnet Freight Rail (TFR) CEO Siyabonga Gamaand the Limpopo Depar tment of Roads andTransport (LDRT) MEC Pinky K ekana signed amemorandum of understanding (MOU) aimedat promoting an integrated rail freight logisticsinfrastructure system in the Limpopo Province.

“The aim is to form strategic partnerships withthe province to create logistics and consolidationhubs for agricultural, mining products and othercommodities to be railed from the province toother parts of the country and for the exportmarkets. This will enable farmers and coal miningcompanies in the province to have the majorityof their products transported through rail.”

According to CEO Gama, feasibility studies willbe conducted within the current financial year(to April 2012) t o establish the t echnical andeconomic viability of the impr oved railwaysystems. “The feasibility studies will focus on,amongst others; the viability of r ail freightservices between Tzaneen/Letsitele and Durbanand/or Cape Town harbour; the viability ofestablishing a citrus hub with s orting, packingand cold storage facilities; and the establishmentof a fresh produce market in Polokwane.

“This initiative is aligned with a number of othersaimed not only a t improving the pr ovincialtransport landscape but ha ve economic andsocioeconomic impact in the province. It willalso stimulate ent erprise development andemployment gr owth b y ensuring tha t allestablished consolidation hubs are multi-userfacilities, and use local labour. Employment isexpected to be cr eated in the packing, c oldstorage, container management and containerhandling facilities. Since this initiative encouragesintermodal transport, more jobs are to be createdin the trucking and rail related industries”, Gamasays. Ms Kekana said the province is establishinga freight databank meant to serve as a platformfor public-private collaboration. Ends

Citrus rail operations in the Limpopo provinceare considered a priority b y the C GA. Risingtransport costs and logistical c onstraints areimpacting he avily on the pr ofitability andsustainability of citrus production in the region.There are many c onstraints that have beenindentified tha t ar e hindering the pr ogresstowards revitalizing this method of transport,with the signing of a MOU between these partiesthese issues will hopefully be addressed.

MOU between Limpopo Department of Roads and Transport (LDRT) and Transnet Freight Rail (TFR)

13

MEC for Limpopo Roads and Transport,Mme Pinky Kekana and CEO of Transnet Freight Rail,Mr Siyabonga Gama, sign a Memorandum ofUnderstanding in Polokwane on 21 July 2011.

Map of Southern African Citrus Production RegionsLinked to Export Ports by Viable Rail Networks

14

Container Rail

Conventional Rail

SWAZILAND

LESOTHOSOUTH AFRICA

BOTSWANA

NAMIBIA

Durban

Port Elizabeth/Ngqura

Maputo

Hoedspruit

TshipiseWeipe

Thohoyandou

Cape Town

ZIMBABWE

Pretoria (Pretcon)

Letsitele

Groblersdal

Zebediella

Letsitele

Polokwane

The future sustainability ofcitrus exports from Southern Africa will

be determined by the growers responsein adopting unconventional practices

in the supply chain

Mitchell BrookeMitchell BrookeLogistics Development Manager

mitchell@cga.co.za

Citrus Growers Associationof Southern Africa

Reg. No, 2000/010147/08

PO Box 461, Hillcrest 3650

23 Plantation Road, Hillcrest 3650KwaZulu-Natal, South Africa

t +27 31 765 2514f +27 31 765 8029e info@cga.co.za

www.cga.co.za

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