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Blog : 4 December 2016 (AFS 2015 for Transport and communication industry)
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We take a look at Annual Financial Statistics (AFS) published by Statistics South Africa every year. This blog will focus on the performance of the transport and communications industry. Technically speaking we will take a look at the performance of SIC7 industry performance. SIC is world wide standard used for industrial classifications, and SIC is an acronym for Standard Industrial Classification. The whole of SIC7 makes up 8.4%of South Africa's economy (as at quarter 2:2016 using 2010 constant price estimates).
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Income vs Expenditure
The bar chart below shows the income and expenditure of various industries within the transport and communication industry from the 2015 AFS results.
As can be seen from the bar chart the biggest contributor to SIC7 is actually the communications sector and not the transport industry. This begs the question whethere the SIC classification should not be adjusted to provide a seperate grouping for telecommunications as this industry is growing in relative importance due to the exponetial growth in smart phones and the use of data.
It's clear that air transport's expenses outstripped it's income. One can only attribute this to "wrecking ball" at South African Airways (SAA), Dudu Myeni. With the parastal being run by a Zuma crony it was never going to succeed. And even after continued failures with her at the helm of SAA, President Zuma has made no effort to remove her, in fact he rather sings her praises. Another loss making industry is the National Postal activities and courier activities. No doubt the Post Office contributing massively to the losses in this case.
Profit/Loss
Trade and other receivables/payables
Below the stacked bar chart will take a look at trade and other receivables (money owed for goods and services rendered) to various sectors within transport and communication vs trade and other payables (money sectors within transport and communication owe others) for goods and services rendered to them. If the red bar is bigger than the green bar, the sector owes more money to others than money owed to them.
Clear from the stacked chart that the Railway transport sector owes a lot more money to others than money owed to them. Almost R13billion more is owed to others than what is owed to them. This sector covers PRASA and Transnet. Another two state owned enterprises (SOE) not exactly shooting the lights out with their financial performance. Freight transport has a positive balance of around R2billion.
The telecommunications sector also owes a lot more for goods and services rendered to them than money owed to them for goods and services delivered.
In total firms operating in the transport and communications industry made a total profit of R13.8billion in 2015, based on income of R790,9billion. That gives the overall sector a net profit margin of 1.74%, which is not very lucrative at all. If the telecoms companies was excluded from this analysis the results would have read: total profit of R5.8billion from R519billion in income giving a net profit margin of 1.14%.
A rise in fuel prices in future will surely see a large number of firms in this sector close down, as net profit margins of around 1% does not leave a lot of meat on the bone to ride out sudden price increases, as this will eat all possible profit margins away.
The telecommunications sector also owes a lot more for goods and services rendered to them than money owed to them for goods and services delivered.
In total firms operating in the transport and communications industry made a total profit of R13.8billion in 2015, based on income of R790,9billion. That gives the overall sector a net profit margin of 1.74%, which is not very lucrative at all. If the telecoms companies was excluded from this analysis the results would have read: total profit of R5.8billion from R519billion in income giving a net profit margin of 1.14%.
A rise in fuel prices in future will surely see a large number of firms in this sector close down, as net profit margins of around 1% does not leave a lot of meat on the bone to ride out sudden price increases, as this will eat all possible profit margins away.