Ranked 341st out of 348 ports: Durban is turning South Africa into a laughing stock

South African companies are their own worst enemy. This is particularly true of SOE’s. Over the past few months, we have been hearing of the sorry state that Transnet is in and the logistical constraints that the company faces. We have also heard about how this impacts the country’s economic growth or lack thereof.

But what happens when export products get to port or container ships enter our ports with imported goods? Durban, Gqeberha (Port Elizabeth) and Cape Town are among the busiest ports in Sub-Saharan Africa and the continent. However, news reports are filtering through, showing the sorry state that these ports are in, and we only have ourselves to blame.

Propping up the table

A News24 article points out that the Durban port has grown increasingly uncompetitive and is ranked, in the World Bank’s latest container port performance index, as the eighth-least competitive container terminal in the world – coming in 341st out of 348 container ports.

The terminal’s efficiency metrics are alarming, notes Jacob van Rensburg, head of research and development at the South African Association of Freight Forwarders (SAAFF).

For example, gross container handling per hour peaked in 2017 at just over 25 (9.3% below Transnet Port Terminal’s own target of 28) and decreased to 17.4 in 2022. Ship working hours (the number of containers moved by cranes working on the vessel) per hour peaked in 2015 at 59.28 (achieving 7.8% above the target of 55) but decreased to 41.82 in 2022.

The article adds that the Durban Container Terminal has a target of fewer than 40 hours for its port turnaround time (the total time spent by a vessel in port). But the turnaround time reached a record best in 2015 at 72.28 hours and increased to 167.4 in 2022.

That, Van Rensburg says, is 319% above target and is a waiting period of almost a week.

The article points out that, as the performance of a dysfunctional Durban port grows ever more dismal, much hope is pinned on Transnet’s new partnership with Filipino ports giant International Container Terminal Services (ICTSI) to upgrade and expand a portion of the port.

Important intervention

Jan Havenga, logistics management expert and professor at Stellenbosch University, welcomed the selection of ICTSI as the preferred bidder out of six submitted proposals.

The article points out that the ICTSI has a wide footprint and a good track record, despite being a relatively young company, having been founded just 36 years ago when it won a concession to manage, operate and develop the Manila International Container Terminal (MICT).

The company operates 32 terminals in 19 countries across six continents and employs 7 000 people. In Africa, ICTSI operates in Madagascar, the Democratic Republic of Congo, and Nigeria.

ICTSI is notably entrepreneurial. It is run by business tycoon Enrique “Ricky” Razon, who came from a third-generation Spanish-Filipino family involved in the business of marine cargo handling, and is now one of the wealthiest men in Asia with a net worth of some $8.2 billion, according to Forbes.

The article adds that, in terms of the transaction, a new company will be formed to manage the operations at Pier 2, in which Transnet will have majority ownership of 50% plus one share. Pier 2 employees will be seconded to the new entity and will retain the same terms and conditions before and after the introduction of the private sector partner.

With ICTSI, Transnet plans to grow Pier 2’s current capacity of 2 million TEUs (twenty-foot equivalent units) to 2.8 million TEUs.

This is aligned with plans by Transnet National Ports Authority (TNPA) to increase the current container capacity in the entire Port of Durban from 3.3 million TEUs to an eventual envisaged capacity of 11.4 million TEUs.

However, Van Rensburg said it is highly unlikely that these lofty throughput volumes will be reached over the short or medium term.

Transnet told News24 that the preferred bidder would make a cash payment, but said it was not at liberty to disclose the amount.

Welcomed

The News24 article points out that many industry observers hope the Durban JV marks the beginning of a new trend.

“The long-maintained ideology of publicly owning and operating the national ports and rails system is archaic and exceedingly rare internationally,” Van Rensburg said.

“We need to fast-track private sector participation in our transport and logistics space, as government cannot go at it alone. Instead, the government must create an enabling environment for businesses to flourish – and this is a step in the right direction.”

Warwick Lord, chair of the Multimodal Inland Ports Association, told News24 the status quo has not worked.

“We’ve had a monopoly on ports and rail and pipelines in this country that has got us to the position where we are now. We are now embarking on a privatisation process. The [governing] ANC and its partners have now taken the bold decision to privatise, so getting a new port operator for Pier 2 is a welcome change,” he said, adding:

We are the gateway to Africa – that is how we bill ourselves. But our gate is closed.

“The Durban port, for all intents and purposes, is congested and inefficient. Our narrative is not being fulfilled in reality. And so I hope that this private sector involvement will start allowing the public sector to have a more collaborative view.”

Jackie Walters, a transport economist and professor at the University of Johannesburg, said the development is long overdue and will, over time, “make a huge difference to the efficiency of the port”.

The Mother City fares no better

The News24 article points out that the City of Cape Town has already called for the local port to follow suit.

The city’s port is even more uncompetitive than Durban’s, ranked by the World Bank as the fifth least competitive container port globally.

The article adds that research conducted by the Western Cape’s Department of Economic Development and Tourism estimates private sector participation at the Cape Town port could contribute an additional R6 billion in exports, 20 000 more direct and indirect jobs and over R1.6 billion in taxes over five years.

At around 4.3 million TEUs handled across all ports, SA’s container throughput last year was similar to 2012 levels (and bulk volumes were similar to 2013 levels at ~210 million metric tonnes), SAAFF notes.

Why efficiency is important

The above situation is the exact reason why companies are looking for alternative transportation methods, such as exporting through Maputo in Mozambique; and why Komatipoort residents are bemoaning the logjam at the border post.

I feel that it is not only Transnet that is broken; the whole logistical ecosystem that supports the utility is just as damaged. News of significant investment into upgrading the Port of Durban is not new and has been circulating for several years.

However, as is the case with Eskom and other SOEs, upgrading and repairing critical infrastructure is one thing, but do we have the requisite skills to capitalise on these upgrades and keep the port running smoothly?

What are the advantages of a thriving port? Research shows that a 1% increase in port cargo throughput can increase GDP per capita growth by 7.6%. Research done by Bottasso et al. in 2014 found that every 10% increase in port throughput can generate a 6%–20% increase in the GDP of the regions and can have a spillover effect on neighbouring regions in the range of 5%–18%. In the context of China, Shan et al. (2014) found that a 1% increase in cargo throughput (at ports) can increase GDP per capita growth by 7.6%. Further, the port throughput of a country has a positive impact on neighbouring economies.

What is the fallout of a badly run port, as is the case with Durban and Cape Town? Chang et al. (2014) revealed that the South African economy could suffer a 17% loss in GDP due to a single unit shortage in port activity.

Imagine if Transnet runs efficiently and the performance of our ports is optimised. The NDP will have to revise their growth targets up.