South Africa is facing up to the problems at its biggest port while keeping its role as the conduit for Southern Africa, says Martin Rushmere

A lifeline for Southern Africa, fellowship with other African ports and the most efficient logistics network in the continent are the overarching guidelines for South Africa. But while the government and private sector both recognise this, the government is yielding to intense popular pressure to provide more jobs and take more control – which means that relations with the industry are as prickly as ever.

Some quarters are optimistic, contending that the authorities "are at least listening" about worries over declining port throughput performance and capital replacement and investment. They support their arguments with a recent declaration by Transnet Port Terminal chief executive Nozipho Sithole about Durban container terminals. With the port facing a storm of criticism for slow truck and vessel turnaround times and inefficiencies, Ms Sithole said: “I will not shy away from saying our operations are poor.”

An indication of this is that rail cargo from the port can take three days to travel the 400 miles to Johannesburg.

Ms Sithole said that consistency was poor and this was partly a result of planning and skills levels but Transnet was working to fix this. Most cheering for the optimists was Ms Sithole's admission that “tariff growth is not going to work” to reduce operational losses.

Government involvement

Speaking to Port Strategy, Mike Walwyn, ports and maritime operations manager of the Association of Freight Forwarders, says that as the ports are all government-owned, and the container terminals are government-operated, it goes without saying that government involvement is almost total in South Africa.

"In the absence of any comparators, it's difficult to say to what extent this hampers efficiency, but we are certain that efficiency and productivity would be improved if the ports were privatised, as we come across inefficiencies and high pricing on a regular basis,” he says. “The Ports Authority is regulated and so their pricing is held in check to some extent, but the terminals are not.”

Mr Walwyn says capital investment is up to speed "and as things stand, South African ports are well-equipped with modern equipment. The deficiencies we see are more in terms of a lack of planned maintenance and over the next few years, we foresee that the availability of capital will be constrained.”

Rail drawbacks

While the immediate hinterland is described as “fairly accessible”, there is too great a reliance on road transport because the rail system is dysfunctional. "This in turn leads to bottlenecks, particularly at Durban, where trucks can stand for many hours before discharging or loading," says Mr Walwyn.

Also, there are real problems with connections with other countries. "We have quite substantial traffic to and from countries to the north of us, and there the picture is not pretty," he adds. " For example, the queue of trucks in Zambia trying to get through the Democratic Republic of Congo border can stretch back over 70 kilometres (40 miles), and there are other borders where major delays occur.

"One of the problems is that there is no continuous rail link, due to the plethora of different rail gauges in different countries."

Transnet plans to bring in foreign operators to improve efficiency at its terminals, but so far it has released no details. But the involvement of Chinese operators is bringing in its own problems.

In a recent report, Fitch Ratings noted that Chinese construction firms are responsible for building 50% of new infrastructure projects in sub-Saharan Africa. Identifiable infrastructure investment flows averaging $12.6bn over 2012-2017 from China via commercial banks, policy banks and corporations eclipse the next largest sovereign investment flows from France which average $2.2bn, according to the Infrastructure Consortium for Africa.

Says Fitch: "A primary challenge for Africa will be balancing new infrastructure development with successfully implementing already funded projects. It would also involve balancing genuine infrastructure needs with sound economic rationale.”

Local industry is said to be incensed by Chinese involvement as they state that there are local companies with powerful international connections who already have the know-how to operate the terminals themselves and boost job creation at the same time.

Looking ahead

Beyond domestic and international concerns, South Africa’s industry needs to make up its mind on its longer-term practical strategy. A hub-and-spoke system for transhipment used to be in contention, but then fell out of favour. Now, it is being reconsidered.

Some analysts believe that South Africa should avoid going down this route because of the geologistics and the costly ramifications of changing the established hinterland network.

Peter Besnard, chief executive of the Association of Ship Operators and Agents, points out that South Africa’s container terminals operate under the Navis system, while the ro-ro/car terminals operate under the G-Cos system. "Both are constantly being upgraded and have simplified electronic working. SARS/Customs also operate scanners and is in the throes of introducing a National Customs Act Procedure (NCAP) that is not fully operational but will in time see penalties for noncompliance enforced.

"The NCAP system has a number of components and is slowly being released into the EDI system that every operator has to be compliant with," says Mr Besnard. "In terms of efficiency, labour is a distinct drawback on efficiency by way of their mindset and manner in which they apply themselves.

"In terms of cost it is largely felt that SA ports are the most expensive in the world but this is arguable in terms of our volatile currency," he adds.

Given the stack date system operated in all container terminals, TFR (Transnet Freight Rail) operates a pretty good service but has lost market share to truckers largely due to the time it takes by rail versus road.

"If a container is uplifted by a trucker it can be at a company in Gauteng by 0800 hrs the next morning,” says Mr Besnard, "versus 27 to 30 hrs by rail. The downside of this is of course the wear and tear on national roads. Trucking has certainly grown but rail generally has seven to eight trains per day both ways to Gauteng. Overall, we are pretty well covered for the movement of containers and other commodities, be it bulk, cars, or steel and so on."

MAKING SMART INVESTMENTS

Nationally, total cargo handled for March was 18.673m tonnes, 1 million tonnes less than the previous month. Predictably, Richards Bay, the main bulk – especially coal – and breakbulk port, handled the most at 46% of the total.

Saldanha Bay (iron ore) was second at 28% and Durban third at 15.6%. The smallest port, East London, accounted for less than 1%.

Durban finished 2018 with a throughput of 2.9m teu, up from the 2.7m in 2017, while the national total was 4.8m teu.

Richards Bay volumes increased to 103m tonnes, up from 100m tonnes in 2017. Coal accounted for 73m tonnes.

Capital investment plans for Transnet include three new dredgers, estimated to be costing $15m, to be operational in Port Elizabeth in July. Berth expansion and deepening at the Durban container terminal will continue once governance issues are resolved. Management problems have been bedevilling Durban for some time, along with continual industry grievances about widespread corruption.

Malcolm Hartwell, a director of international law firm Norton Rose Fulbright and head of transport in Africa, has called for South Africa to "attract direct foreign investment before any of our neighbours do so and permanently relegate us to being a local transport hub. This requires policy certainty and absolute assurances from government that any investment in this country will be protected."

Devlyn Naidoo, a facilitator and customs mentor at the privately-owned Maritime School and Transport College, has called for greater investment in smart technology. Writing in a regional publication, Freight and Trading Weekly, he advocates "taking a leaf out of certain European smart ports like the ports of Hamburg, Rotterdam and Valencia".

Source: Port Strategy