South Africa is currently in the midst of a major crisis at its prominent ports, with the Port of Durban being particularly affected. and significant backlogs leading to delays in cargo off-loading.

The repercussions extend far beyond the immediate shipping industry, impacting trade, regional logistics, and even the broader economy. This article explores the root causes of the crisis, its far-reaching consequences, and the interim and long-term solutions being implemented.

The Backlog at Durban Port

The backlog at the Port of Durban is a result of a combination of factors, including lack of equipment such as gantry cranes, poor port performance, delays in offloading containers, and a lack of efficiency in cargo handling. According to Transnet, it will take approximately 18 weeks to clear the 63 vessels anchored off the Port of Durban. This has raised concerns among importers who fear missing the Christmas rush, impacting businesses and consumers alike.

* lATEST pORT STATISTICS (AS AT 23 NOVEMBER 2023)

Transnet's initiatives

Transnet, the state-owned company responsible for South Africa's ports and rail infrastructure, has outlined several initiatives to tackle the backlog. Plans include:

• Increasing container handling capacity at Durban Container Terminals (DCT) Pier 1 and Pier 2.  New recruits and a fourth shift have been added to expedite the offloading process, while a maintenance service contract aims to enhance equipment reliability.

• The Port of Cape Town requires approximately 28 gantry cranes to meet its operational needs. However, on a recent working day, only 18 cranes were available, and unfortunately, 5 of them broke down during the same day. There are currently 8 gantry cranes en route from Los Angeles to Cape Town, which will help alleviate the crane shortage.

TRADE AND REGIONAL LOGISTICS IMPACT

The port crisis has significant knock-on effects, affecting trade across the region.

1. Border Crossing Standstill and Alternative Routes:

1. • The Lebombo border crossing between Komatipoort and Mozambique experienced a standstill due to clashes between truck drivers and taxi operators.
   • Mining companies, facing significant revenue losses due to port congestion, are seeking expedited routes to Mozambican ports.  The loss of revenue will affect businesses and have a substantial impact on the overall economy.
   • The Logistics Co (TLC), indirectly owned by Old Mutual's African Infrastructure Investment Managers, plans to establish a dedicated truck crossing near Komatipoort to alleviate congestion. TLC manages a rail terminal on the Mozambican side.
     
     

2. TLC's Border Crossing Project:

   • TLC's project involves upgrading an existing service road alongside a railway line and constructing a truck staging area with customs and immigration facilities.
   • The proposed crossing aims to process up to 500 trucks daily, easing congestion at the current Lebombo border post, where up to 1,800 trucks arrive daily.
   • Initial focus on accommodating TLC-operated trucks transporting magnetite into Mozambique, with subsequent transportation by train to ports in Maputo Bay.
     
     

3. Impact of Port Crisis on Trade and Economy:

   • The congestion at South Africa's ports, particularly the Port of Durban, is causing trade disruptions across the region.
   • Delays in cargo offloading have led to fears of missing the Christmas rush, with ships taking 20 days or more to offload cargo, three to four times longer than average.
   • Prominent retailers such as Mr Price, Toyota, and Defy have been directly impacted by the crisis. In addition, Ford has been forced to resort to flying in vehicle parts to mitigate the effects of the backlog.
     
     

4. Macro-level Connectivity Alternatives:

   • Due to global geography, there are two intercontinental connectivity alternatives: those linking Asia and Europe and those linking the Pacific and Atlantic Oceans.
   • The famed Panama Canal, historically the shortest route between the Atlantic and Pacific, is now confronting challenges as reported regularly by Ziegler One. After nearly a century of serving as a vital transoceanic conduit, the canal faces both existing and potential maritime alternatives.
   • The Cape Route through South Africa is also offering an alternative to the increasing trade relations between Brazil and Argentina with China which - if implemented - will increase inefficiencies even further. And there goes another source of revenue down the drain thanks to the inefficiencies of South African ports.
     
     

5. World Bank Report on Port Performance:

   • South African ports rank poorly on the World Bank's Container Port Performance Index 2020, causing annual challenges for exporters.
   • Transnet, the entity responsible for overseeing rail and port authorities, has experienced significant financial setbacks, resulting in growing discontent among various sectors. In its most recent financial year, Transnet recorded an annual loss of 5.7 billion rand ($304 million).
     
     

6. Potential Loss of Revenue and Regional Developments:

   • While South African ports are in a crisis, other African countries are forging ahead with major Container Terminal development such as DP World development at Dar es Salaam port, Grindrod flags expansions at Mozambique’s Port of Maputo, AD Ports Group and Walvis Bay new development on which Ziegler One reported recently but to name a few. 
     
     
   • Public-private partnerships in Namibia and Mozambique are luring ships away from South African harbors. Another opportunity for generating revenue and creating jobs within the South African economy lost.
     
     

7. Job Losses and Creation Concerns:

   • The port crisis and potential revenue loss pose a threat to job stability and creation in major economic hubs like Johannesburg, Cape Town, Durban, Pretoria, and Gqeberha.
   • Approximately 90 percent of South Africa's economically active population resides in these cities, representing significant areas of economic activity and consumer markets.
     
     

8. Consumer Impact:

   • Over burdened consumers very likely to feel the pinch further. John Lawson, CEO of the Cape Chamber of Commerce & Industry, warned that consumers would pay the price of government delays on implementing proposed solutions.
   • The inefficiencies of the South African government are increasingly causing a financial emergency for consumers.

Global Shipping Lines React

Major shipping companies, including MSC, have imposed congestion surcharges due to the backlog and difficult operating conditions at South African ports. This has led to increased costs for importers and exporters, further straining the already challenged logistics infrastructure.

About 70,000 shipping containers are stranded on ships off Durban and Cape Town, prompting Maersk to stop using Cape Town as a port of call on a major Far East route. This decision has caused concern among businesses, who say Transnet's inability to fix or replace equipment is holding the economy hostage. Maersk will now transship all Cape Town cargo in Port Louis, Mauritius, and impose a congestion surcharge of R8k per incoming container. Talks have been held between businesses, the government, and shipping line representatives. Cape Town port currently lacks the necessary gantry cranes and is awaiting the arrival of 8 cranes from Los Angeles.

TRANSNET'S REFORM AGENDA

Transnet's reform agenda, requiring R122 billion over the next five years, aims to address the root causes of the port crisis. The plan involves private-sector investment to improve infrastructure, enhance performance, and increase competitiveness.

According to Transnet Group CEO Portia Derby, the involvement of the private sector in Pier 2 is an essential driver for transforming the Port of Durban into a prominent container hub port. 

Transnet expresses their satisfaction with having a globally recognized player like ICTSI on board to lead this initiative. According to Transnet, their partnership with ICTSI will significantly enhance the logistics at South African ports and drive trade to and from the country.  However, it has postponed finalization of the contract until April 2024.

Conclusion

The ongoing port crisis in South Africa demands swift and effective solutions to prevent further damage to the economy. Transnet's reform agenda, private-sector partnerships, and strategic initiatives such as the joint venture with ICTSI provide a glimmer of hope for long-term improvements. However, immediate challenges persist, and the nation's businesses and consumers remain at the mercy of a complex and interconnected logistics network that requires urgent attention and decisive action.

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https://www.treasury.gov.za/legislation/pfma/treasuryinstruction/National%20Treasury%20Instruction%20No%204%20of%202022%202023%20PFMA%20Compliance%20reporting%203%20January%202023.pdf

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https://www.fruitnet.com/eurofruit/dismal-report-on-state-of-south-african-ports/256256.article

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https://coalmandi.in/in-detail.php?did=399#:~:text=The%20project%20involves%20upgrading%20an,on%20the%20outskirts%20of%20Komatipoort