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By Ciaran Ryan

Moneyweb: Journalist & Host of Moneyweb Crypto Podcast

Transnet says it can clear Durban port backlog by early 2024

Bad weather and decision-making paralysis to avoid adverse findings by the Auditor-General have contributed to the nearly three-week delay in offloading ships.

There are more than 70 000 containers anchored off the coast of Durban, with a nearly three-week waiting period for offloading.

The backlog will only be cleared by February or March 2024, Transnet executives told the media on Monday.

Transnet has toppled Eskom from its perch as the biggest threat to economic growth in SA, largely due to the massive investment in solar power systems that reduced strain on the electricity grid.

Meanwhile, NT55 Investments, operator of the Port of Gauteng, has called for Transnet to be placed in business rescue on the grounds that it is commercially insolvent and its assets exceed a realistic valuation of its assets by a substantial margin.

Transnet is under pressure from every quarter: government, customers, shipping companies, National Treasury, the public and trade unions.

ALSO READ: It will take months to clear Durban port backlog

Shipping companies recently told customers they would have to introduce a congestion surcharge of $210 (close to R2 200) per 20-foot equivalent (TEU) container, starting in December – though Transnet says it is in discussions to seek ways to avoid this surcharge.

Causes of delays

The unprecedented delays at the Durban container terminals are partly due to bad weather in October, resulting in 159 hours of lost production, up from 106 hours for the same reason in September.

But a far bigger problem is the decades-long underinvestment in equipment and lack of adequate maintenance.

“This has resulted in a backlog in infrastructure both in rail and ports,” said newly appointed Transnet chair Andile Sangqu. “We are busy working on funding arrangements that will assist in procuring the necessary infrastructure.”

This is a R50 billion infrastructure problem that will not be fixed overnight.

First, Transnet will have to source the funding at commercially competitive rates, presumably with some backing from National Treasury. Another way to do this is to concession parts of the business to private operators who will provide the funding and run the operation, provided they can do so with a relatively free hand.

Philippines-based port operator International Container Terminal Services Inc (ICTSI) has been selected as the preferred bidder to take over the running of Durban Container Terminal Pier 2, which handles about 70% of Durban’s throughput and 46% of SA’s port traffic. ICTSI is busy with its due diligence, which will inform the next step in the process, said Earle Peters, managing executive at Durban Terminals.

Transnet Durban port backlog
Source: Transnet

The chart above for Pier 2 shows waiting times are unlikely to improve over the next 14 days as we head into the Christmas season.

Peters told media that immediate steps to alleviate the backlog included re-routing vessels to one of the four other terminals in Durban and adopting two 12-hour shifts a day. This has already been implemented at Pier 1 and will be introduced at Pier 2 from 1 December, allowing for better continuity of operations.

On a positive note, Transnet has committed to providing bi-weekly updates on the progress being made to clear the backlog at the Durban Container Terminals.

Decision-making paralysed

Another revelation from the Transnet media presentation on Monday was that decision-making was paralysed by staff attempting to avoid adverse findings by the Auditor-General, who raised several concerns in recent years, mostly around the valuation of assets, poor internal controls and material irregularities in awarding certain contracts for equipment leasing.

Acting Transnet CEO Michelle Phillips said staff were careful to avoid falling foul of National Treasury, which had issued several instructions in recent years.

People had become “overly cautious in making decisions” – but several of these instructions have been lifted, allowing for quicker decision-making, particularly in areas such as procurement.

Other immediate improvements include adopting the Navis container management system, awarding maintenance contracts to Transnet Engineering, and extending maintenance overage times from eight to 24 hours a day. The lead times for spares replacement will be reduced to 24 hours, cutting out a large part of the port downtime.

Longer-term, new and refurbished equipment will have to be sourced. Four new ship-to-shore cranes will be operational by 2025, and 36 straddle carriers starting in 2024.

ALSO READ: Durban Port congestion sparks chaos

The vessel backlog should be cleared by early 2024, working within the limitations of the existing equipment at Piers 1 and 2, says Transnet.

Andrzej Kiepiela, co-ordinator KZN Growth Coalition, said in an SAfm Market Update with Moneyweb interview that he had never seen Durban being more handicapped than now.

“Shipping lines [are] charging a surcharge, and the delays are about three weeks, so retailers [are] not getting their stocks into the stores. Shipping lines [are] starting to avoid entering SA ports, choosing neighbouring ports instead.”

Shipping lines also reportedly offered to purchase needed equipment at the Durban port terminals to reduce the vessel backlog with a view to recovering the expenditure later.

Richards Bay chaos

Gavin Kelly, CEO of the Road Freight Association, told Moneyweb that Richards Bay is in chaos with thousands of trucks trying to get into and out of the port area.

“So the whole infrastructure in that port process of loading or offloading or getting onto ships needs to have an interface between the trucks and this loading system.

“The roads around the port and the access points into the port just cannot deal with these thousands of vehicles that are trying to get in and out because, of course, there’s other cargo that needs to get into the port that was traditionally coming by road.

“Around the world, people are looking at us, and hopefully not laughing at us, but saying, ‘if I cannot get my goods out of South Africa through ports, I’m going to use a different port, or what the heck, I’m going to go and buy it from somewhere else’,” added Kelly.

This article was republished from Moneyweb. Read the original here.

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