Transnet crisis will cost South Africa 5% of GDP

Transnet’s deteriorating performance will cut South Africa’s economic output by 5% in 2023, with increasing delays increasing the cost for companies to import goods and preventing the country’s exports from getting to market. 

Durban’s two piers lost a combined 265 operational hours in September and October, causing more than 20 vessels to wait at outer anchorage, with berthing delays averaging up to 18 days.

The port is Transnet’s largest container terminal, handling 46% of the country’s total port traffic and over 60% of its container traffic. 

The port is already facing severe congestion and hefty fines from shipping lines. The breakdown of essential equipment has triggered a crisis at the port, a vital artery for the country’s container traffic.

So far, Transnet estimates that it has lost R160 million since September and will continue to lose millions more from the delays. 

This is relatively financially insignificant to Transnet as it rakes in over R70 billion in annual revenue but severely affects the country’s ability to conduct trade. 

This negatively affects the country’s financial health, trade balances, and potential economic growth. 

Transnet estimated that it would take four and a half months to clear the backlog at the Durban harbour, with 63 vessels anchored and waiting to be processed. 

Head of logistics at Investec, Denys Hobson, said that South Africa’s port and rail utility will cost the country 5% of its GDP in 2023. 

“That is a really big hit for our economy, never mind the hit to investor confidence in South Africa,” Hobson said to Newzroom Afrika. 

He added that the delays at the country’s busiest container terminal have come at the worst time for many businesses. 

In particular, retailers will come under significant pressure as they will most likely be unable to maintain their existing profit margins nor get stock on sale for the festive season. 

Hobson said there are few options available to companies to minimise the impact of Transnet on their businesses as it is too late. 

Companies can use alternative ports, such as Maputo, Cape Town, or other African ports, but these come with additional costs and potential delays. 

Cape Town is also handicapped by a lack of capacity, and it is not ideal for many shipping routes and quick transport of goods to Gauteng. 

“We do not expect any major improvements any time soon. It is going to take a long time to clear this backlog,” Hobson said. 

There is currently a 15 to 18 days wait at Durban, while performance at ports in Cape Town and Coega is improving, but they are constrained by a lack of capacity.