The privatisation of Durban’s container terminal will significantly improve productivity and, in time, resolve the severe backlogs at the port.
Durban 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.
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 utility blamed poor weather, equipment breakdowns, and shortages for the significant delays in processing ships.
However, the head of logistics at Investec, Denys Hobson, said this crisis has been looming for some time as Transnet’s mismanagement, corruption, and lack of maintenance are the root causes.
“Warning signs were there. We cannot beat around the bush – corruption was alive and well for a period of time at Transnet, but it is also a case of poor management and leadership,” Hobson told Newzroom Afrika.
The utility has known for years that its equipment is outdated and has failed to maintain its machinery adequately, resulting in repeated breakdowns.
International Container Terminal Services Inc. (ICTSI) is set to take over Durban’s container terminal after entering into a 25-year partnership with Transnet earlier this year.
The Philippines-based company is the largest independent terminal operator in the world, with operations in over 20 countries.
Hobson said ICTSI has vast experience managing ports, increasing their efficiency, and modernising them.
Their takeover will make a difference and improve the performance of Durban’s container terminal, but it will take time.
Head of ports, transport, and logistics at Bowmans Law, Andrew Pike, is far more optimistic about the impact of the privatisation of the container terminal.
Pike said ICTSI’s track record resulted in it beating out six competing bids for the container terminal.“If you look at their ports, it is really world-class. They are a very good partner to go with.”
ICTSI also has experience dealing with unionised labour in the Philippines, enabling the company to operate effectively with Transnet’s heavily unionised workforce.
Transnet will have a 50+1% share in the joint venture, and the utility will remain the employer of workers contracted out to ICTSI.
ICTSI will have management control of the company and “will be fairly free to introduce change”.
Pike expects the company to overhaul the port’s management structure and operational systems, focusing on automation and digitisation. This will increase the productivity of the port immensely.
“If you look at some of their performance figures from around the world, it is not unreasonable to expect them to double, if not triple, the productivity of Durban’s port.”
This does not mean ICTSI will have it easy, as there are at least five months of negotiation before the deal is completed.
“Transnet is used to running a monopoly, and they will not take kindly to being told what to do,” Pike said.
There are also significant problems with getting goods to and from the port as Transnet’s rail infrastructure is collapsing.
“Without an efficient logistics system, a well-functioning port is a bit of a waste of time,” Pike said.