Transnet port crisis starting to bite

The poor performance of Transnet’s ports across South Africa is increasingly resulting in shortages in the supply of goods critical to the functioning of local businesses. 

This hampers their ability to operate effectively, resulting in reduced income and, in some cases, job cuts. 

Most of the focus regarding the impact of Transnet’s port crisis has been on the inability for miners to export their commodities to global markets. 

This has cost the South African economy billions in lost economic output and foreign exchange earnings, with mining companies resorting to trucking their products to Maputo for export. 

However, the inefficient operation of South Africa’s ports also affects companies that import goods that are sold to local consumers or need foreign equipment for manufacturing purposes. 

Retailers, in particular, have been hit hard, with many relying on imported clothing from China and other Asian countries to stock their stores. 

They have been affected to varying degrees by the problems depending on their local manufacturing capacity. 

Woolworths noted recently that it is experiencing a shortage of ingredients for some of its products sold at its cafes due to inefficient logistics. 

The retailer also struggled during the festive season in 2022 and 2023 to source clothing stock, leading to subdued sales. 

Aside from problems with the rail network, logistical problems at South Africa’s container terminals have also caused havoc to the economy, the Bureau for Economic Research (BER) said in a note. 

These problems not only hamper exports but also constrain manufacturers that rely on imports as input into production. 

The container terminals in Durban and Cape Town have been primary sources of concern, although there has been some progress since the end of last year. 

The Absa Purchasing Managers’ Index (PMI) survey, conducted by the BER, asks companies to indicate the direction of change in overall purchased inventory quantities. 

It creates an index that tracks the level or volume of overall purchased stock of materials and goods used in normal business or activities.

Aside from a momentary uptick in April 2023, the index has been in contractionary territory (below 50 points) since the start of last year. 

Coupled with comments from respondents bemoaning import delays, the low stock levels likely reflect the difficulty of getting goods in and out of South Africa’s harbours.

This contraction can be seen in the graphs below and its impact on businesses, which are increasingly citing raw material shortages as a constraint on their activities.

Turnaround on track

As the BER noted, there has been some positive reform at Transnet’s ports to improve their efficiency and ease the flow of goods into and out of the country. 

In June, a World Bank report ranked Cape Town’s container port as the worst performer among 405 assessed globally, with three others in the nation among the bottom 15.

Transnet — which is under pressure to improve its performance as exports ranging from food to minerals have slowed due to the bottlenecks — disputed the findings. 

Since then, the state-owned enterprises has significantly cut the wait time for vessels at South Africa’s ports and shortened the turnaround for docked ships. 

In a recent interview with PSG, Transnet CEO Michelle Phillips said the company is simply too big to fail and has to be turned around. 

“Certainly, with this new leadership team, the board, organised labour, and our customers, we’ve really rallied together to ensure that this organisation does not fail, and she will not fail,” she said.

Since she was appointed interim CEO in October 2023, Phillips has led a recovery plan for the struggling utility that is now starting to bear fruit. 

Phillips explained that it is an 18-month recovery plan, of which the first six months have been completed – with great success.

“We’ve seen the stabilisation and, in fact, some turnaround in our operations and in our financials. We’ve seen the positive impact of the kind of work that we’ve been doing,” she said.

The next “phase” of the turnaround will run until the end of the 2024/25 financial year.

“We’ve got a transformation leg together with a recovery leg. It’s not an easy place to be,” Phillips said.

“There is a lot of work to be done, and we are by no means out of the woods, but we are certainly beginning to see some green shoots.”