D-Day for Durban port privatisation

The court hearing on the case by Maersk against International Container Terminal Services, Inc. (ICTSI) and Transnet on the Durban Container Terminal Pier 2 concession process begins today. 

The court hearing is expected to run over two days and is a key part of Transnet’s plans to concession some of its port assets to private operators. 

Durban’s container terminal is the largest on the African continent, but has been plagued by operational issues in the past few years to be ranked it among the least efficient ports in the world. 

Late last year, the Durban High Court temporarily blocked the deal between ICTSI and Transnet to expand and run the container terminal after Maersk challenged the award. 

Maersk unit APM Terminals was among the unsuccessful bidders in a tender run last year by South Africa’s state-owned Transnet to sell almost half of the main terminal in Durban and operate it for 25 years.

It claims that ICTSI did not meet a stipulated solvency measure, which the Philippines-based company denies. 

On the day of the court hearing, ICTSI reiterated its full confidence in the process’s integrity, fairness, and transparency, which was run by Transnet. 

“The challenge of losing bidder Maersk risks delaying critical upgrades to one of South Africa’s most strategic trade gateways,” the company said. 

“Unlike Maersk, ICTSI is not vertically integrated into shipping and port operations, allowing it to serve all shipping lines impartially.”

ICTSI was named the preferred bidder for the DCT2 concession on 11 April 2023, following a tender process that began in August 2021 and progressed through multiple stages of evaluation. 

After ICTSI was announced as the preferred bidder, ICTSI was submitted for further evaluation by an independent financial consultancy, a step that was over and above standard tender processes, the company said. 

Despite this, the implementation of the 25-year public-private partnership between ICTSI and Transnet remains stalled due to a legal challenge brought by APM Terminals. 

This challenge was lodged nearly a year after the preferred bidder was publicly announced and is based on their interpretation of the financial solvency ratio. 

ICTSI claims that this metric was not a disqualifying factor at any stage of the tender process.  

Durban port privatisation

The effective privatisation of Durban’s container terminal is expected to significantly improve the port’s efficiency and expand its operations. 

Head of ports, transport, and logistics at Bowmans Law, Andrew Pike, said that the privatisation of the port could treble its productivity. 

Pike praised ICTSI when it was announced as the preferred bidder in 2023, saying it has extensive experience in running ports in emerging markets. 

ICTSI is a specialist port operator managing 32 terminals in 19 countries, including Brazil, China, Indonesia, the Philippines, Australia, Madagascar and the Democratic Republic of Congo. 

Pike said that 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,” he said. 

ICTSI also has experience in 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 treble, the productivity of Durban’s port.”

However, there are challenges, particularly with ICTSI’s ability to work with Transnet, which is used to being a monopoly and may not take kindly to being told what to do. 

There are also major 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.

ICTSI said that it stands ready to begin implementation immediately and remains committed to partnering with Transnet to deliver improved operational efficiency, transparency, and reliability at Durban Container Terminal Pier 2.