SA’s port and logistics crisis: 11 things to understand


SA’s port and logistics crisis: 11 things to understand

This week, almost 100 vessels were anchored outside ports, victims of a logistics nightmare that is costing the economy more than R1bn a day. ANNELIESE BURGESS tries to understand what is going on and where the solutions lie.


State of our harbours

#1 Durban: Too few cranes

With containerised cargo, a vessel berths then containers with imports are moved off and export containers moved on.

But in Durban and Cape Town, unmaintained and broken equipment has decimated the harbours' capacity to handle the required volumes. 

Durban is our busiest harbour and our biggest crisis. On Monday, 22 vessels with 55,084 containers were awaiting berthing slots.

Durban uses straddle carriers to move containers and the harbour was designed with 108. On a good day, only 62 work. In a recent week, availability dropped to 51.

“This is costly equipment," says Dr Juanita Maree, CEO of the South African Association of Freight Forwarders (SAAFF). “Fleet maintenance requires a constant programme of servicing, refurbishing and overhauling your equipment. This was not done, mainly due to lack of money."

Equipment failure is the number one reason for the disaster in Durban.

But another often overlooked element that puts additional pressure on the harbour is the closure of the Sapref refinery, says Maree. “Of the 58 vessels in the queue today, 30 are containerised, 11 are dry bulk like maize and wheat, and 19 are liquid vessels bringing in oil."

#2 Gqeberha and Ngqura: Mooring equipment

Gqeberha harbour handles 421 containers a day. Ngqura at Coega handles 1,200. Their joint backlog is 10,720 containers. Mooring equipment needed to stabilise berthed vessels in these windy ports is not up to standard and there has been a run of bad weather.

#3 Cape Town: bad weather and broken cranes

Cape Town has also had to contend with bad weather, but its main issue is cranes. It uses 30 rubber tyre gantries (RTGs) but only 16-18 are operational. Seven refurbished RTGs will arrive from Los Angeles at the beginning of December.

But severe damage has been done. International shipping lines are trying to circumvent our harbours because the delays affect their global schedules and rotation path.

The container backlog in Cape Town is 1,359 — modest in comparison to Durban but not an indication of better productivity; Maersk, one of the world's biggest shipping companies, has decided to dump Cape Town as a primary port of call for mother vessels and will tranship cargo to and from Port Louis in Mauritius using feeder vessels.

Mike Walwyn, director of maritime affairs at the SAAFF, says: “By using efficient ports like Port Louis as hubs, they can tranship South African cargo using feeder vessels, thereby not interfering with the schedules of their mainline ships."

Years in the making

# 4 Lack of skills and toxic work culture

The equipment failure in our ports is the tipping point of a long-brewing problem stretching back over at least a decade, says Prof Jan Havenga, professor in logistics at Stellenbosch University. 

“If we go back just two years, then less than 10% of Transnet's problem was our ports and more than 90% was the rail system. Very suddenly, the ports have also disintegrated. The equipment is in terrible condition because it was not upgraded when required or maintenance was not done."

But there is another element, he says: people.

“You can have an operational crane but the operator needs to arrive on time and shift changes must occur seamlessly. And in many places in Transnet, a sense of stewardship does not exist any more; there is a don't-care attitude. 

“You also have a whole level of leadership that has been hollowed out, and there has been a massive skills drain. People weren't allowed to do their jobs; they were chased away and given packages.The toxic culture in Transnet has had a massive impact on people's ability to do their work or to want to do their work."

# 5 Collapse of rail leads to destruction of roads

Rail infrastructure has collapsed due to lack of maintenance and investment, says Havenga. “I hear people hammering on about us not having enough locomotives, but I don't think that is the real issue. At one point, we were transporting 200 million tonnes of cargo with fewer locomotives than with the 150 million tonnes they managed to move last year. The real issue is that the infrastructure has collapsed."

This has caused an additional problem at Durban and Richards Bay harbours, which were designed to work with rail freight. Now, most cargo travels by road and the harbour entrances and exits cannot handle the volume of trucks. The result? Massive congestion and destruction of the roads.

“Our roads were not designed to cope with these loads. When your design capacity is correct, a road has a + 40-year lifespan. But with the current overload, that is reduced to 10 or 15 years," says Maree.

“The N4 corridor was designed to handle 600 trucks daily, not the 1,800 we see now. Certain towns like Komatipoort and Hoedspruit have resorted to not allowing tipper trucks because they destroy the infrastructure that municipalities must fix."

This also explains the 27km truck queue on the Mozambique border at  Lebombo in Komatipoort. 

“That is an export corridor," explains Maree. “On the South African side, it takes us four minutes to process a truck, but on the Mozambican side it can take an hour and a half, and the congestion will show up on our side."

The economic implications

# 6 Delay penalties 

The first impact is shipping lines charging surcharges for delays at our ports. SAAFF says the 96 vessels waiting outside ports cost the economy R98 million daily. 

“We are being charged between $200 and $ 210 per container, the cost of which is passed on to the market. And because cargo is stuck, and there is no prospect of clearing this backlog quickly, retailers must resort to air transport to bring buffer stock into the supply chain," says Maree.

“And it goes without saying that if you have to bring two to three weeks of buffer stock into the supply chain, it has cash-flow implications, and many small and medium-sized enterprises aren't in a position to do this."

# 7 Fruit exports 

Walwyn says transhipping through Mauritius will lengthen transit times and increase costs for cargo owners. “We are about to go into our peak fruit exporting period, where shelf life is critical, so the extended voyage time could have a major negative impact on the final prices realised, not to mention the negative cash-flow implications.” 

Maree says another concern is the negative impact on South Africa's reputation. “It's a hazardous situation because it affects Brand SA."

In the dog-eat-dog world of international trade, lack of reliability is exploited by competitors. South Africa has had an outstanding fruit season; efficiently getting the crops to market is vital.

“If Europe sees we are struggling with supply chains, we risk losing our export market to places like Brazil or Argentina," says Maree. 

This seems to be what happened when problems hit citrus exports and Spain jumped into the vacuum.

“There is a lot of global competition. Nobody is going to take our goods just because they like us. Europe would rather support their supply chains. So we have to be very careful," says Maree.

# 8 Richards Bay is bleeding money

According to Havenga, the most “stupid thing" Transnet did was not to prioritise maintenance of the coal line to Richards Bay, where it could have made the most money and used it elsewhere. “The signalling system on that line has not been revamped since 1976," he says.

“That rail line could move 75 million tonnes a year. Last year, they only managed to move 50 million tonnes. At R5,000 a ton, it means our economy lost R125 billion, which is shocking."

#9 Massive knock-on effect

Havenga says the overall cost to the economy was more than R1 billion a day before the ports fell apart, so it is much higher now.

There are three parts. First, the money you don't earn due to the collapse of logistics infrastructure. One example would be a mine unable to get minerals to ports for export.

The second element is paying more for transport than you should. An example is the five-fold escalation in transport costs when coal goes by road instead of rail. 

Then there are externalities — the roads that are destroyed, the increase in accidents, and job losses.

“If a mine loses money there are job losses. If people lose their jobs, they don't buy from local shops, and they close. They don't buy cars, so dealerships shut down," says Havenga.

“It is a snowball effect, and there is a way to make that calculation, which we have done. It is now far more than R1 billion a day."

Fixing the problem

#10 Bring in the private sector

There are no quick fixes. SAAFF predicts the congestion will be cleared only by the end of January or early February.

But in the long term, bringing in the private sector is essential, says Maree.

“And we need to segment the activities. Currently, Transnet manages all three functions in the six commercial harbours. Transnet National Ports Authority (TNPA) manages the infrastructure and marine services like tugboats and helicopters. Transnet Port Terminals manages terminals and Transnet Freight Rail manages freight rail. All three of these divisions are compromised."

Havenga adds: “It is critical that TNPA be delinked from terminals. They need to be an independent entity. The president promised three years ago that it would at least get its own board, and they have now been appointed but not begun their work. We are one of the very few countries where the same company handles these two functions.

“We should concession our harbours and rail networks as we do with Sanral. The government remains the custodian of the infrastructure — harbours and rail track — but you give concessions to private operators to allow them to run trains and manage functions like terminals and tugboat services. In the same way, you allow private trucking companies to move cargo by road."

“Yes, government stays the landlord," says Maree. “But you allow private operators to manage the terminals, which, if different ports compete with each other, will also encourage productivity. The same with rail. The government owns and maintains the rail network but you let private operators operate locomotives, wagons and signalling. The private sector is good at these things. Let them help."

#11 This is our last chance

We had a good harbour and rail system, says Havenga. “These are difficult things to break, but state capture and the previous Transnet management practically destroyed them. It is frightening to see how much is broken; fixing it will not be easy.

“We are off to a good start with the two top-notch interim leaders brought in to help Transnet and the rail division. But this has to extend to the rest of the entity. Cadre deployment has to stop. This is our last chance.

“And if we can get the systems to work, then we can fix the infrastructure because there is more than enough affordable development capital. It won't be easy but it can be done."

The alternative, Havenga says, is a total collapse of the economy. “It is over if we don't get the right people now. Apart from the R1 billion a day we are losing now, we stand to lose another 500,000 jobs if we don't fix our logistics. And our economy will not survive that."


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