It is ludicrous that Transnet is bogged down in legal entanglements over a tender that should be tossed aside like a jinxed relic. Instead, the organisation should be tackling the mountain of self-created disasters it faces; a lack of investment in equipment and maintenance, resulting in staggering port delays, crumbling railways, rampant cable theft, incompetent management, and a pervasive atmosphere of corruption and theft.
By Themba Khumalo
October 9 marked a shattering turn for Transnet as their aspirations crumbled under the weight of a Durban High Court ruling.
The court’s interim interdict slammed the brakes on their plans to hand over the management of Durban Container Terminal Pier 2 to the Philippines’ International Container Terminal Services Incorporated (ICTSI), leaving Transnet in a state of negotiation paralysis.
Seething with rage, ICTSI has now decided to plough through the chaotic tides of legal battles, regardless of the impending storms.
The company has announced its intention to challenge the Durban High Court’s ruling that has put a damper on Transnet’s agreement for the operation and upgrades at Durban Container Terminal (DCT) Pier 2.
ICTSI has declared that it will unleash every legal weapon in its arsenal to thwart APM Terminals, a subsidiary of the Danish shipping giant AP Moller-Maersk, in what it labelled as APM Terminals’ brazen effort to “hold the Durban port, and indeed the South African economy hostage to their interests”.
On October 9, the Durban High Court delivered a punishing verdict, imposing an interim interdict that effectively halts Transnet’s ability to negotiate or finalise any contracts with ICTSI.
Judge Robin Mossop’s ruling exposed the significant flaws in Transnet’s procurement process, tarnishing the reputation of the state-owned freight and rail operator’s decision-making and raising serious concerns about their controversial choice of ICTSI.
The legal saga that birthed the interim interdict is heading to a crucial second phase. APM Terminals has set sights on convincing the court to overturn Transnet’s controversial decision to award the contract to ICTSI.
All this legal wrangling might seem fine on the surface, but it is bound to derail Transnet, plunging it into a sea of danger. Unfortunately, the nation’s economy will bear the brunt of this debacle, emerging as the biggest casualty.
With legal experts predicting a three- to five-year saga, the Durban Container Terminal—vital for South Africa’s industrial lifeblood—simply cannot afford such a protracted courtroom drama.
Shortcomings of the DCT Bid
The keys to DCT Pier 2 have been tossed to the highest bidder, a decision that is set to inflate terminal handling charges to stratospheric levels. The fallout will land squarely on the shoulders of the government, local businesses, and the broader economy, as these exorbitant fees will choke exports.
Transnet may enjoy a flush of cash, but the economy will be left to foot the bill, and it is a bill that is bound to be astronomical. This arrangement is anything but favourable for South Africa.
The contract went to a terminal operator who will control pricing for Terminal Handling Charges (THC). The operator’s revenue hinges on these THCs, which South African businesses will be forced to pay, meaning any price hike will hit local exporters hard. Terminal operators are, by design, driven by profit motives and will undoubtedly impose steep prices in this monopolistic setup.
A more advantageous scenario would involve a consortium of shipping lines managing and improving DCT Pier 2, as their primary interest lies in profiting from their core activity of cargo transportation instead of THCs.
Roadmap for the journey onward
Transnet must withdraw the tender, given that the ongoing legal wrangling is wreaking havoc and will continue to do so for the country and its citizens. The port is a crucial state monopoly, and transferring it into private hands contradicts the very essence of the National Ports Act.
By the way, the tender does provide for a withdrawal.
The consortium of shipping lines I alluded to must develop a backbone and submit a joint unsolicited bid for the operations of the Durban port. This offer should be based exclusively on the most effective pricing, calculated through a predetermined formula. As I mentioned, shipping lines care more about swiftly turning their ships around than squeezing exorbitant profits from terminal operations.
Furthermore, the shipping consortium must invite a third party to refine this unsolicited bid. It is worth noting that a pair of shipping lines control about 60 to 65% of the container trade in South Africa, making their participation in an unsolicited bid of utmost significance. They carry substantial cargo volumes and will ensure that the ports operate at their utmost capacity. What they envision for DCT Pier 2 could easily be adapted for other container hubs nationwide.
The success of this initiative is heavily dependent on strong collaboration among all parties involved. Transnet will retain authority over the ports, ensuring consistent oversight and strategic direction. Meanwhile, the bidders will step in as financial partners and operational overseers, bringing their expertise and resources to the table.
To assess the effectiveness and efficiency of the bidders, the government, working closely with Transnet, will use a comprehensive framework of established key performance indicators (KPIs). This framework will serve as a benchmark for evaluating how well the bidders meet their objectives and contribute to the initiative’s overall success.
This approach will guarantee that profit margins are scrutinised with clarity, adhering to set formulas. Furthermore, it significantly reduces the risk of a private monopoly disrupting operations at our ports. Given that shipping lines crave rapid cargo transit, should this bid gain approval, I am convinced we could see swift implementation. Importantly, this unsolicited bid guarantees that Transnet’s labour force will stay as is, without compromise.
As Transnet’s top brass engage in farcical dance over the ICTSI tender and other inconsequential matters, it is high time for Minister of Transport Barbara Creecy to step up and take charge. She needs to urgently scrap the bid, ending the pointless legal wrangling that squanders precious time and resources. This bold step would allow her to declutter the mess and pursue more sensible options.
Once the contentious tender is six feet under, Creecy should urgently assemble the industry’s heavyweights, particularly the shipping lines, to hammer out practical solutions for the country’s beleaguered ports.