Durban upgrades ahead of new operator

In-Depth

Transnet’s selection of ICTSI as a partner for the Durban Container Terminal Pier 2 faces challenges, but operational improvements are anticipated.

There has been a late twist in Transnet’s process of selecting a new partner for Durban Container Terminal (DCT) Pier 2 in South Africa, with a rival bidder objecting to how the tender has been carried out. However, it now looks certain that a new operator will eventually be put in place, while a string of changes looks like improving operations in the more immediate term.

Transport utility Transnet chose ICTSI as its preferred bidder to partner Transnet Port Terminals (TPT) in operating DCT Pier 2 last July and this March announced that it had concluded financial due diligence on the company, enabling it to finalise the 25-year contract. Transnet also appears to be avoiding the use of the term “concession” to describe what is planned, but it seems likely that ICTSI will take the leading role in operating the terminal.

In a statement, Transnet said: “Transnet’s employees will play a significant role in the success of the partnership and all existing TPT employees will be retained.” This will be the first Transnet container terminal transferred to independent management and is designed to “improve terminal productivity and increase terminal throughput”, according to the parastatal.

The partnership could be extended to 30 years if the North Quay berths are deepened as planned to increase total terminal handling capacity from 2M TEU/year to 2.8M TEU/year. DCT Pier 2 is Transnet’s biggest container terminal and handles 72% of the Port of Durban’s throughput.

However, APM Terminals has challenged Transnet’s decision to select ICTSI, apparently arguing that the Filipino company cannot have met some of the tender requirements to secure its 50% stake less one share. Transnet insists that the selection process complied with governance standards.

Given the scale of corruption scandals in which Transnet has been caught up over the past decade and the close attention paid to any new contract negotiations, it would seem unlikely that officials would have failed to follow the rules in this instance. The company attributes the fact that it has also taken a long time to get to this stage to the thoroughness of its approach and the fact that it is the first time that it has attempted such a process.

The Ministry of Finance and Transnet National Ports Authority (TNPA) must still approve the deal but this is expected to be a formality. The transfer of port facilities to private sector or foreign operators was part of Transnet’s recovery plan agreed with the government of South Africa last year, which included the provision of a key R47B (US$2.5B) guarantee facility.

Roadworks

While Transnet waits for the fate of Pier 2 to be settled, several improvements are being implemented in an attempt to improve operations at the wider Port of Durban. For instance, work is now well underway on the road network around the port and in the city itself. There was uncertainty over the division of responsibility for undertaking the work between Transnet and the city council, but a deal has now been struck to finally undertake the work.

TNPA is investing R233M (US$12.38M) in upgrading the roads around the port that have been damaged by growing numbers of containers transported to and from the port by road over the past few years. A total of 16 roads around Maydon Wharf, three at the liquid bulk Island View facility, and two on Bayhead, are to be rehabilitated.

The acting TNPA Port Manager for Durban, Nkumbuzi Ben-Mazwi, commented: “Embarking on this road rehabilitation journey will ensure that we deliver on our mandate of providing port infrastructure to ensure the port’s efficient functioning as the economic gateway to our South African economy.”

The completion of the new Newlyn PX rail terminal in the Bayhead area should help take more container traffic off the roads, thereby easing pressure on the city and port’s road network. The facility was officially opened by President Cyril Ramaphosa in early April. Newlyn Group’s R2.6B (US$138M) multimodal project will be able to handle containers, breakbulk, bulk, and project cargo, in another example of growing private sector investment in the logistics sector.

“The terminal has also been recognized as a flagship development expanding the logistics capacity of the country as well as enhancing global competitiveness as part of the critical NATCOR trade corridor linking Johannesburg to the port of Durban,” read a statement from the Presidency. “This will also accelerate the government’s objective of migrating cargo from road to rail,” it added.

Citrus demand

Durban has struggled to deal with congestion in recent months, with ship waiting times of 22-28 days reported in the South African media. Transnet has repeatedly pushed back the date it expects to bring vessel waiting times at Pier 2 back to normal, partly because cargo handling equipment, including straddle carriers and ship-to-shore cranes, has been out of action.

However, 45 new fully-assembled tractors from Terberg Tractors are being delivered to Pier 1 and Pier 2 to help the port cope with what is expected to be its biggest ever citrus season. A total of 35 tractors had arrived by late April with the final 10 due by the end of May.

While many parts of the South African economy have stagnated over many years, fruit exports have continued to grow strongly and the country is now one of the three biggest citrus exporters in the world, with a 15% increase in volumes forecast for this year on the back of rising yields.

All of Durban’s container terminals now have dedicated entry lanes for refrigerated containers, while there is scope to increase the number of truck appointment slots in line with demand. Pier 1 now has 1,440 plug points, Pier 2 2,424 and Durban Multipurpose Terminal 277, and 200 more staff have been hired to cope with the citrus season.

MSC opened its new Medlog cold storage facility in Durban in March. Covering 15,000 square metres, it has both chilled and frozen sections with capacity for 8-10,000 pallets, with citrus comprising most of the exports it handles.

Medlog Warehousing & Distribution Manager Jose Carlos Garcia commented: “The building features convertible rooms to accommodate both chilled and frozen cargo, as well as mobile racks to optimise space. The warehouse management system is fully integrated with the PPECB (Perishable Produce Export Control Board) database to ensure regulatory compliance and full traceability.”

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