Port Crisis: DA proposes urgent steps to end South Africa’s trade and logistics paralysis

27 November 2023

The Presidency

Together with the DA’s Shadow Minister of Public Enterprises, Dr Mimmy Gondwe, I have just concluded an extensive aerial oversight of the Durban harbour and surrounding ocean by helicopter to determine the extent of the South African port crisis which threatens to paralyse South Africa’s container terminal operation, halt international goods trade, and paralyse the retail economy ahead of the festive season.

I can confirm that the situation is disastrous.

The 60 000 containers aboard stranded vessels bordering our Eastern coastline are now piling up due to the collapse of the Durban port at the hands of Transnet which has failed to maintain and upgrade port infrastructure for decades.

This despite the announcement of Operation Vulindlela in October 2020, a joint initiative between the Presidency and National Treasury, to improve the operational performance of the multimodal and bulk freight rail network and port system.

Three years down the line, with congested ports, a dysfunctional freight rail network and truck queues stretching kilometers on end, the verdict is clear, Operation Vulindlela has failed.

According to the 2021 World Bank Index of Container Port Performance, which ranked the efficiency of 370 maritime ports around the world, Durban currently sits at 364 and Cape Town at 365.

This means that under President Ramaphosa’s leadership, South Africa is just about the worst performing country in container port performance globally.

President Ramaphosa admitted to this catastrophic failure in government and Transnet operational leadership during his visit to Richards Bay port on Thursday last week. Ramaphosa essentially confirmed that Operation Vulindlela had failed to rid our ports of incompetence, maintain Transnet infrastructure, and implementation consequence management. What was his solution to the problem? The President ignored the port crisis and opted to open a new cruise terminal at the Durban Harbour instead. It is clear that the President and this government are completely out of touch with this crisis.

This is what needs to be done to resolve this problem as a matter of urgency:

1. President Ramaphosa must urgently establish a Port Performance Task Team, which must include private sector stakeholders and international industry experts, to urgently undertake to draft and implement a port performance recovery plan where the National Logistics Crisis Committee has dismally failed to do so.

2. Parliament must urgently establish an ad-hoc committee, comprised of the Departments of Transport, Public Enterprises, and Finance, to fast track solutions and remove legislative, financial, and regulatory bottlenecks to port recovery. This must take place before the end of the year – parliament cannot ruse until this crisis is urgently addressed.

3. President Ramaphosa must collaborate with the private sector to salvage Transnet by commencing the process towards privatisation of this state-owned entity for the economic well-being of our country.

4. President Ramaphosa must urgently brief parliament on the state of South African ports including the immediate steps his government will take to resolve this crisis which threatens the collapse our economy.

Implications of the port crisis on the economy

The cost of this crisis is gargantuan and threatens not only the performance of South Africa’s already ailing economy, but our desirability as an investment destination for international trade.

South Africa is now trailing investor-friendly governments elsewhere on the African continent which see the private sector as a rightful ally in their growth and jobs agendas.

Just last week, Kenyan President, William Ruto, announced that 35 state-owned companies will be privatised to enhance performance and unlock immense economic potential. Here in South Africa, the corrupt and archaic fist of state under Ramaphosa and the ANC continues to destroy South Africa’s economic prospects.

The port crisis will be financially devastating for South African businesses who are waiting for their products that are stranded at sea. Retailers who were targeting Black Friday sales have lost an economic opportunity and similarly, tens of thousands of containers will only now be delivered after Christmas- missing a critical sale opportunity.

Accumulating surcharges as ships wait to berth will be passed on to consumer, further compounding inflationary pressures. For businesses that had paid up front for containers and not being able to realise sales from their imported products, will increase financial stress and possible job losses due to elevated interest payments.

Intermediary importers who supply retailers be severely impacted by the unrelenting backlog at ports. There is no question that many containers have sell by dates, which may force some chain stores to cancel orders not delivered in time, exerting further cost pressures to the importer. With many importers already living hand to mouth - within the context of loadshedding, water shedding and an underperforming economy, cancelled orders for products stranded at sea will be the final straw and could see many businesses shut down.

With Eskom increasingly becoming reliant on diesel to power its Open Cycle Gas Turbines, failure to procure the diesel supplies on time increases the risk of elevated stages of loadshedding. The return of stage 6 loadshedding means that Eskom needs keep the supply of diesel flowing, failure to which the grid may become severely strained.

The Ministry of Public Enterprises

This aerial oversight of the Durban harbor brings South Africans face to face with the consequences of the government’s failing state led SOE model.

There simply isn’t enough capacity to provide berthing slots for ships that want to offload their cargo and the presence of idle straddle carriers, to move containers, confirms widely held fears of unmaintained and broken equipment.

While Transnet has sought to blame the weather for exacerbating the port crisis, the truth it is a disaster that has been years in the making:

- Experienced Transnet employees who have left the entity have never been replaced and this has resulted in crippling shortages of skilled personnel, low staff morale and the appointment of inexperienced Executives.

- In the 2022 Medium Term Budget Policy Statement, Treasury allocated R5.8bn to Transnet for repair and maintenance of its infrastructure but a year later, the entity is sitting with an infrastructure maintenance backlog.

- Transnet has run its operations on a debt fueled binge that has seen its liabilities escalate to R130 billion. Unable to service its debt, and inspired by the Eskom debt takeover, it now wants taxpayers to shoulder its debt load.

- According to the progress report on Operation Vulindlela announced in May this year, Transnet was supposed to establish a separate Infrastructure Manager within Transnet Freight Rail by the end of October. No updates have been given on this initiative.

- Industry practitioners and stakeholders in the logistics sector have warned Transnet of the impending port and rail disaster but no mitigation plan was put in place to avert it.

- Despite repeated calls from the DA, Transnet has still not tabled its turnaround plan for expedited parliamentary oversight.

The DA has long advocated for private sector participation in state owned enterprises to improve efficiency and increase productivity. When Transnet announced that they will be opening their rail network to third party access and entering into joint ventures with private sector players for port management, we were cautiously optimistic that sense had finally prevailed.

However, since then, Transnet has not followed through.

There has been no update on the deal that Transnet entered into with the Philippines-headquartered International Container Terminal Services Inc which was the preferred bidder for a 25-year joint venture to develop and manage Durban Container Terminal Pier 2 and neither has there been progress reports on third party access to Transnet’s rail network.

DA proposals to enforce accountability

The DA has taken proactive steps to get Parliament involved in enforcing accountability on the port crisis.

Following DA submissions on the impact that the crisis was having on the economy, the Portfolio Committee on Public Enterprises has agreed to conduct oversight visits to the Durban and Richards Bay Ports from 7 to 8 December 2023.

It is imperative that Parliament plays its part to fill the leadership void that has been created by an ineffective ANC government and now threatens to collapse the economy.

We look forward to this oversight to get to the bottom of this crisis.

We reiterate our call that Minister Pravin Gordhan should be fired with immediate effect. His tenure has been economically devastating, from Eskom’s inability to keep the lights on to the Transnet port and rail crisis that is threatening to torpedo South African multi-billion rand export economy. Gordhan has given up all the pretense and is simply unbothered by the economic devastation being inflicted by failing SOEs. He is now a liability to the country’s economy and the longer he remains in his position, the economic crisis that South Africa is currently facing will only get worse.

The DA cautions Transnet Executives that their plan to stop accepting trucks carrying coal to the port is counterproductive and detrimental to the sustainability of commodity exporting businesses.

The scale and depth of the port crisis is such that Transnet should be clearing the existing backlogs whilst also ensuring that the trade and export sector continues to function.

Issued by John Steenhuisen, Leader of the Democratic Alliance, 27 November 2023