Transnet group COO Solly Letsoalo says the country’s ports are ready to make the most of the Middle East conflict, as ships reroute around South Africa to avoid the dangerous Red Sea and Suez Canal routes.
“We are ready. We’ve got enough capacity on the container side to take on more, and to assist vessels that are in distress and vessels that are bunkering.”
This will be news to Maritime Business Chamber chair Unathi Sonti, who says the bunkering industry has yet to recover from the South African Revenue Service (Sars) impounding tankers and ships during tax disputes in 2023 when they were being rerouted around the Cape after Iran-backed Houthi rebels attacked marine traffic using the Red Sea corridor.
Not to mention the ports of Durban, Ngqura and Cape Town being ranked among the worst in the world in the latest Container Port Performance index, and most congested in the world by the World Bank and S&P Global last year.
“We have queried the methods and data they’re using to compare the capacity and performance of our ports with other ports around the world,” says Letsoalo, speaking as acting Transnet group CEO with group CEO Michelle Phillips on leave.
“In 2023 we were really in trouble with long queues and congestion, but in the past two years or so we’ve eliminated that. You can’t eliminate that if you haven’t had a significant improvement in your performance. If you look at the data for the past two years, you will see that we’re handling a lot more volume at all our ports with minimal queues.”
The South African Association of Freight Forwarders points out there have been only 1.5% more vessel calls at South African ports in the past two years.
Letsoalo concedes this could change as potentially more than a thousand ships reroute round the Cape, but he says it won’t necessarily lead to unmanageable congestion.
“If ships are rerouted and are berthing at our productive berths, that will not happen. If they are berthing there as distressed vessels and taking away capacity for our normal vessels, obviously that creates an unscheduled and unexpected queue. But for operating vessels with cargo, we have capacity.”
The port of Cape Town has recorded a 112% surge in diverted vessels as global companies reroute around the Cape. And the Cape Chamber of Commerce & Industry says Western Cape exporters and agricultural producers are “feeling the weight” of cargo disruptions.
“I’m not saying we have excess capacity,” says Letsoalo. “But with the limited capacity that we have, we are ready to take on some of the vessels that are coming.”
When are they going to expand this limited capacity?
“We are renewing equipment across our port systems. By increasing the capacity of the equipment we have, we can increase the capacity of the ports by handling vessels faster.”
He says the 2023 Transnet National Ports Authority (TNPA) master plan identified where capacity needed to be invested at the ports of Durban, Cape Town and Ngqura, and “this is happening”.
The Maritime Business Chamber says between the Middle East crisis of 2023 and the current Middle East crisis, South Africa has not done enough to prepare for a repeat opportunity such as the one it blew three years ago.
“Where you can say we haven’t done enough is in adding new berths. But we’ve got the capacity that is required for incoming and outgoing freight. Looking at future planning so that you have excess capacity where you build new berths and just have them sitting there waiting for emergencies, we don’t have that as yet.”
The result is that far from positioning South Africa as the alternative ports hub eulogised hopefully by President Cyril Ramaphosa at the National Transport Conference in Midrand last month, the Middle East crisis is likely to enhance the reputation of our ports as the world champions of congestion.
At the moment, the only way berthing requests from vessels “in distress” needing speedy maintenance and servicing can be accommodated is to take “a productive berth” out of circulation, says Letsoalo.
“You take away that capacity from your normal production, and you create a queue of vessels waiting to berth. So, if we get more of these kinds of requests, it can throttle our port system and obviously create congestion.”
But the TNPA has not received a significant increase of berthing requests from shipping lines so far, he says.
That’s the good news, given its obvious lack of capacity to handle such requests. The bad news, according to the Maritime Business Chamber, is that this means rerouted ships are bypassing South African ports because of their abysmal performance record. Global shipping companies don’t believe South African ports have the capacity to rise to the current situation.
Letsoalo concedes they’re not entirely wrong.
“Our port systems are designed to handle cargo freight that is moving into the country and out of the country. That’s what they’re designed for. They’re not designed for a big emergency,” he says.
The emergency confronting global shipping companies because of the Middle East conflict is pretty much as big as such emergencies can get.
If they say business is going to double, then obviously we may not be ready for that. Maybe we can handle 30% more
— Solly Letsoalo
And so, for urgently needed bunkering facilities, refuelling, maintenance, provisioning and port services, their ships are going to neighbouring ports in Namibia, Mozambique, Mauritius and Madagascar, just as they did three years ago.
“In terms of bunkering, ships that want to come in and refuel and move on, or vessels that have problems and want fixing, those are the ones that are most likely to congest our port system,” says Letsoalo.
In spite of this, he insists the TNPA does have the capacity to take on vessels that need bunkering and refuelling, “and we’ve prepared ourselves to handle more”.
South Africa’s bunkering industry is up and running and ready to generate more revenue for the country, he says.
The Maritime Business Chamber says the local bunkering industry has not recovered from the Sars tax dispute that crippled it during the 2023 Middle East rerouting crisis.
Has it been sorted out?
“I wasn’t with Transnet then, so I can’t confidently state it has been sorted out,” says Letsoalo.
He’s also unable to refute with much confidence the Maritime Business Chamber’s bleak assessment of South African ports’ capacity to provide bunkering, refuelling, maintenance and provisioning services to rerouted ships.
“But it’s based on higher volumes than local ports are equipped to handle. Based on those volumes you’d assess us to be not ready. If they say business is going to double, then obviously we may not be ready for that. Maybe we can handle 30% more.”
The Maritime Business Chamber and other stakeholders say Transnet should have been moving much faster on port concessions and private participation across the system to avoid a repeat of the missed economic windfall in 2023.
“We have accelerated that. If you look at the port system and how many private operators there are in all of our ports, you will see that there are a lot more private operators than public operators.”
The corporatisation and capitalisation of the TNPA led by the department of transport in co-operation with the World Bank is making good progress, he says.
“There are teams of people working on that. Obviously, they’re hitting some brick walls on certain aspects of the corporatisation. This has necessitated the participation of the World Bank to resolve some of the areas that are difficult to finalise.”
He says this has nothing to do with the red tape flagged by the Maritime Business Chamber as an impediment to infrastructure upgrades. Lack of funding is the main constraint, he says, not red tape.
“I don’t know of any red tape that would stop projects that are viable. It’s just technical matters of corporatisation that need to be sorted.”
Stakeholders, including the Maritime Business Chamber, have highlighted the need for further and swifter separation of landlord and operator functions at ports to improve competitiveness and transparency in concessions and remove regulatory hurdles.
“The separation has been in effect for many years,” says Letsoalo. “It’s the corporatisation and total annexing of TNPA from the Transnet stable that is still being finalised.”
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