In late November the fruit-growing industry waited nervously as quality-grade produce sat in the port of Cape Town, getting older by the day. It was the beginning of the export season, a time when farmers rush to get their fruit to overseas markets. But there was a problem. Out at sea there was a traffic jam: reefer ships, meant to take the fruit to market, sat anchored as they waited their turn to come in to port.
“We couldn’t get [the produce] from the ports into the vessels. We needed to move the product through the [cold] chain in two to three weeks, not four or five weeks,” Anton Rabe, executive director of the deciduous fruit body Hortgro, tells the FM.
It wasn’t just the port of Cape Town; along the South African coast there was gridlock, with the number of ships waiting their turn to unload or pick up cargo piling up. In the week of November 23-30 an estimated 79 vessels, carrying 61,000 containers, were waiting off Durban harbour. In that same week, vessels were experiencing delays of between 12 and 14 days at the port of Cape Town, according to Western Cape finance MEC Mireille Wenger.
The congestion was blamed on poor weather and heavy seas. As Oscar Borchards, acting Western Cape managing executive of Transnet Port Terminals, has explained it, inclement weather “really sets us back as we have to close the terminal for extended periods”.
There were other causes — some more predictable. For years the ports have experienced underinvestment that has affected the maintenance of vital equipment. For the fruit growers, that’s meant trying to find a way to get their produce onto ships quickly — but that comes at an additional cost.
Moving containers cross country to other ports is an expensive business. “Just sending containers to other ports, for instance in the Eastern Cape, costs R30,000 more. If a container needs to be moved to Durban that is R50,000 more,” says Rabe. “So if it is a thousand containers, you can start doing the sums — and it will be a couple of thousand containers.”
The port delays have cost the country’s fruit industry dearly. Against 2022, export volumes are down 35% for November/December. And, over the past two years, Hortgro estimates that the dysfunction at Cape Town’s port has cost the industry about R2bn. This has come at a time when farmers have been dealing with other challenges, including the electricity crisis, inflation and high fuel costs.
It’s no small matter: the fruit industry accounts for R72bn, or 35% of South Africa’s agricultural exports, the Agricultural Business Chamber’s Wolfe Braude has told the FM’s sister publication, Business Day.
For the fruit growers in the Western Cape, this latest crisis was the culmination of four years of bad service at the port of Cape Town. But there have been improvements: last month President Cyril Ramaphosa set up a task team to look at the day-to-day operations at ports. And Transnet tells the FM it has done a lot to ease congestion in recent months.
By January 29, for example, the Durban container terminal pier 2 had reduced its vessel backlog to eight vessels, the ports authority says. On the same day there were no delays at the Gqeberha container terminal and the Ngqura container terminal in the Eastern Cape. The Cape Town container terminal had just five vessels waiting at outer anchorage.
As Transnet tells it, the improvement was due to Transnet National Ports Authority (TNPA) scheduling employees to work through weekends and improving attendance over the festive season, it says. These teams are being supported by equipment manufacturers on site. And recent seven-year confinement agreements have reduced waiting times for critical spares of handling equipment.
It’s part of an aggressive recovery plan that the state-owned entity’s board announced in October last year, through which it plans to increase collaboration with shipping lines, customers and industry by improving the availability and reliability of equipment.
Since then there’s been an exodus of top-tier staff at the company; most recently TNPA CEO Pepi Silinga has taken a leave of absence while an investigation into allegations of corruption takes place.
One step forward ...
Just as the country was clawing its way out of the great congestion crisis of 2023, another was brewing — one that should have been a boon for South Africa.
Back in October, Yemen’s Houthi movement had begun targeting Southern Israel and ships in the Red Sea that it claimed were linked to Israel. As the number of attacks on commercial vessels rose, shipping companies stopped using the Red Sea route.
Adding thousands of kilometres around Africa is costly: the incremental costs of diverting a tanker from Asia to Europe via the Cape will cost an extra $932,905, according to a report by London Stock Exchange Group’s Shipping Research, with an increased transit time of 16-32 days. This extra cost is mainly for added fuel, which is an increase of 110% for a large tanker.
So, by December 19, most shipping operators had announced that they would be suspending voyages transiting the Red Sea. Shipping giant Maersk was among those that decided to continue journeys through the Red Sea and the Suez Canal, after the launch of Operation Prosperity Guardian, which aimed to escort and protect ships. But this hasn’t deterred the attacks, which have included increasingly sophisticated drones and ballistic missiles.
Last Wednesday Maersk announced its US subsidiary would not be using the Suez Canal but would be rerouting around the Cape. This came after two of its ships were targeted by missiles, even though these were successfully intercepted by two US warship escorts.
It’s all meant a dramatic change in shipping traffic. The International Monetary Fund released data on January 22 that shows Suez Canal passages to be at 63% of last year’s volumes, while traffic around the Cape is up 70%. And the situation doesn’t look likely to change any time soon; shipping company Honour Lane expects it to last six months to a year.
This increased traffic around the Cape could have been a return to an age when South Africa fulfilled an important maritime service, when the Mother City was known as the Tavern of the Seas, a port of call to break a long voyage where ships could replenish their supplies. It was not to be.
Ongoing congestion, a lingering bad reputation and the South African Revenue Service (Sars) have prevented this. It’s a missed opportunity that could have meant added revenue and possibly even prestige.
The problem for South Africa, according to Unathi Sonti, chair of the Maritime Business Chamber, a nonprofit seeking sustainability in the maritime industry, is that many of these ships plan to bunker (refuel) only when they reach their destination. “Those that are already en route will require some bunking during their voyage,” he says.
Traditionally, South Africa has been one of the cheaper jurisdictions to refuel, says Andre Pike, head of ports, transport and logistics at law firm Bowmans.
Only, as Transnet acknowledges, few ships are currently using South Africa as a bunkering destination. Those that do need to bunker are mostly choosing other African ports, in particular Port Louis in Mauritius and Walvis Bay in Namibia.
“We are hearing that Port Louis is struggling to keep up with the high demand,” Sonti tells the FM. Ships are bypassing South African fuelling stops, he believes, because of the congestion problem and, second, because of reputation.
On the first point, South Africa’s performance is dismal. The World Bank’s container port performance index rankings are based on the average port hours per port of call, which is the time from when the vessel first arrives in port to when it departs. Delays in port have an impact on overall operating costs. Its most recent release ranks the port of Durban at 341 out of 348, with the port of Cape Town at 344.
Then there was a recent incident that, Sonti says, did much to dent South Africa’s maritime and bunkering reputation. Algoa Bay, in Gqeberha, is ideal for offshore bunkering. Rather than having to wait for a berth in a port, ships anchor in the bay and are serviced by a bunker barge. “This reduces the cost of doing business, and reduces the time spent in port,” Sonti explains.
In September last year Sars detained five bunker barges over what it claimed were suspected illegal operations. This action, according to a government statement, was part of an investigation into whether there had been a contravention of the Customs & Excise Act.
The tax authority’s accusation is that the barges had received fuel from other countries which was then delivered into floating storage facilities. This fuel, according to Sars, was not properly taxed and registered as imports. The shipping companies argue that their fuel is transferred between ships offshore.
Sonti last year told the Sunday Times the industry was awaiting clarity on issues; in the meantime it had requested intervention from the presidency.
“This is an ongoing situation and for the bunkering industry there is this belief that if my vessel goes to South Africa it will be detained,” Sonti tells the FM. “So with the reputational damage of Algoa Bay, it means South Africa’s bunkering industry is dead.”
South Africa is missing out on an industry worth billions of rand, by Sonti’s count, which feeds an ecosystem of associated maritime industries. The ships that stop to bunker often use the time to replenish supplies. Local companies offer these services, often tendering to ships at anchor. Refuse needs to be collected and oil spill response companies are on standby during the refuelling process. If there is a replacement crew, they have to be put up in hotels.
“This leaves South Africa in a very disadvantaged position and if we had the available space for bunkering we would be benefiting,” adds Sonti.
Getting the Algoa bunkering industry back on its feet is important for another reason. The trend among ship builders is to construct larger container vessels. Many of these will not be able to berth in South Africa’s ports, and will have to anchor in Algoa Bay. “To sort it all out the government needs to acknowledge that the private sector has a role and needs to be roped in,” Sonti says.
Economic fallout
While the dysfunction at the ports is hurting the local maritime industry, there is a knock-on effect for the greater South African economy. Just as South Africa is missing out with the Red Sea crisis, there have been other opportunities that have gone amiss.
The road map for the freight logistics system in South Africa, which was circulated by the government last year, reveals that the underperformance of the transport network, including the ports, has left South Africa unable to take full advantage of recent commodity price booms. As a result the country has, since 2010, forfeited an estimated $26.7bn in iron ore and coal export trade.
Azar Jammine, director and chief economist of Econometrix, says the ports issue “is having a deleterious effect on manufacturing now as they are not able to source imports rapidly enough through our ports. This tends to be inflationary because you don’t have sufficient supplies, so prices tend to rise.”
He adds that falling fuel prices have helped counterbalance some of this inflationary effect. “But we could have had inflation a lot lower than it is right now and interest rates could have already been coming down had it not been for this.”
The state does have a plan to sort out the ports. It is contained in a 124-page road map and Transnet believes it will usher in “a new era of logistics excellence” that will improve productivity and agility in the industry. It’s being overseen by the presidency, and is due to be implemented by the department of public enterprises.
The document is a sobering reflection of the state of South Africa’s logistics infrastructure and sets out deadlines to address the problem.
“In the past decade, many state-owned enterprises [SOEs] have underperformed. They have underinvested in the maintenance, modernisation and expansion of network infrastructure. Service quality has declined and corruption within and around these SOEs persists,”, the document says.
It points to an employee problem too. Anecdotal evidence, according to the report, suggests equipment failure and underinvestment have contributed to low levels of morale, which has led to a high staff turnover and the loss of critical skills.
“The analysis shows that South African container terminals improved their performance over the past three years, though this remains below their productive efficiencies in 2010,” the report adds.
The road map emphasises that the recovery process will rely heavily on the private sector. “The National Ports Authority will be the landlord of the South African ports and will own all the land and the port infrastructures within the port estates,” the report says.
Greater private sector involvement will be sought through leases and concessions — not through privatisation.
The report also says that to encourage “a level competitive playing field” within the ports and rail sectors, an independent transport economic regulator is to be established.
And it notes that significant progress has to be made by April in the concessioning of two container terminals to private operators.
While Jammine believes the document has plans that would go a long way in improving South Africa’s logistical infrastructure, there are stumbling blocks. “There are all these wonderful plans, which we have seen on the electricity front, the crime front and other areas where we are given road maps and then the implementation is left wanting.”
The reason for this, he says, has to do with conflicting views within the ruling party over whether to support these initiatives. “A lot of this has to do with the ideological baggage that many in the ruling party sit with, where they want the government to be in control.”
Jammine also believes any attempt to bring in private enterprise will face opposition from the unions.
Transnet is already busy with some of the plans laid out in the road map, according to Sonti. One of these is a joint private venture with Philippines-based International Container Terminal Services, which won a contract to develop and upgrade the Durban container terminal pier 2. The project is set to last 25 years.
“This is going to be a game-changer in my view,” says Bowmans’s Pike. “They are a very credible organisation and they have a few terminals operating in Africa and are used to operating in tough environments. And they will ease congestion enormously: not overnight, but give them six months to a year.”
Legal action ahead
Back at the port of Cape Town, where the fruit farmers waited anxiously last November for their produce to get to sea, conditions have improved somewhat. Hortgro is working closely with the port authorities to ensure things stay that way.
“We work with them on a daily basis, looking at the previous 24 hours, and then plan for the next day,” says Rabe.
Like many others reliant on South Africa’s ports, he believes the situation will only get better with the private sector taking over the running of the facilities, with the state acting as landlord.
“Hopefully a new culture will develop that will be service and productivity orientated because currently it is not there,” he says.
His organisation feels that someone needs to be held accountable for what happened last year and has been looking at the option of taking legal action.
“We plan to get all the exporters together so we can consider what to do next,” he says. “We are looking at ways of recovering costs, as people have to be held accountable.”
But damage has already been done. “I do expect that we will see some bankruptcies,” says Rabe. “It is sad that that is the reality.”
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