Urgent action needed as port congestion causes billions in losses, business sector warns

Urgent action needed as port congestion causes billions in losses, business sector warns

Port congestion is resulting in the loss of billions of rand, and the business sector criticised the government for delaying action on an offer from shipping lines to purchase the necessary equipment for Transnet’s repair. This sentiment was expressed by the business sector as it contemplated the path ahead.

The Durban Chamber of Commerce and Industry NPC, along with the Road Freight Association (RFA) and the South African Freight Forwarders Association (Saaff), among others, have highlighted a concerning situation involving over 96 vessels waiting at anchorage outside commercial ports. This situation is causing a daily direct cost of R98 million in sunken costs and at least R26 million in indirect costs. Additionally, it is obstructing the movement of at least R7 billion worth of goods every day.

Palesa Phili, the CEO of the Durban Chamber of Commerce and Industry NPC, said, “As organised business, we have closely monitored the situation. Since January, this year we have seen an exponential increase in delayed hours. In January, the delay was 39 hours, July 96 hours. August 194 hours and September 364 hours. This is unacceptable, businesses must bear the brunt of these delays.“

As organised business it requested that chambers, businesses including the shipping lines to be on the National Logistics Crisis Committee. It believed this would allow the private sector to present tangible solutions.

As organised business it also opposed the privatisation of the container terminal.

Phili said that shipping lines have extended an offer to the government to acquire the necessary equipment for Transnet’s long-term repair, aiming to recover their investment through relaxed surcharges. Additionally, emphasizing the importance of appointing an independent engineering consulting firm with robust project and programme management expertise to oversee the operation of the equipment.

The chamber pointed out to a long-term Original Equipment Manufacturer (OEM) strategy to address equipment challenges by awarding contracts for major equipment across 48 brands.

The strategy includes a 10-year supply of Original Parts Manufacturer (OPM) spares for maintenance. Container handling equipment is expected to be delivered within six to 24 months.

Meanwhile, the SA Association of Freight Forwarders’ (Saaff) said in a statement South Africa’s commercial ports – and, by implication, its extended end-to-end logistics network – were currently in a crisis, which was arguably more significant than the October strike of last year.

Saafsa estimated the cost of the current situation amounted to at least R48.5 million of pure, sunken cost just sitting outside at anchorage per day.

“Furthermore, with the port congestion surcharges for containers awaiting implementation, this figure jumps to R98 million of pure, sunken cost, per day. In addition, the direct logistics costs involved in shipping goods through our ports in perfect conditions in normal conditions is around R1 billion a day. Therefore, we are already paying nearly 10% more with the current conditions, in direct cost,” it said.

However, Saafa said the indirect logistics cost far outweighed the effect of the direct logistics cost. With all the vessels waiting outside the ports, the current impact in opportunity cost was stopping the movement of at least R7 billion worth of goods.

“Furthermore, if we consider the time delays in costs, the time variability (depending on the commodity, the origin-shipping line combination, and several other factors) indirectly adds between 3.9% and 24.5% of the value of the cargo. Therefore, with the most conservative estimate, the current delays are adding at least R26 million in indirect costs (and possibly as much as R165 million), Saafa said.

The solution it said was private-sector partnerships to modernise infrastructure and enhance operational efficiency at Transnet, with ongoing collaboration to improve service delivery.

“These proposals are at the heart of our potential recovery, as the current operating model is archaic and needs to be revolutionised.

“Ultimately, we need a concerted effort from all parties. Not only Transnet, not only the extended Government working in this industry, and not only the private sector represented by the cargo owners, freight agents, shipping lines, and other related parties. But everyone. Together. With a sense of urgency that the situation desperately needs,” Saafa said.

Andrew Bahlmann, the CEO of Corporate & Advisory, Deal Leaders International, said yesterday, “Transnet has replaced Eskom as the major threat to South Africa’s already stuttering economic growth.”

Even before the current logistics crisis, a study by GAIN group calculated the economic cost of rail inefficiencies at 5% of gross domestic product in 2023

Bahlmann said the current situation was expected to exacerbate this, leading to a further decline in the country’s economy. The delay in the delivery of goods could lead to a shortage of essential commodities, which could cause inflation and a rise in prices.

BUSINESS REPORT