Transnet opposes court action

Transnet opposes court action

Transnet SOC Ltd, which is opposing the court action brought by a subsidiary of shipping and logistics company AP Moller-Maersk to challenge the awarding of the Durban Container Terminal Pier 2 (DCT Pier 2) contract to a Philippines-based company, says it believes due process was followed in appointing the preferred partner.

Transnet said it will allow the legal process to take its course. It was commenting after reports that APM Terminals, a subsidiary of AP Moller-Maersk, had brought an interdict application in the Durban High Court to prevent Philippines-based company International Container Terminal Services Inc (ICTSI) from taking on its role of managing the terminal operations.

In response to questions from The Mercury, Transnet said it was aware of the application by APMT in the Durban High Court and has filed its opposing affidavit.

“In processes of this nature, it is to be expected that a bidder would find reason to contest an outcome that is not in their favour.” It added that it believed due process was followed in appointing the preferred partner.

“We can confirm that work continues on the financial closeout, as announced by Transnet in a market update on March 1, 2024,” it said.

In terms of the plan for the DCT Pier 2, Transnet has previously said that Transnet Port Terminals will form a joint venture with ICTSI to manage the operations of DCT Pier 2 for a period of 25 years, with the option to extend the time period.

According to reports, APM Terminals were among the terminal operators that had bid and been shortlisted to manage DCT Pier 2.

AP Moller-Maersk had not responded to a request for comment by the time of publication.

It has previously been reported that DCT Pier 2 is Transnet’s biggest container terminal, handling 72% of the Port of Durban’s throughput and 46% of South Africa’s port traffic.

Commenting on the court action, Malcolm Hartwell, Norton Rose Fulbright director and Master Mariner, said South African ports, particularly the container terminals which the Transnet National Ports Authority (TNPA) has a monopoly over, have slid to the bottom of global port rankings over the last several years.

“Shipping lines and importers and exporters have suffered huge delays in loading and discharging containers which have had a very negative effect on the economy and on shipping lines and traders,” he said, adding that this was highlighted by the delays of months at the Durban Container Terminal over the last year’s Christmas period which saw thousands of containers stuck off the port until well into this year.

Hartwell said the decision by TNPA to appoint ICTSI was welcomed at the time by those in the logistics sector as it was hoped that ICTSI, with its international experience, capital and proven efficiency, would help solve the problems.

“The AP Moller-Maersk subsidiary has now opposed that appointment and although the grounds for that opposition are not yet clear, what this will do is delay the implementation, possibly for years,” he said.

He said APM Terminals was entitled to ask the ports regulator to review or set aside the decision to appoint ICTSI and the regulator’s decision could be taken on review to the high court. The court’s decision can be taken on appeal to a full bench of judges and that decision may itself be subject to an appeal to the Supreme Court of Appeal and/or the Constitutional Court. Hartwell said this could result in a delay of several years before a private terminal operator assumed the running of Pier 2.

Gavin Kelly, CEO of the Road Freight Association, said the current delays seen at the ports were damaging the image and reputation of South Africa as a reliable and efficient logistics hub for Africa.

He said this meant that volumes will continue to decrease as ports on the eastern and western shores of Southern Africa benefited.

“That holds dire consequences for the freight, logistics and warehouse sectors – which will filter through to retail and consumers. Transporters cannot continue to carry the cost of delays – and even they may seek ‘greener pastures’ of ports closer to South Africa where they can move far quicker through the ports systems.

“The longer the resolution of the terminal challenges takes (and the appointment of a terminal operator), the longer logistics will languish, margins will get tighter, work becomes more scarce and the logistics sector in general will suffer,” said Kelly.

Professor Irrshad Kaseeram, from the University of Zululand’s Economics Department, said these types of bids are worth billions to the successful bidder.

Kaseeram further stated that AP Moller-Maersk has a long history of operating in South Africa and may have good insights about promoting efficiency and cost effectiveness in rail, road and harbour operations.

However, he said the successful bidder, ICTSI, was also an international company that is operating in both the developing and the developed world.

Johann Els, Old Mutual Group chief economist, said he was not sure whether the case will prevent ICTSI starting operations at the port.

“It’s crucially important that we get the private sector more involved in the economy and that has gained significant momentum. Not only imports, but also the railways and of course, the most significant one is the private sector involvement in electricity,” he said.

The Mercury