Road Freight’s call to end ‘useless’ SOEs control of vital logistics like ports – Gavin Kelly
South African ports have been grappling with high levels of congestion and long queues of trucks waiting to enter the ports, which has now reached crisis proportions. There are according to the SA Association of Freight Forwarders, 96 vessels waiting at anchorage outside our commercial ports, which cost the economy a staggering R98 million a day in direct, sunken costs, at least R26 million a day in indirect costs and R7 billion worth of goods from moving every day. Transnet said in a statement released earlier this week that it was implementing "a number of urgent interventions to address the backlogs at the Port of Durban and to ease the congestion at Richards Bay to minimise the impact on the South African economy" However, trust in South African ports has already suffered a blow been with Maersk, the global shipping giant, deciding that it will ditch Cape Town as a port of call in favour of Mauritius. In an interview with BizNews, Gavin Kelly, CEO of the Road Freight Association in South Africa said the issues at harbours have been coming for several years. Warnings have come from various industries, including mining for the past five to six years, signalling the impending collapse of core export corridors. He criticised Transnet for not foreseeing the disaster and stressed that South Africa, currently home to the largest port in Africa in Durban, risks losing this status. Kelly said a couple of years ago, exporters used to laugh at Dar-es-Salaam where it took 21 days to clear a container out of the port, it is now down to seven days. South Africa is going in the opposite direction. "We can no longer let state-owned entities that have proven to be absolutely useless to run these sort of crucial logistical nodal points and infrastructure points," he said. These key points should be given to the private sector to run. – Linda van Tilburg
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Relevant timestamps from the interview
- 00:09 – Introductions
- 00:37 – Gavin Kelly on a summary of the situation with regard to freight
- 04:49 – Has the crises been coming for a long time
- 07:55 – Why are the queues all at Richards Bay
- 09:23 – The situation at the other ports
- 16:19 – Will Transnet's plan make a difference
- 18:15 – Gavin Kelly on how he's helping his members at the moment with these problems
- 20:28 – Solution is the Private sector
- 21:31 – Conclusions
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Edited excerpts from the Interview
Richard's Bay railway line from Mpumalanga coalfields operates at 48-49% capacity
The current situation has been brewing for several years. The sudden outcry and frustration this past week are due to the massive queues at the harbour of Richards Bay, located on the northern coast of South Africa.
Richards Bay was primarily established in the early 70s to export coal. The Richards Bay Coal Terminal (RBCT) was specifically designed to transport large amounts of coal from the heartland of Mpumalanga, around Ermelo, to the RBCT via a dedicated railway line. This approach was based on globally applied principles for transporting a single cargo from point to point. However, in recent years, the efficiency of this line has declined. According to the latest figures from Transnet, the line is operating at around 48-49% of its capacity. If the line is supposed to carry 80 million tons a year and it's only doing 38-39 million tons, the question arises: how do you get the remaining coal to the market? The only alternative is to transport it by truck to the Port of Richards Bay, hence the long queues of trucks.
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The reason for the queues is not just the volume of coal. The process of getting vehicles into the port isn't as fast as the dedicated train. Since the 70s, the port has grown and now accepts other cargo. It's not just coal anymore.
Moreover, the coal terminal is on the far side of the harbour, while the entrance is on the eastern side, near the town. This requires a lengthy detour to reach the coal harbour. Once inside the harbour, the trucks need to dump the coal somewhere. They can't dump it where the train dumps because they can't access that area. This results in trucks shuttling back and forth, filling up the harbour quickly and causing long queues outside.
Alarms were raised for years about persistent port concerns
The Road and Freight Association, mines and various other industries have been raising their hands in desperation over the last five to ten years as we've seen some of the core corridors start to collapse. For instance, the Richards Bay coal line, a railway link that connects the harbour to the heart of Mpumalanga, has seen a decrease in capacity. This line, now called the Eastern Corridor Multi-ore line, transports not just coal, but also iron ore, manganese, and chrome. The mines were quick to identify the issue and sought our help when they could no longer use rail for transportation. Despite their repeated warnings, it's puzzling why no action has been taken to address the declining capacity of this line.
A few years ago, the harbour faced issues with its loaders, and conveyor belts were burned. Despite the excuses, the bottom line is that those responsible for various bits of infrastructure in our logistics supply chain are not fulfilling their duties. Transnet should have foreseen this disaster years ago and devised a plan. This issue affects the whole country, not just the mines, as exporting and importing through ports involve all sorts of industries. Currently, container ships are waiting off the Port of Durban, with around 70,000 containers stuck either going in or out.
This affects everybody and what we are saying as the Road Freight Association is we can no longer let state-owned entities that have proven to be absolutely useless run these sort of crucial logistical nodal points and infrastructure points. Give it to the private sector, let us get this back up and running.
Traffic congestion at Richards Bay made life miserable for residents
John Ross Parkway is a road that was originally a small two-lane road but has since expanded. However, it is now full of trucks all the way up and into Empangeni, which is causing congestion to the N2 bridge over the Umhlathuze valley. There is a queue of trucks at least 15 kilometres long trying to get into the port, which is causing the road to be choked up all the way almost to the heart of the city. This means that if you are trying to get to Arboretum or Meer-en-See or any other location along that road, you may encounter trucks standing on either side of the road. This situation is not pleasant for people who need to use that piece of road, including those who work in the port, health services, and other types of commodities.
We risk losing Durban's status of gateway to Africa
Earlier today, someone asked me, "Why don't we just send the coal somewhere else? Why is it such a problem?" The answer is multifaceted.
Firstly, we prefer to send coal through our ports because it keeps the commodity's cost down. That's the purpose of Richard's Bay. We have mines, but it's not the trucking companies that decide how and where the coal goes. It's the owner of the commodity who makes these decisions. Many people misunderstand this, thinking that the truck driver or owner decides where to go each day.
The owner of the coal, who has an agreement with the global customer, must choose the most efficient method of delivering their product. If your mines are in Mpumalanga, the nearest port is Maputo. This has led to queues of trucks at the Lebombo border post, near Komatipoort, similar to the situation at Richards Bay. These locations were not designed to handle such volumes, which is causing significant issues.
Durban has also faced challenges for several years, worsened by the immense floods a few years ago that destroyed some terminals and the road network into the port. When disasters occur, we need a plan B. However, the alternative access roads have been closed due to housing developments.
Durban now has a backlog for various reasons, including strikes and natural disasters. There are reports of approximately 70,000 containers waiting to be moved. Despite discussions about modernising the port, progress has been slow.
Cape Town's port also faces challenges due to weather issues and workforce and process inefficiencies. Our towns have grown around most of our ports, effectively choking them. This was the reason for the development of Koega, a deep water port on the other side of Port Elizabeth's other port.
To improve efficiency, we need to look at successful examples from around the world. Unfortunately, progress has been slow, and we risk losing our status as the largest port in Africa. A few months ago, a Filipino company signed up with Transnet to take over one of the terminals and implement changes, but nothing has come of it yet.
The logistics of coal transportation are complex and involve many factors, from the location of mines to the capacity of ports and border posts. It's not as simple as deciding to send the coal somewhere else.
The rest of the world will take note of delays at ports
Transnet's plans have been announced numerous times, and while I'm inclined to say, "Let's give them a chance," I can't help but wonder how many chances they should be given. The situation is concerning. They mention a backlog of approximately six months at the ports, but the actual duration is unclear. Is it two or three months? What is the real backlog?
Reports of ships waiting offshore are also concerning. Verifying these reports can be challenging, but we've heard of ships waiting for 14 to 21 days, and in some cases, even a couple of months. Whether these reports are accurate or not is debatable, but even a delay of a few days is significant. Shipping companies are now imposing delay fees, demerit fees, or penalties, which can range from US$50,000 to US$200,000 per day, depending on the timeline and pressures.
Who bears the cost of these delays? Even if we had ample funds to cover these costs without concern, the issue remains that the rest of the world will take note. If shipping to South Africa means a minimum 14-day delay offshore, followed by additional delays due to strikes, load shedding, and other issues, it becomes a less attractive option.
A few years ago, we used to joke about Dar es Salaam, where it would take 21 days to clear a container out of the port. Now, they've reduced that time to seven days, while we seem to be moving in the opposite direction. If we add the extra time for ships to stand idle, the situation worsens.
I sincerely hope that a workable solution is on the horizon, though I must admit, my enthusiasm is tempered.
Resistance from SOEs to solve the problems
Assisting our members at the Road and Freight Association with these challenges is difficult. We apply pressure and raise awareness where we can, and engage in discussions with the relevant authorities. Recently, following our comments in the media, we've been invited to meet with various CEOs of State-Owned Enterprises.
We've proposed solutions and put them on the table. When the new minister was appointed, I shared a few proposals with her, half-jokingly unsure whether to offer congratulations or condolences given the long-standing issues we face.
We encounter resistance on several fronts. The first is the perception that the private sector merely wants to take over and profit. However, the private sector's role is to generate revenue, which in turn produces taxes that can be used for societal benefits like education and healthcare.
Secondly, we advocate for competition. Many infrastructure nodes, such as ports and rails, are state monopolies. Their performance is often subpar, with little consequence to those in charge.
We've made proposals, drawing on best practices from associations worldwide. In terms of customs, we've proposed and designed many initiatives that SARS Customs has implemented. We're ready to collaborate with various authorities and entities to improve operations.
If things start to work more efficiently, it will stimulate more activity through our ports, infrastructure, and rail, generating more revenue and, importantly, more jobs.
Private sector won't contribute a dime until they have control over how it is spent
While there's a notion that the private sector should resolve the mess, we need to tread carefully. The government's proposal of injecting R200 billion, or securing a similar amount from the Chinese, isn't the ultimate solution. Funding isn't the silver bullet here. The key lies in how the funding is managed and how operations are handled.
Yes, some aspects will require significant investment. However, merely introducing new equipment and rebranding doesn't guarantee a change in operation or attitude. It's crucial for the private sector to get involved in transforming day-to-day operations.
Investment is necessary, but our members in the private sector won't contribute a dime unless they have control over how it's spent and can make decisions to turn these entities around. Otherwise, it's just throwing good money after bad.
South African ports have been grappling with high levels of congestion and long queues of trucks waiting to enter the ports, which has now reached crisis proportions. To deal with the congestion in Richards Bay, Transnet has suspended processing trucks carrying coal. In Durban harbour, more than 70,000 containers are anchored off the coast of Durban with a three-week waiting period for offloading. This backlog, Transnet says, would likely only be cleared by February or March 2024. The state-owned enterprise said in a statement released earlier this week that it was implementing "a number of urgent interventions to address the backlogs at the Port of Durban and to ease the congestion at Richards Bay to minimise the impact on the South African economy" However, trust in South African ports has already suffered a blow been with Maersk, the global shipping giant, deciding that it will ditch Cape Town as a port of call in favour of Mauritius. In an interview with Biznews, Gavin Kelly, CEO of the Road Freight Association in South Africa said the issues at harbours have been coming for several years. Warnings have come from various industries, including mining for the past five to six years, signalling the impending collapse of core export corridors. He criticised Transnet for not foreseeing the disaster and stressed that South Africa, currently home to the largest port in Africa in Durban, risks losing this status. Kelly said a couple of years ago, exporters used to laugh at Dar-es-Salaam where it took 21 days to clear a container out of the port, it is now down to seven days. South Africa is going in the opposite direction. "We can no longer let state-owned entities that have proven to be absolutely useless to run these sort of crucial logistical nodal points and infrastructure points," he said. These key points should be given to the private sector to run.
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