SA needs a port in a storm

Congestion at South African ports is crippling the country’s economy, further increasing costs. CHRIS HATTINGH says it is vital that the country ups its logistics game.

According to data from Fruit SA, claims of bad quality produce have doubled to 37% over seven years. The main cause of this has been delays in moving South African fruit through and out of the ports to global markets. Within that context of ever-increasing problems – with numerous negative effects on businesses, employees, investment, and growth – the recent call by the Western Cape Provincial government for assistance at the Port of Cape Town (as reported on page 2 in this issue of FOCUS) must be heeded without delay. Should the call by both the provincial government and Fruit SA not be heeded, alternative plans and programmes should be explored and implemented where possible.

At the end of October, the 2023 Medium Term Budget Policy Statement was presented by the Minister of Finance, Enoch Godongwana. The revenue shortfall in particular stands out starkly: R56.8 billion for the current fiscal year. That kind of shortfall impacts negatively on government spending and programmes across the board, forcing more difficult decisions and possibly leading to a paring back of services that serve and support indigent citizens. As to causes behind the shortfall, alongside continuous loadshedding, the country’s problematic freight rail systems are the other major headache.

The mining sector has perhaps been hit the hardest. Provisional corporate tax collections from mining companies were down by R24.6 billion for the first half of 2023/24. While lower international demand for commodities has no doubt played a role, South Africa has done remarkably well to score own goal after own goal, as inefficient railways and ports make it more difficult to move raw materials and commodities out of the country.

From December, those companies that use South Africa’s ports to move their goods and commodities out of and into the country will need to contend with yet another cost: both the Mediterranean Shipping Company (MSC) and Maersk have announced that they will begin charging a fee for congested vessels.

For its part, MSC has stated: “Due to congestion in the South African ports generating difficult conditions to operate, MSC will [as of 3 December] apply a CGS [congestion surcharge] for cargo to all South African ports to maintain our services provided.” In terms of concrete amounts, this means an estimated R3,850 per shipping container due to congestion. Thus, the continued delays at the country’s ports manifest negative effects time after time, increasing businesses’ operating costs, raising the costs of goods and services, and rendering South Africa’s international trade appeal far less than ideal.

Congestion at the ports – coupled with the inordinately long time taken to resolve at least some of the relevant pain points – does not only impact South African exporters. Importers experience delays, further increasing their costs and potentially the prices of the goods and components for which they are responsible. This impacts negatively across various supply and value chains throughout the economy. Given that South Africa is more exposed to imported inflation – as we need to import more complex manufactured goods, given our own declining manufacturing capacity – making the ports more efficient would assist in lowering prices, and possibly aspects of inflation, over the long term.

In the context of the country’s ports being managed by Transnet Ports Authority, the onus rests on the state entity to either adhere to reforms – with strict turnaround times – or move out of the way to allow private sector players to take over at least some aspects of operations at a given port. For local authorities in provincial and municipal governments, avenues for their own initiatives must be explored. The businesses and consumers in those geographic areas – to say nothing of the country’s economy as a whole – desperately need better functioning ports.

Should government continue to delay reforming Transnet and the wider logistics sphere, South Africa will fall further behind other commodities-exporting emerging markets, and especially neighbouring countries such as Namibia and Mozambique, which are modernising various facilities and setting themselves up on a much stronger footing for the future. Global trade will continue to flow; with interest rates possibly declining from 2024 onwards, economic activity and demand for commodities will once again increase. It is within South Africa’s power, and choice, to take advantage of that upswing, or alternatively to be left behind.