Challenges and inefficiencies experienced at the Port of Cape: Transnet & SA Association of Freight Forwarders Input

Meeting report

Opening remarks
The Chairperson welcomed Committee Members and the delegations from the South African Association of Freight Forwarders (SAAFF) and Transnet to the meeting, and invited them to introduce themselves.

Briefing by SAAFF: Challenges and inefficiencies experienced at the Port of Cape
Dr Juanita Maree, Chief Executive Officer (CEO), SAAFF, said the country’s logistics network was not Transnet or private-sector owned, but was shared infrastructure, and it was the core of the supply chain. It included air freight, port freight, truck freight, rail freight, pipelines, and conveyor belts. Friction in any part of the supply chain leads to waste. There was also a maintenance aspect with shared infrastructure, with Transnet looking after ports and rail tracks and the private sector looking after the terminals and storage facilities.

In terms of trade flow, about 1 800 trucks per day moved through the Maputo Corridor, which was a mainly export corridor designed for about 600 trucks. This resulted in long queues. The N3 moved between 8 000 and 9 400 trucks a day going into Durban Port, handling about 7 464 twenty-foot equivalent units (TEUs) daily in imports and exports. Ngqura Port handled around 1700 TEUs a day, Gqeberha handled 428, and Cape Town handled around 2 400. The Richards Bay coal line transported around 159 178 tons a day, and the iron ore line moved about 149 315 tons per day. Inbound international air freight amounted to around 452 tons a day, outbound international air freight amounted to around 278 tons a day, and domestic air freight totalled around 57 tons daily.

The sea and the rail portions of the network should work together, but there was currently no rail infrastructure, which meant that the roads had to cover the capacity meant to be covered by the rail network. This distorted the network, causing congestion at ports, overburdened roads and overuse of expensive air freight. This was the reason behind the President’s establishment of the National Logistics Crisis Committee. One challenge for the sector was that equipment at the ports was outdated and its capacity was insufficient. The supply chain also needed the right kind of people for the job, people with the requisite skills and capacity to run an operation. The struggling infrastructure and equipment put pressure on the people who had to deal with long waiting times and delivery backlogs.

See attached for full presentation

Discussion
Mr A Van der Westhuizen (DA) asked what kind of port equipment would be suitable for the weather conditions in Cape Town. Regarding the car operations for those who want to import or export and the scheduling of arrivals and departures from the Cape Town Port, he wanted to know whether there is room for improvements so that people do not transport their goods too far in advance without any cargo scheduled to collect the goods. What can the private sector do to assist the Cape Town Port in controlling the flow of cargo?

Ms N Nkondlo (ANC) said that considering the growth of economies across the world, including in South Africa, in terms of the ports and other logistical capabilities, she would assume that SAAFF had done some studies on the pressures that burden economies as they grow. She wanted to understand how agile the sector responded to changing logistics demands. She also asked who the members of SAAFF were, what the growth of new entrants in the organisation was, and how difficult it was to enter the logistics space.

Mr I Sileku (DA) asked Dr Maree to speak more about the misalignment issues, what caused them and whether there were any attempts to look at short, medium, and long-term solutions. Were they a result of skills shortages, for example?

The Chairperson asked Dr Maree to clarify the issue of the imbalance of cargo and how it affected the profits and losses of different industries. Which markets do the different transport modalities serve and in what ways are they interchangeable? What are the current infrastructure challenges concerning the Port of Cape Town? When were they operating at their peak and what contributed to their decline? What could be done to ensure they were operating at a suitable scale?

SAAFF’s response
Dr Maree said the equipment in Cape Town was designed so that businesses would bid on ship-to-shore claims, and rubber tyred gantry crane (RTGs), which moved the containers around the port before they were transported by rail or road. The RTGs in Cape Town currently had to move about 2 400 TEUs daily, which required about 30 working RTGs, according to SAAFF estimates. Cape Town currently had about 16 RTGs working on a good day, and Transnet was developing new engines for some of the RTGs to extend their lifespans. The Transnet engineering team had tested about four engines in the RTGs, but there was an incident where some of the RTGs overheated, and there was no way to tell if the engines that were installed were suitable for the amount of work that had to be done. There was also an order for six second-hand RTGs from Los Angeles, expected to arrive towards the end of November. Other equipment that could be used in Cape Town to deal with the weather conditions might be sought elsewhere around the world. There was a need for investment into new technology, and this could be done by ensuring that there was collaboration between the relevant stakeholders and ensuring that the private sector was held accountable. The Western Cape also considered establishing a logistics structure where mines could get together and discuss such issues, which was an exciting development.

Regarding coordinated planning and scheduling, she said much more could be done in terms of planning because ports knew in advance when vessels were arriving and were aware of the local export needs. There should be further investment into Transnet’s Navis system, which is currently in use at the ports, and planning must be capacitated to optimise cargo inflows and outflows. SAAFF also recommended bringing back inter-port competition by using key performance indicators (KPAs) to measure and make visible the efficiency of different activities at different ports. This was not currently done because Transnet ran all the different cargo initiatives. This need not be done in a way that damages the country’s branding, but having a good competitive environment would remove complacency and improve performance at the different ports. 

There was a very tight link between trade development and the logistics network and because the country’s logistics network could not support trade, growth was hampered. However, When comparing port statistics with competitors like Maputo and Walvis Bay, as was often done in the media, there could be no comparison as South Africa’s ports still handled many more ships.

SAAFF currently had about 351 members, which were mostly big logistics and supply chain companies, but the organisation was aware of the need to make space for Small, Medium, and Micro Enterprises (SMMEs) in the sector because there was an outcry about the inclusion of SMMEs in Africa. The United States had the Federal Marine Commission and Europe also had a ports regulator but there was no equivalent body in Africa, and it was said that multinational logistics giants had been crowding out SMMEs. SAAFF believed that SMMEs would keep the economy going in Africa, and there must be a need for a balanced view.

Regarding misalignment, she explained that cargo imbalances occurred when cargo was carried in only one direction on a particular route. For example, the Maputo corridor was an export-only corridor, meaning that trucks returned empty, making it expensive. The Durban N3, by contrast, was a balanced corridor because there was an inflow and outflow of cargo, reducing costs. SAAFF was concerned about a recent development which had seen copper imports entering the continent via Dar Es Salaam instead of Durban. It had not noticed any significant disturbance in shipping costs yet but would inform the Committee if it did.

Regarding the interchangeability of different transport modalities, air freight was usually used for perishable cargo, such as medicine, flowers, etc. Transporting something bulky, heavy, and non-perishable on air freight, like a hospital bed , did not make sense.

South Africa needed to work together as a whole to ensure the alignment of imports and exports and the balancing of shipping according to transport modality. If rail was returned to its rightful place, transporting bulk commodities, then the logistics landscape could be changed significantly, because trucks would be taken off the road and rail-friendly cargo could be developed and there could be a much more balanced situation. There should be more engagements and open debates about the misalignment problem and how it could be solved.

Follow-up questions
Mr Van der Westhuizen wanted to know how the South African ports compared to Windhoek and Maputo in terms of cost. Were these ports experiencing the same slow turnaround times as South African ports? What was the price elasticity of port costs?

Ms Nkondlo wanted to know, given the concept of shared infrastructure, what financing models SAAFF had explored in the logistics space in its studies to help finance infrastructure around the ports and rail lines. She appreciated the comment about the participation of SMMEs on the continent. She asked whether a conversation about law or policy reform in that regard was gaining traction within the South African context, especially considering Kenya’s new law that prohibited dominance in the logistics space.

The Chairperson wanted to confirm whether the number of RTGs coming from Los Angeles to Cape Town was 16 and whether these RTGs would only serve the Port of Cape Town. Would they bring the port to capacity, or would there still be a shortfall of RTGs? What was the ideal designed capacity from SAAFF’s perspective and how could it be brought into action in the Port of Cape Town? Lastly, on slide seven of the presentation, she noted the average berthing times, average hours at berth, and the 25th percentile figure totalling 922, and asked how these figures compared to the industry globally and in Africa.

SAAFF’s response
Dr Maree said Transnet ran the South African ports and rail infrastructure, and it was evident that National Treasury was not keen to give more money to Transnet, for various reasons. This meant that to bring the logistics network up to standard, the ports had to make money. One financing model that had been explored was for the private sector, for example, the chemical industry, to help finance a ship-to-shore crane via a joint venture with Transnet. Another option would be for the private sector to finance equipment run through an operating lease with a buying clause in the contract requiring Transnet to but it after a set number of years, were currently about nine different models that could be considered. She cautioned that while Transnet was unbundling its divisions, it must be careful not to create another problem where it creates competition for itself by enabling another company to dominate one of the ports. 

Dr Maree did not think the South African ports were too expensive. The problem was that only multinational companies could tolerate a delay of two weeks in shipping. SMMEs did not typically have the working capital and buffer stocks of materials to absorb such a delay. Maputo and Windhoek did not handle large numbers of vessels, and South Africa had crafted its logistics network in a unique way regarding how much visas cost weekly, and how products moved around the country. South Africa had good ports, and good schedules and it had perfected the imbalance of the inflow and outflow of goods, but the issue was with the distortion of the imbalance, so there was price elasticity in South Africa but it was not unlimited or untapped.

She clarified that six RTGs were coming from Los Angeles, and 11 had been refurbished. SAAFF would monitor the progress.

An official from Transnet said that seven RTGs would be coming from Los Angeles.

Dr Maree said SAAFF had done some analysis in terms of the ideal capacity and was willing to share that information with the Committee because it felt that Cape Town was an important port, but it could work better if it had freight facilities and different modalities that linked to the road and rail, and took the truck staging areas outside the city, and ensured that the freight facilities flowed into different terminals. She said they could share their ideal picture with the Committee and analyse how the port was fairing from time to time.

She said that South Africa and Africa could play an important role in SMME support. South Africa should take the lead at the African Union (AU), saying the continent must establish a board like the FMC in America and the European ports regulator. This could look at how the continent worked with different shipping lines, the place of dominance, how the different ports worked and how they created space for SMMEs. This could be an important role for South Africa to play because the country has expertise in that field.   

The Chairperson thanked Dr Maree for her time and wished the SAAFF team well. The Committee was excited to hear about the RTGs and the role that they would play, and it would take up their offer of information regarding the position dominance and the statistics that SAAFF was waiting for in January and February that would impact the SMMEs, as well as the ideal design capacity.

Update by Transnet: Transnet National Ports Authority (TNPA)
Adv Phyllis Difeto, Managing Executive, TNPA, presented on the eight-point plan to improve the Port of Cape Town. The eight-point plan included the following:

1. Optimising the port as a delivery platform
2. Combating adverse weather conditions
3. Improving truck operations
4. Optimising marine services
5. Improving information sharing and port operations’ visibility
6. Improving terminal equipment and port infrastructure
7. Adding the necessary people and skills
8. Immediate crisis management.

She said the success of the eight-point plan would ensure growth in key commodities, which would position the Port of Cape Town as a global premium fruit and agriculture export hub, a diversified energy hub for the Western Cape complementing the Port of Saldanha, a container terminal for the Western Cape and a multi-commodity mix port specialising in handling dry bulk and bread bulk, a leading boat building and ship repair hub for Sub-Saharan Africa, and a “SMART People’s Port” focusing on cruise, real estate development, recreational and tourism.

Update by Transnet: Transnet Transport Port Terminals (TPT)
Mr Jabu Mdaki, Chief Executive Officer (CEO), TPT, provided a broad and detailed overview of the time taken for various stages of the freight handling process, including vessels waiting to berth, truck turnaround time, anchorage time and container dwell times at Cape Town Container Terminal. He also discussed the impact of the weather. He discussed the progress made on several key projects such as increasing the RTG availability, enlarging the fleet of haulers and installing additional shore tensioners to mitigate the effect of rough seas.

(see presentation document slides 13-22 for details)

Update by Transnet: Transnet Freight Rail (TFR) on the Cape Corridor
Ms Ayanda Petela, Head: Corporate Affairs and Stakeholder, Transnet Freight Rail, presented the TFR value proposition for the agriculture industry, noting that some of the objectives include the following:

- Shifting volumes from road to rail
- Increasing density of under-utilised lines
- Harnessing market opportunities
- Optimising less than train load traffic
- Improving asset utilisation and efficiency
- Risk distribution/sharing – PSPs
- Contributing to the growth of key agricultural sectors
Some of the challenges include:

- Low rail market share
- Need for containerised/palletised & intermodal solutions to ship time-sensitive produce to target markets
- Seasonality of agricultural commodities
- Low train utilisation
- High operational costs
- Low operations efficiencies
- Limited infrastructure investment
- Profitability of short distance traffic

She reported that security incidents throughout the province had declined substantially since implementing new security contracts. She gave a broad overview of the development of the Belcon Terminal in a public-private partnership with Maersk, which TFR was particularly proud of.
Discussion
Mr Van der Westhuizen recalled that seven RTGs were expected to arrive at Cape Town Container Terminal at the end of November. Would they be able to be put into service immediately or would they need further engineering work? He asked Transnet to elaborate on the engineering work that had been and was being done on the existing RTGs, as mentioned by SAAFF. He added that when the Committee had visited the port, it looked unkempt. There had been grass growing and obsolete equipment. Recently, the former CEO of Eskom mentioned that when going to a power station, he would look at the grass mould and found a correlation between the general appearance of the power station and its performance. With the Committee visiting the port after the meeting, would they see an improvement in the upkeep of the Port? He said that that there was an enormous need to reinvest in capital goods and equipment and a lot of this work was still marked as ‘in progress’. When he had enquired at the last meeting, he had been informed that the Port was serving a surplus into Transnet’s coffers. However, it seems that the entity was struggling to access capital funds. To what extent could Transnet ring-fence the Port of Cape Town for investment based on its good performance?

The Chairperson asked for clarity on exactly which targets had been completed or improved since 6 June. Have there been any engagements regarding the role that Transnet could play in mitigating surcharges and have there been any engagements regarding the recently announced surcharges? On the eight-point plan, she asked what crystal-clear change would be evident if the plan was completely carried out. How would it position the Port of Cape Town globally?

Ms Nkondlo recalled that some time ago, officials had mentioned technology being used at the Ngqura Port in the Eastern Cape to mitigate the effect of high winds. Transnet had been considering using the same technology at the Port of Cape Town. However, the presentation suggested that the wind issues in Cape Town had still not been resolved. Given the approaching summer season, was any forecasting done on the potential interruptions the wind could cause? What solutions or mitigation measures were in place in anticipation of interruptions? Has industry demand for the coming season been confirmed yet, and are there any concerns from Transnet, especially on capacity? What has been the cost of vandalism and theft, compared to what Transnet was paying for security contracts?

Mr Van der Westhuizen asked for an explanation of slide 16, which seemed to suggest that when waiting times for berths were low, the contribution of the weather to the waiting time was high. This did not make sense to him. He said he had read in the newspaper that Mediterranean Shipping Company (MSC) and Maersk Line were considering a surcharge because of delays, which was concerning because it contributed to the image of the Port as not being up to international standards. What were the implications of the surcharges from Maersk for the Port? He recalled that during the Committee’s previous engagement with Transnet, it was said prices would play a big role in who was awarded tenders, but now the focus was on regional equipment manufacturers. The bidders were expected to have minimum stock of certain spare parts. His impression from the presentation was that this had reduced the downtime for equipment. Was this impression correct or was Transnet still experiencing challenges with those responsible for maintenance?

The Chairperson noted that agricultural goods for export were expected to increase by 25% because of good rains, and asked whether the Port would be able to cope with the expected increases in volumes, considering the deterioration of equipment.

Responses
Adv Difeto explained that completed targets were indicated in green in the presentation, although where it was noted that these targets were “ongoing,” Transnet was continuously monitoring them. For example, for the shore tensioners, Transnet had secured 16 additional units for the Port as the target required, but it had since decided to secure further shore tensioners for the entire port system, which meant that the 16 that had already been acquired would be dedicated to the Port of Cape Town. She said they were awaiting the delivery of these 16 shore tensioners, with at least two expected to be delivered this year.

Transnet had committed to signing a memorandum of understanding (MoU) with the Council for Scientific and Industrial Research (CSIR) to assist them in developing a model to predict weather patterns for several days to come, which would assist them in planning for movements within the Port. The focus would be on understanding the extreme wind and other environmental problems within the Port and their logistical and economic impact. The targets of the eight-point plan would constantly evolve because when one was achieved, more activities to sustain the achievement would be triggered. There would not be a stage where the work was be completed and the plan was closed, as it would continue to evolve and pose new challenges and targets to be achieved. For example, the research being done by the CSIR would come with its own recommendations and associated performance targets.

Mr Rajesh Dana, Port Manager, Port of Cape Town, said regarding the surcharge, three shipping lines gave indication of the intention to impose a surcharge on all imports from all international destinations to all South African ports, ranging from around $100 per TEU to $400 per TEU. The three shipping lines that indicated this were MSC, Maersk, and CMA CGM. The Port had had very high-level initial discussions with the shipping lines and would intensify those discussions in the coming weeks. The underlying assumption was that if congestion is eradicated, the surcharge would fall away, so that was the immediate aim of the Port.

Ms Andiswa Dlanga, Managing Executive: Western Cape Terminals, TPT, added that the issue of the surcharge related to all Transnet Ports, and TPT was already engaging with the shipping lines. There were plans at all the ports to ensure that they improved efficiencies and equipment. The efficiencies would assist with the turnaround of the vessels, which was the fear that the shipping lines were sitting with. The upcoming season collided with the bad weather conditions in the Western Cape. The weather was broken down into three parts: high swells, fog, and wind. The technology being used at Ngqura that Ms Nkondlo had mentioned was the shore tensioner system. It held vessels in one place, preventing them from ranging while in the berth, so loading could continue. Some were already installed, and the Committee would get an opportunity to see them during the walkabout. TPT was also running a programme that was aimed at mitigating against the wind. Feasibility studies had been completed, and TPT would soon start looking for funding. It looked at remote control of key equipment in the terminal such as the ship-to-shore cranes and RTGs. Once they had the proof of concept, TPT would then move on to other equipment. TPT also continued to monitor the weather, working with the South African Weather Services (SAWS), and they had tools in the terminals that assisted them in monitoring the weather daily.

The terminal had full capacity, and the capacity had been increased in Cape Town Multi-Purpose Terminal (MPT) and in CT Container Terminal, and there were more than enough plug points. Scrap equipment had been sold, and the space had been converted into a reefers deck and reefer plug points were installed to assist the terminal to have more containers plugged in. TPT continued to sell scrap as there were still a few scrap products at the site. The only capacity challenges now were related to the RTGs. They had been due for mid-life refurbishment in 2016 but this had not happened due to financial constraints at that time. The Minister had pledged his full support for all the plans regarding acquiring new RTGs and accelerating the process. The second-hand RTGs acquired from Los Angeles were due to arrive in South Africa’s Port of Cape Town on 3 December. The first batch of brand-new RTGs was expected in November 2024, but the Minister said he would like to accelerate that process. While the award for the long-term partnership with the original equipment manufacturers (OEMs) was still pending, the spares contract was in place. TPT also received technical support from the OEMs. For big equipment such as the ship-to-shore cranes, an OEM working with the Port from the 1 November. The long-term partnership with the OEMs would be used for spares that could not be kept in the country. As another mitigating action against the wind, Transnet had also acquired four anti-sway RTGs, which was the type of RTG the entity would be going for in making the acquisitions of new RTGs. The plan was to replace over 24 RTGs.

Regarding the increase in the current crop and what will be exported by this year, she said Transnet always had pre-season planning meetings where different stakeholders were represented to discuss some of the things that are often delayed from their side. The industry was also currently sending information to the Minister in line with the discussions that were had in the meeting regarding how to prepare for the season ahead, and Transnet was comfortable that the season would be a success story.

The two terminals, City MPT and CTCT, were not affected in the same way by the winds, as City MPT was more sheltered than CTCT. In collaboration with the shipping lines, Transnet had some services that created redundancies for CTCT, so some of those services were moved to City MPT and the first vessel was loaded successfully last week, and there would be more vessels loaded during the season, including the American line calling at City MPT.

Ms Charlene Lefleur, Head: Office of the Management Executive, Cape Corridor, said the costs of vandalism were difficult to quantify. Apart from the fact that it included the cost of maintenance and cost of repairs, other costs such as the cost of delays, customer dissatisfaction, and lost trains, must also be factored into the cost of vandalism. There has been a significant improvement in the cost of security after the conclusion of outcome-based contracts, which is based on the premise that the cost of security is linked to performance. She said the security company started working on the Cape Corridor at the beginning of July, and there had been a trend, but she did not want to commit to a number in terms of quantifying the value of the security because it was linked to specific targets and specific indicators.

Ms Difeto said Transnet did not struggle to get budget for their capital programmes, but they had already allocated budget amounts to implement every initiative.

Follow-up discussion
Mr Van der Westhuizen said his impression was that the trains taking containers from Belcon to the terminal were perhaps not running as they should. What percentage of the containers going through Belcon were eventually brought to the terminal by train? In general, it was disturbing to read that several trains acquired from China were currently idle because a specific spare part seemed to be causing trouble, and that Transnet was unable to obtain that spare part from the manufacturers or the suppliers of those trains. What spare parts were these and could these parts be reverse-engineered by Transnet’s own engineers? He recalled that South Africa had suffered through severe trade boycotts in the past but had been able to circumvent some of those barriers. Was there no other way to get the trains and running again? The economy was suffering because the country could not get its iron ore to overseas customers and the mines were not paying the same taxes they had paid in the past. This seemed to hamper the work of Transnet and the economy of South Africa in general.

The Chairperson asked how many RTGs were not operational and the reason for this. What was being done to service those RTGs to bring them back into service, and how many could be brought back? Regarding average vessel turnaround time, she understood that the ideal target time was generally two days, but at the port of Cape Town, it was four days. In the figures for June, the average total turnaround time was 8.7 days and in August, it was 7.4 days. What was the reason for such a high total turnaround time? How could the eight-point plan play a role in bringing that turnaround time down toward the ideal? She also asked how many working cranes Transnet had, compared to non-working ones. What plans were there to bring the idle units back into operation and what were the reasons for them not working?

Transnet response
Ms Dlanga said that Transnet received rail freight to the Port of Cape Town, but not to the level they wanted, mainly because of a long-standing discussion between Transnet, the Ministry, the industry, and customers. At this point, it really has cut to the bone with the tariff between Belcon and the Port. There were now two inline terminals at Belcon, with Maersk having developed one with nice facilities which is currently working and would assist during the upcoming export season. She encouraged the industry to use that facility. Belcon had about a hundred plug points and continued to work, and the Port of Cape Town was receiving trains at its design capacity of three per day. The Port had rail-mounted gantry cranes (RMGs) used to offload trains, and the turnaround for offloading the trains is one of the KPIs currently in the green. Transnet hoped to be getting more trains during the export season using the two facilities at Belcon.

She explained that the difficulty of getting spares for the Chinese locomotives had no impact on the locomotives that Transnet was using in the Western Cape. It only affected new locomotives such as the 43 class, 23 class, and 22 class diesels, which were not being used in the province. The rest of the country was rightfully concerned about this, however.

Out of the fleet of 32 RTGs, 18 were currently operational. With the spares contract in place, Transnet was doing repair work to get back to the balance of 23, and the seven from Los Angeles would take the Port closer to the target of 32. There were a total of nine ship-to-shore cranes, of which seven were in service at any one time, according to the design of the port. The two remaining cranes were for redundancy. Currently, there are seven ship-to-shore cranes operating and all nine of them should be in working condition next week.

She said that the reason for the long turnaround time in June and July was that there were high swells in Cape Town at that time of year. During the summer, delays were often caused by high winds, hence the fluctuations on the graphs. In early January, fog in the morning sometimes affected the turnaround time.

The Chairperson thanked Transnet for the fruitful engagement and transparency, and for showing the Committee that it was putting its best foot forward with implementing the eight-point plan. The information it provided to the Committee also brought confidence to the people of the province, industry and SMMEs, as it put them at ease and helped them understand the severity of the situation and how Transnet planned to resolve its challenges.

The meeting was adjourned.