Addressing Inefficiencies at the Port of Cape Town: Stakeholder Input

Meeting report

Minister’s Opening Remarks
Ms Mireille Wenger, Western Cape Minister of Finance and Economic Opportunities, said that there would be presentations giving an analysis of the functioning of the Port of Cape Town, especially the container terminal, which experienced issues during the peak export season the previous year. Trade was important provincially and nationally, and it was essential that the port work optimally. About 55% of agricultural exports went through Cape Town. All the work being done was to realise the full potential of the Port and to generate economic growth and jobs. The Western Cape Department of Economic Development and Tourism (DEDT) clearly needed action in the medium term. There was a need for investments in the long term to enable future growth, and the matter was a priority for a breakout growth trajectory.

Update by the Department of Economic Development and Tourism
Mr Glen Steyn, Business Economist, DEDT, on addressing the inefficiencies at the Port of Cape Town, spoke to a historical overview where ship working hours had declined since 2010 to half of its target.

He said that the root causes of congestion were identified as being institutional, including poor logistics integration, communications, industrial relations, data and the weak voice of cargo owners, an old and inadequate fleet of heavy lifting equipment, no strategy for cargo growth, seasonal peaks, high wind speeds and truck congestion in the morning, with queuing on Marine Drive and Duncan Road. This was the situation while there was anticipated growth of 26% projected in containerised cargo for 2026.

The root causes of transporter congestion were identified as terminal equipment, gate coordination, transporter behaviour of both companies and drivers, planning and communication amongst logistics chain members, traffic management, the wind/weather and the institutional development for transporters.

On the economic impact of the logistics chain, it was estimated that container terminals contributed 8.6% towards the Gross Value Added in the Western Cape in 2021 and to the creation/sustaining of 225 000 jobs. Taxes paid from these activities was almost R20bn.

He said that the Port Manager had hosted weekly operations coordination and quarterly strategy engagements with prominent logistics chain agencies for the past two years, and Transnet leadership was committed to improving freight logistics. Senior Transnet and DEDT managers met on 09 February to align Western Cape’s Growth4Jobs strategy with Transnet strategy for the Western Region and to discuss a list of urgent interventions. The 2024 Port of Cape Town stakeholder dialogue hosted by Minister Wenger on 13 February reached consensus on the alignment of strategies for economic growth and job creation, an open line of communication on priority interventions, and partnerships where private sector capital investment and technology were needed.

He said the Belcon inland terminal first phase was completed in November, and further development was underway.

The priorities going forward would be to:
- mobilise industry and public sector support for the Port of Cape Town container development plans by way of efficiency improvements, including interventions to pro-actively manage peaks in cargo volumes and recovery after adverse terminal events;
- develop a viable digital technology platform to facilitate cargo planning along the entire container logistics chain;
- reduce transporter congestion by way of appropriate and viable joint interventions;
- encourage viable private sector participation to contribute the resources and skills required to achieve and maintain fluid freight logistics;
- promote integration of the Transnet strategy in the western region and the Western Cape growth for jobs strategy to achieve best case outcomes for sustainable economic growth and employment.

Challenges were the institutional vacuum, industrial relations, the fact that exporters did not have a voice, and an inadequate fleet of machinery.

See attached for full presentation

Discussion
Mr A Van der Westhuizen (DA) said that the Committee had engaged with port authorities in November of the previous year and many undertakings regarding the purchase of equipment were given. Did the equipment land, and were they operational?

He had observed that only one of three loading lanes was used. New equipment could not be purchased because of balance sheet pressure, and the balance sheet could not improve because of a lack of income because the equipment was not there. Could Transnet not be assisted by using long term leases to get equipment?

Ms N Nkondlo (ANC) said that she preferred a progress report based on the resolutions of the previous meeting and not detailed technical presentations. Was part of the challenge the relationship between the Department and Transnet? If so, what were the relationship problems? She asked if the presenter was referring to Transnet’s board chairperson in his presentation.

The Chairperson asked how the way forward aligned with Transnet’s eight-point plan. What factors contributed to the stabilisation being seen at the Port? She also wanted clarity on Transnet’s comment on understanding the market.

Mr Steyn confirmed it was Transnet’s board chairperson he was referring to.

Update by Transnet on addressing the inefficiencies at the Port of Cape Town
Captain Vernal Jones, Acting Manager of Transnet National Ports Authority (TNPA), gave a port overview and spoke to the eight-point Port Efficiency Improvement Plan which covered:
- Immediate Crisis Management
- Improved Information Sharing and Port Operations Visibility
- Combatting Adverse Weather Conditions
- Terminal Equipment and Port Infrastructure
- Improving Truck Operations
- Optimising Marine Services
- People
- Optimising the Port as a Delivery Platform

He also spoke to the Port’s growth strategy regarding key commodities and to position the Port as a global premium fruit and agriculture export hub; a diversified energy hub for the Western Cape; a container terminal for the Western Cape; a multi-commodity mix (MPT) port specialising in the handling of dry bulk and break 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, recreation and tourism.

Mr Oscar Borchards, Acting Managing Executive, Transnet Port Terminals (TPT), spoke to the issues and metrics of waiting for berth and berth occupancy; average volumes per month; truck turnaround time; average vessel turnaround time; average anchorage time; container dwell times; volume and vessel performance tracking. He noted that average daily moves reflected an upward trend.

Ms Smangele Khumalo, Head of Operations: Transnet Freight Rail (TFR), spoke to TFR’s value proposition for the agriculture industry, namely to:
- Shift volumes from road to rail
- Increase density of under-utilised lines
- Harness market opportunities
- Optimise train load traffic
- Improve asset utilisation and efficiency
- And contribute to growth of key agricultural sectors

She said that TFR wanted to get traffic from road to rail, so it was focussing on this aspect.

The challenges were: low rail market share; the need for containerised/ palletised & intermodal solutions to ship time-sensitive produce to target markets; the seasonality of agricultural commodities; low train utilisation; high operational costs; low operations efficiencies; limited infrastructure investment; and the profitability of short distance traffic.

She spoke to the Belcon Terminal Development, the PSP opportunities and to the challenge of security incidents such as cable theft, sabotage, vandalism, and general theft.

She said that Overhead Traction Equipment (OHTE) theft incidents had reduced substantially since the implementation of an Outcomes Based contract. A Joint Corridor Command Centre was being established to assist with real time monitoring and to enable quicker response times to security incidents.

See attached for full presentation

Discussion
Ms N Nkondlo asked whether there had been 60% losses by fruit exporters in the previous season, as alleged in newspapers. What had been planned to prevent this from happening particularly in this season? What were the problems, and what was the extent of those problems? She asked what the agreed waiting times negotiated with industry were, and she felt that this was due to the old infrastructure at the Port. Were these waiting times being met? If not, what was the extent of the problem? The Premier of the province had said that none of the dashboard targets during waiting times had been met.

Mr Van der Westhuizen asked whether the used equipment which had been purchased had arrived and was operational. He said that vessel turnaround time was way above target. Was this target self-determined or linked to international benchmarks? What was meant by container movements? Was it related to containers being put on a ship or being taken off a ship?

The Chairperson asked what the contributing factors were to the decline in berthing and anchorage from January to February. Why were there currently no ships at berth? Why were vessels bypassing Cape Town? Why was the havoc in the Red Sea not causing more boats to come Cape Town’s way? She said that the average total turnaround time reached up to four times the target time in the busier periods of December and January. What were the reasons for this, and what steps had been taken to provide capacity in this period?

Mr I Sileku (DA) asked whether Transnet was satisfied on how the eight-point plan was progressing currently. If not, why were they unhappy? Were the measures they had put in place to deal with cable theft, vandalism and sabotage?

Responses
On whether the agreed waiting times negotiated with industry were being met and, if not, what the extent of the problem was, Captain Jones said that the ship turnaround times achieved were higher. The factors affecting this was weather, particularly wind.

On vessel turnaround times being above target and whether this target was self-determined or linked to international benchmarks, Captain Jones said this was calculated from the vessel passing the breakwater inwards till it crossed it outward. Nothing was deducted from this time for TNPA, but there might be different calculations with commercial undertakings which would be classified as deductibles from the turnaround time and be used in agreed upon undertakings.

On the issue of inefficiencies, he said they did have a bearing on achieving KPIs.

On why vessels were bypassing Cape Town, he said that, in the Covid-19 period, just over 50% bypassed Cape Town because of wanting to stick to a schedule. More recently, it was because of economic decisions the shipping lines made. More consolidation was also happening on the western half of Africa, which led to more decisions to bypass the Cape for economic reasons.

On why the havoc in the Red Sea was not causing more boats to come Cape Town’s way, he said that, in general, the trade routes were set and used – for example, ultra large carriers which could not be accommodated in Cape Town. These very large carriers operated between hub ports in Asia and Europe. But the Cape did do services such as provisions and stores and crew changes.

Mr Rajesh Dana, Port Manager: Port of Cape Town, added that the one positive spin-off was increased cruise liner calls.

On the eight-point plan, Mr Dana said that three weeks ago, all members of the logistics chain had met at a quarterly meeting where the eight-point plan was presented. The question had been posed whether the eight-point plan had not delivered the desired outcomes because it was flawed. The unanimous feedback was that the plan was sound but the implementation of the plan needed to be accelerated.

On the issue of whether the equipment had not been purchased because of a lack of money, Mr Borchards said that they could have claimed they had no money but that other methods could be used to get equipment, such as full maintenance leasing while they awaited new equipment. An example of this was the rubber-tyre gantry crane (RTG) that had been ordered, and they had ordered second-hand RTGs. In the meantime, Transnet engineers were co-opted to fix one machine at a time to bring them back into the system. More breakdowns were found on the cranes, and this related to why Transnet was not performing. The manufacturer of the cranes was on-site and a seven-year parts contract was concluded. A total of 26 new artisans would enter service by end of March. It could not just buy a new crane as the lead time for purchasing a crane was 12 months old.

He said that the lack of cranes had an impact on the fruit season and that 5 000 containers were diverted to Port Elizabeth and Durban. This decision was done by the fruit exporters. They were now committed to Cape Town.

On waiting time, he said this was purely dependent on productivity at the quayside. He acknowledged the low productivity then, but there has been a great improvement in the last three weeks.

On why the targets were not met, he said that it was due to equipment and system inefficiencies and not engaging shipping importers and exporters, but that had since improved through collaboration allowing Transnet to have better information to make better decisions to try to improve the turnaround times of vessels.

On the vessel turnaround targets, he said that Transnet had engaged with its stakeholders to see how the turnaround time could be reduced. Transnet was not focused on the wind but on what it could do to improve turnaround times. The targets were not met, but Transnet focused on reducing downtime to reach 40 hours. High winds did occur in the peak fruit season but the solutions were to provide extra gangs, to ensure the equipment was up and running, to work smarter and to work with stakeholders. Transnet had worked on working out the challenges of their truck system and had their first report back recently on this study, which had yielded some interesting factors that could be worked on to improve the truck flow through the Port.

Regarding the measures put in place to deal with cable theft, vandalism, sabotage, and theft, they said that outcome-based security had yielded positive results in the Western Cape and had also led to arrests and convictions. Cable theft was still a work in progress, but they were working on mitigating it.

Ms Nkondlo asked about the collaborative work with the stakeholders in Private Sector Participation (PSP) projects. What number of PSPs was added, and what were the amounts invested following the engagement with stakeholders?

Mr Van der Westhuizen asked about the road-to-rail initiative. He noticed a lot of trucks on the N7 carrying ore. To what extent could one look forward to the ore of the heavy trucks being transferred to the railway line?

The Chairperson asked why it would not be economical for a shipping line to use Cape Town. Which ports was Cape Town losing out to and to which ports were these boats going?

On the private sector and percentage of investment, Captain Jones asked that that question be removed as it needed information to be consolidated at Transnet level to ensure the numbers were validated and correct.

On the movement from road to rail, he was unsure whether it was a general statement or it was meant for road shipments to Cape Town or shipments to Saldanha Bay. If it was for the latter, there was specific available capacity for the rail. There were emerging miners who moved cargo by road, but the major miners moved it by rail. The emerging miner transport was not done via Transnet’s subsidiaries. He said that the N7 had been upgraded to account for the heavy traffic on the road.

On shipping lines bypassing Cape Town and whether South Africa was losing cargo, he said the answer was no, as cargo destined for Cape Town would be offloaded at another port and feeder ships would deliver it to Cape Town. This was done in terms of economics and impacts on schedules. This bypassing was not unique to Cape Town and happened all over the world. He added that the cargo size had increased while vessel numbers might have decreased.

Mr Dana said the evolution of logistic transport had led to three phenomena. One was the rationalisation of vessels on a route, the consolidation of cargo on a vessel, and co-sharing and co-loading by shipping lines. Cape Town attracted the hinterland cargo.

Ms Charlene LeFleur, Head of the Office of the Managing Executive at Transnet Freight Rail (TFR), said that the iron ore line in the Northern Cape was running at capacity. Each year Transnet has been increasing rail capacity for emerging miners. Unfortunately, Transnet could not meet all their requirements and demands as contracts were in process with many role players. TFR was looking at an expansion program together with the Port and rail side.

On the PSPs, she said that it would be working on coordinating the PSP spending to add to the response to that particular question.

Ms Ilse van Schalkwyk, Chief Director: Sector Support, DEDT, said that there were still five to six weeks left in the table grapes season, and that slight improvements were being seen but the Department wanted to triple exports and that would put more pressure on the ports. The impact of the Port was not only on the movement of exports but also for imports. They needed to maintain and preserve the shared priorities, be aware of competition regarding container terminals, and remain globally competitive.

Mr Steyn said that all the Members’ questions were related and the responses were interconnected. He said the first half of the fruit export season was a disaster but changes were made and in the second half one saw a totally different picture and that a recovery was in place. He was cautiously optimistic for operations by the end of March. He said vessels redirected from the Suez to around the Cape did not want to stop as it was already taking a longer route. That was not the market the Cape wanted. The Cape needed to identify the particular market it wanted to attract.

Briefing by the Western Cape Exporters
The meeting then heard a briefing by Mr Terry Gale, the Chairperson of the Western Cape Exporters, on the challenges experienced regarding exporting goods via the Port of Cape Town, particularly during the grape harvesting season. He referred to the figures presented at the weekly meeting of stakeholders on waterside TEU (twenty-foot equivalent) movements, truck gate moves, stack occupancy, and stock occupancy, which reflected the improvements taking place, but there was a need to increase productivity.

He then moved on to look at CTMPT (Cape Town multipurpose terminal) container movements, which was very slow because the terminal did not have all the landside equipment necessary. He highlighted the need for multipurpose terminals and that these terminals were for general cargo, not necessarily fruit, and especially for use for trade with the USA. He turned to the deciduous fruit presentation which spoke to the different fruit types being moved where there have been improvements for the past three weeks.

See attached for full presentation

Discussion
Mr Van der Westhuizen wanted clarification on the additional costs of transporting fruit to Durban, Gqeberha, or Coega instead of Cape Town.

Mr Gale said he did not have that number on hand and would respond in writing.

Mr Steyn said it cost R38 000 to move a container from Cape Town to Gqeberha.

Briefing by South African Association of Ship Operators and Agents
Mr Eben Joubert of the South African Association of Ship Operators and Agents briefed the Committee on the challenges experienced at the Port of Cape Town, on the surcharges at the Port, and on the gap between the average turnaround time at the Port and the ideal turnaround time needed.

He said that the challenges were on productivity around turnaround times of Cape Town compared to the international standards, and to berthing delays and Port congestion surcharges and on the Cape Town Port’s gross crane moves per hour per, per ship, along with gross crane productivity. He said that the reason for low productivity was related to both quantity and quality of terminal equipment, which also led to trucks waiting for hours to load/discharge containers outside the terminal, costing transporters dearly and causing major congestion. He said that PSPs would only be successful with long-term leases and the removal of restrictions in the leases.

See attached for full presentation

Discussion
The Chairperson asked what metrics needed to be improved to increase gross crane productivity and avoid port congestion surcharges. She wanted further elaboration on THE leases and their length and the restrictions around them.

Mr Joubert said the biggest problem was not enough equipment to service trucks bringing in or taking containers out. Unfortunately, the equipment was not immediately available, and there was a two to three year waiting period. So, the situation would not improve drastically for the next few years.

On the leases, he said that the lease for a berth was a short-term lease, and there had been a request to extend the lease. If one wanted to effectively run a berth, it had to be a long-term lease to make investment economically viable. The lessee was also restricted to the type of vessel they could handle.

Mr Bradley Augustine, Divisional Financial Planner at Transnet, said that the presenter had spoken of the current waiting time for vessels being 100 hours or approximately four days. What level of working time was needed to get rid of the surcharge?

Mr Borchards said it was important to understand the parameters of what was being dealt with. For efficiency to improve, one needed multiple pieces of equipment. The fleet level of haulers was low. This was identified and needed to be increased. A total of 47 haulers would be arriving in July, and haulers would be leased in the interim peiod until then. Start up times and shift change times had improved as that was regarded as waste. A new four-shift sytem would be put in place to reduce the number of changeovers.

Captain Jones emphasised that the A-berth terminal operator, FPT, won the short term bid but when the TNPA went to market it would be a transparent, open process open to everyone.

On FPT being constrained to only handle geared vessels, he said TNPA had approved gearless vessels at A berth.

Mr Joubert said that the congestion surcharge was not determined by the shipping lines on a local level. It was at their head office and determined by their operations. He was not privy to these calculations and the criteria they used.

On the use of gearless machines, he said that was a statement made by an FPT executive a week and a half ago. It appears the concession was handled on a case-by-case basis, which should not be the case. It should be an open ended agreement.

On the various times for truck and container movements, he said they would be happy when there was a drastic improvement in these parameters in the Port of Cape Town. .

The Chairperson noted that the Committee also received a submission from MSC shipping lines which the Committee would consider.

Regarding how long it would take to wait before berthing, Mr Steyn said he would be very happy if it berthed on the day it arrived. It might be happening from next week and berthing within 24 hours of arrival was international standard practice.

Mr Van der Westhuizen thanked everyone for their presentations and said he realised the complexity of the issue even more.

Mr Steyn said that there was a lot of discussion about equipment. In his opinion, there were two common themes and that was people and management. Transnet’s PWC report also spoke to a lack of oversight and accountability. He said one had to look at the people, the mangement, the processes, the recruitment, the training and the discipline. He said that, in all their engagements, they had to include labour. That was a crucial part as the stakeholders did not see or hear what their challenges were within industry.

Committee Deliberations
The Chairperson asked if the Committee had any resolutions.

Mr Van der Westhuizen said that he had a number of questions he would like to propose for resolutions.

The Chairperson said that he should forward that to the Secretary. She wanted to ask Transnet to share their PWC research report. She also wanted to know what the specific infrastructure was that was needed, and what the status of its procurement was. When was it anticipated to arrive, and when would it be functional, and how would this help meet the targets of the eight-point plan?

Mr Van der Westhuizen said that the Committee needed to express its gratitude for all the efforts, and recognise the work of DEDT in engaging with the Port of Cape Town and alleviating the bottlenecks experienced, acting in the interest of the Western Cape and the producers of agricultural products as well as bringing all stakeholders together, as the producers of exports have historically not been heard before. The Committee should write to the Minister and Department for the excellent work they were doing in supporting the Western Cape economy.

The Members supported this.

The meeting was adjourned.