By Hans-Ole Madsen
Port congestion frequently makes headlines, as bottlenecks exporting and importing goods constrain multiple sectors of the economy including retail, mining, agriculture, and manufacturing. For years, systemic issues at the ports have remained unresolved, stifling growth, job creation, and tax revenue generation.
Clothing retailers at times bemoan reduced sales due to insufficient seasonal or fashionable inventory in store as clothing stock gets stuck on ships waiting to enter the ports. Similarly, mining firms have been unable to fully capitalise on commodity booms, such as the surging coal prices of 2023 with minerals remaining in the ground despite demand for them abroad.
Agriculture suffers equally. Fresh fruit or even wine destined for international markets frequently gets stuck in South Africa’s ports, arriving overseas too late to be sold. Cancellations and contract terminations then result eroding the industry’s credibility and leading to fewer overseas buyers in the long term.
In short, the operational inefficiencies at the Cape Town and Durban ports reduce local and foreign sales, tax revenue, jobs and opportunities for economic expansion.
It is against this backdrop that International Container Terminal Services, Inc. (ICTSI), a global terminal operator with a proven track record, won a tender from Transnet in 2023 to manage the Durban Harbour’s Container Terminal Pier 2 (in partnership with Transnet), that manages more than 60% of the country’s imports and exports.
The decision to create a public private partnership reveals foresight and proactive management from the government and a commitment to solving the country’s logistics challenges. With operations spanning 31 terminals across 19 countries, ICTSI has demonstrated success in diverse economies, from an inland river port in the Democratic Republic of Congo to major ports in Australia, Brazil and China.
The ICTSI proposal includes an upfront investment of R11 billion. Transnet, South Africa’s state-owned logistics company, simply does not have similar funds readily available to invest into port operations without taking on more debt.
ICTSI has the financial muscle to help upgrade Durban’s Terminal Pier 2 as it earned revenues of R41bn in the first nine months of its 2024/25 financial year.
Yet this public private partnership is on hold due to a court case over one disputed technical metric raised by the losing bidder, Maersk who offered 20% less investment. This disingenuous legal challenge has paralysed a project critical to South Africa’s economic recovery.
Government contracting should not be delayed for years by legal challenges of such a self-serving nature. The tender process in question was fair, transparent, and well-run by Transnet. Allowing one losing bidder to derail the process for years undermines the nation’s broader economic interests.
Delays in contracting with ICTSI are particularly troubling given Transnet’s dire financial state. For the financial year ending March 2024, Transnet reported a R7.3bn loss, its second consecutive year in the red.
In the first six months of the 2024/2025 financial year to September 2024, losses grew to R2.2bn, up from R1.6bn the previous year. Transnet’s inability to fund essential infrastructure upgrades—let alone expand capacity—makes private sector investment not just beneficial, but essential.
Transnet’s challenges extend beyond ports to its rail infrastructure. Theft, vandalism, and outdated systems have rendered entire rail corridors unusable. Refurbishing these corridors requires a minimum R14bn with some estimates being much higher, leaving few remaining funds for port infrastructure upgrades. ICTSI’s proposed investment offers a rare opportunity to address at least one critical aspect of the logistics chain.
ICTSI’s involvement has proven transformative in other contexts. In Mexico, ICTSI developed a port during the height of Covid-19 that revitalised the textile and manufacturing industries in the country.
The terminal sparked economic growth even before it became operational as manufacturing industries invested in capacity knowing they could soon export goods. In Australia, ICTSI’s investments turned its Melbourne terminal into one of the country’s busiest terminals, despite initial scepticism that it could compete with established players.
What ICTSI wants to do first at the Durban port is to install technology that enables real-time tracking of containers, enhancing supply chain transparency and reliability—a critical need for South African exporters and importers.
Currently if a retailer is unsure where their container is, they need multiple services and intermediary companies to locate it or estimate when it will arrive.
If a local exporter cannot tell an overseas customer when their order will arrive, it reduces their credibility in key markets. Locally, if a clothing retailer thinks specific stock will be arriving, they may spend money printing adverts showcasing certain styles only for the stock to miss the season and render the adverts as wasted expenditure.
A lack of transparency on the whereabouts of incoming and outgoing containers wastes the time and money of multiple sectors of the local economy.
ICTSI’s history of unlocking growth and high-tech approach in challenging environments makes them an ideal partner for South Africa.
South Africa cannot afford to let its economy be held hostage by Maersk in a protracted legal battle – one that leaves miners, the agricultural industry and manufacturing exporters financially worse off. Expediting the privatisation process, while retaining state ownership of key assets, is a pragmatic solution to Transnet’s financial and operational challenges.
ICTSI’s proposal, expertise and willingness to invest represent a lifeline for South Africa’s busiest container terminal and, by extension, its economy. It is time to prioritise national interests over legal delays and pave the way for a more efficient, competitive logistics sector. The stakes are too high for inaction.
Hans-Ole Madsen is the ICTSI senior vice president, regional head for Europe and Middle East and Africa.
BUSINESS REPORT