Hub potential yet to be realised

While its gross domestic product per capita of $12,000 may appear low by western standards, it is still more that 10 times greater than the majority of the other African countries.

Its success in Africa is something its inhabitants should be proud of, yet despite a recent shake up at the top and continued large scale infrastructure investment there is a vein of frustration at the lack of progress on privatisation. Speaking to Port Strategy,Dr Andrew Shaw from the Southern African Development Bank believes that "South Africa has still to capitalise on its Southern Hemisphere trade position".

This is borne out from discussions with some of the larger shipping lines. They are frustrated with African ports in general and although South Africa is performing better than many other African ports, container moves per hour are still somewhere in the region of 19, compared with higher figures for other African ports.

The natural hub port for South Africa is Durban and the higher economic growth rates of Gauteng and KZN imply that increasing volumes will continue to be an important driver of growth for this port.But Durban, like many other large emerging hub ports,has little scope for expansion in a city that considers that the port generates high levels of heavy vehicle traffic on an already congested road network. In other city-ports, such as Hamburg and Rotterdam, there is a realisation that the ports need to capitalise on their hub status to generate further traffic and economic growth for their regions.

A local agent and freight forwarder, with a hands-on involvement that puts him in daily contact with front line operations, takes a more direct approach. "Cargo handling and marine operations remain poor," he says. "Whilst there is money being spent on upgrading equipment and infrastructure in certain sectors, unless the workforce is productive, nothing much changes.

Container handling rates per hour at Durban, the premier African port are embarrassing, stoppages are rife, transport into and out of the container terminal is at times so seriously congested due to trucks that the queue can be 2km-5km outside the port gate".

Another local observer notes that for Southern Africa to match the European handing rates required by the major operators, the authority needs to 'go private'. "The simple answer is that a privatised terminal operator at Durban's DCT would quickly increase port Room for improvement:

Durban has little scope for expansion and container handling rates are 'embarrassing' productivity," he says. "There are however operational challenges such as the age of equipment, the Z shape of the terminal which means longer moves from stack to vessel and even the new Pier One is constrained by a lack of adequate storage space."

On a more positive note, he continues: "The age of equipment is being addressed and new Liebherr container cranes and straddle carriers are in the process of being delivered.This must have a positive impact on productivity as the existing port equipment is old and unreliable."

Dr Shaw adds that Transnet, the government-run organisation controlling the nation's ports, is being turned around. "Its new chief executive, Maria Ramos, has already substantially improved financial performance and has been clear that productivity is a central challenge facing Transnet and that this is being addressed and in a number of areas has improved significantly." But even with this continued progress, Dr Shaw believes that another challenge is that the port sector in South Africa is designed for multiple operators based on the landlord model and provided for by the Ports Act. Under that set up, he believes that the National Ports Authority (NPA) does not naturally sit in Transnet and, in terms of the legislation, it should be moved out as a direct agency of Government. "South Africa Ports Operations (SAPO) is more aligned to the role of Transnet as freight transport operator. Transnet sees the link between ports and rail as a strategic benefit. However, as has been found around the world, the synergies between rail and ports particularly in respect of the container market are very weak (rail carries approx 5% of total domestic container  traffic). The synergies between ports and shippers are much stronger. It is possibly for this reason the Department of Public Enterprises (DPE) has been clear that a private sector operator will be used for the Coega Container terminal." It would seem that Transnet may agree with this issue. Local sources believe that Transnet may begin to incrementally open up the market to multiple operators. However, it has stated that it first needs the revenue earning contribution of the ports in the short term to sustain the turnaround of its business,primarily the rail component which faces significant financial constraints.While there might be some logic to this, it must come at quite a price: continuing poor ports performance has a dramatic affect on any economy.

Exactly how private sector operators will become involved in South Africa's ports is not yet clear.Transnet seem to be in talks with some operators already, although the DPE makes it clear in its most recent Strategic Plan that it will go through a request for proposal process and award a principal support provider contract. This process will not be new to Coega: after years of work and considerable investment by TCI Infrastructure and P&O Nedlloyd the Coega concession came to a grinding halt.Today, there is more pressure for terminal space and this time Coega may choose to develop a hub based on an efficient private sector operator model, probably owned by one of the dominant

shipping lines. Coega as a port, however, continues to face the challenge of having a very small hinterland market and so, unlike Durban, has no natural geographic traffic volume advantage. So it should come as little surprise to hear that it is apparently on top of the list for public/private partnership. Originally, it was planned to be operated solely by SAPO, with its 550m quay and 15m depth becoming operational by 2008. With these credentials it certainly has the potential to become South Africa's transport hub.