South African retailers are having a hard time stocking their shelves in preparation for festive season shopping due to significant delays at South Africa’s ports.
This is according to Mike Walwyn, director for maritime affairs at the South African Association of Freight Forwarders, who said the delays are bound to impact Christmas shopping in the country.
“I think it’s going to have a huge impact. It’s difficult to tell exactly how much, but this is the time when most of your pre-Christmas imports arrive, and there have been huge delays in that,” said Walwyn in an interview with Cape Talk.
“So there’s bound to be an impact.”
The situation at Transnet’s ports is so bad that Maersk — a global shipping and logistics giant — has had to start offloading cargo in Mauritius to allow smaller vessels to bring the shipments to South Africa.
It created “Cape Town Express” — a new feeder service to reduce wait times.
“South Africa, which is facing congestion, will get connected on a dedicated feeder service via Port Louis to improve reliability and transit time,” said Maersk.
Walwyn said the fact that big companies like Maersk can’t rely on Transnet is an embarrassment to the country.
“We have become a sort of third-grade wayport, and the time it takes our cargo to get here from origin is obviously longer now with the extra stop,” he said.
“That is something that should never have happened.”
While some shipping companies can make alternative plans like Maersk has, others are forced to wait in excessively long queues to enter South African harbours.
Walwyn said he had heard of retailers flying cargo into South Africa to stock their shelves, which is a significant added cost for these businesses.
“I have heard [of] it, and it would not surprise me,” he responded to a question regarding retailers using air shipping.
He said this also significantly impacts South African exporters, who might also fly shipments to their destinations.
“If you think about it, it’s the export side as well. For example, your fruit, your grapes, whichever popular fruit is going into the UK market before Christmas, your chances of getting it there by sea have evaporated, so you end up flying it,” said Walwyn.
This comes at a significantly higher cost than shipping products via sea.
Transnet worse than Eskom
FNB Wealth and Investments’ Wayne McCurrie recently described the situation at Transnet as “way worse than Eskom”.
“The average South African don’t realise what a complete and utter catastrophe Transnet is. It is way worse than Eskom,” Daily Investor quoted McCurrie as saying.
His views echo Peter Attard Montalto, managing director at Krutham, who said the problems at Transnet are more complex than those at the state-owned power utility.
Attard Montalto said Transnet’s request for the National Treasury to take over R61 billion of its debt, made in October 2023, wasn’t surprising as it had already breached loan covenants with banks earlier in the year.
“If you did not do these bailouts, they would come back to bite you ten times worse later regarding defaults and investors pulling out of the country,” he said.
The situation at Transnet has significant consequences for the South African economy, with Stanlib chief economist Kevin Lings saying it puts 68% of the country’s GDP at risk as companies struggle to import and export goods.
Put into numbers, this means approximately R3.1 trillion of R4.6 trillion of GDP depends on Transnet.
As Walwyn mentioned, Transnet’s poor financial situation has led to congestion at South African ports due to broken machinery and other issues.
This has resulted in shipping and logistics companies having to make alternative plans, such as Maersk’s “Cape Town Express” service.
“South Africa, which is facing congestion, will get connected on a dedicated feeder service via Port Louis to improve reliability and transit time,” it said.
In September 2023, South Africa’s public enterprises minister, Pravin Gordhan, pledged that the underperformance of Transnet would end after it reported a R5.7 billion loss for the year ending 31 March 2023.
The loss represented a significant swing in the state-owned rail and port company’s finances, as it had posted a R5 billion profit in 2022.
“The deterioration in its operational and financial performance will be stopped,” said Gordhan.
“Nothing will be allowed to get in the way of the effective implementation of a radical plan.”
Transnet’s rail infrastructure is in far worse condition than its ports, with the rail network having been poorly maintained and ransacked by criminals.
The volume of iron ore and coal transported via Transnet’s freight rail network for export has dropped significantly, leading companies such as Glencore Plc, Sasol Ltd., Thungela Resources Ltd. and Exxaro Resources Ltd. to transport their minerals by road.
It also led companies like Glencore Plc and Seriti Resources Holdings Ltd to consider cutting jobs in the country due to Transnet’s inefficient exports.
The Minerals Council estimates that Transnet’s poorly run ports and rail lines cost South Africa roughly R150 billion in exports in 2022.
Shortly after Gordhan’s pledge, Transnet announced CEO Portia Derby and CFO Nonkululeko Dlamini would leave their roles.
The Transnet board appointed Michelle Phillips, chief executive of Transnet Pipelines, as acting group CEO with effect from 1 November 2023.
Prior to that, the South African government revamped the Transnet board in July 2023 and appointed former mining executive Andile Sangqu as its chairman.