Maputo is eating Transnet's lunch

RW Johnson says Mozambique and the private sector is stepping in as SA's ports fail

Recently the World Bank ranked the world’s container ports. It used two different approaches. First, an administrative approach relying on the knowledge and opinion of experts. On that basis Durban came 351st out of 351 with Ngqura at 349, Port Elizabeth at 348 and Cape Town at 347. Second, it used a statistical approach. On that measure Ngqura came 351st, Durban was at 349, Port Elizabeth at 348 and Cape Town at 347. These were, by definition, by far the lowest rankings in Africa. Mombasa (Kenya) came 43rd with Djibouti at 93rd.

These utterly miserable figures were, of course, a reflection on Transnet which owns and operates South Africa’s ports. Transnet’s reaction to this data was to pick a quarrel with the World Bank and to announce that South Africa would conduct its own analysis “representative of all stakeholders in the logistics network”.

The phrase “representative of all stakeholders” essentially means the only two unions recognised by Transnet, the United National Transport Union (UNTU) and the SA Transport and Allied Workers Union (Satawu). As with all SOEs, the unions have a complete stranglehold over management.

When the National Ports Authority was set up as an independent subsidiary of Transnet in 2005 the unions forced management to agree that the authority would not be set up. They were utterly furious in 2021 when Ramaphosa again said he wanted to set up the NPA.

In fact the union stranglehold is a primary reason why the ports are in such a rotten state. Endless inflation-plus wage settlements and the usual over-staffing are a chief cause of South Africa’s port charges being among the highest in the world – ten times higher than China’s.

In addition, Transnet’s railways are in a shocking state and there has been a history of under-investment. Virtually all the port equipment needs modernizing and digitalizing, though the unions, of course, are extremely suspicious of words like “reform” and “modernization”.

As a result South Africa’s ports are legendarily inefficient with long waiting times. Drive up to Umhlanga Ridge any day and you will see 25-35 ships waiting to enter Durban. Every day thus wasted costs a great deal of money and these inefficiencies are costing Transnet at least R50 billion a year. Naturally ships try to avoid South African ports, a huge handicap for the nation’s manufacturers, farmers and traders.

The World Bank reckons that by doubling the efficiency of a port you effectively halve the distance that your imports and exports have to travel – a huge saving.

Its experts shake their heads and say that 15 years ago they would have said Durban was Africa’s best port but the opposite is true now. Meanwhile we have got used to reading that South Africa’s mines are quite unable to export all their production through Richards Bay, with huge consequent losses for the country’s economy.

Not far up the coast, however, a super new port is developing fast – Maputo. In 2003 a private company, the Maputo Port Development Company (MPDC) was formed by a partnership between the Mozambican Railway Company, Grindrod, Dubai Port World and the local company, Mozambique Gestores.

MPDC was given the concession for Maputo’s port for 15 years with an option for an extension for a further 15 years. Thus guaranteed a long management horizon the consortium has been busily investing in the port’s expansion – and already it has been given a further option for an extension to 2043.

The result is that Maputo is booming. Its port fees are far lower than South Africa’s and there is no congestion – you can sail your ship into Maputo without delay, offload your cargo and leave the same day. The port now has over 1,000 metres of wharf space and is still expanding: it will double its capacity again in the next few years. The berths have been dredged to allow large displacement ships. The port has modern equipment and now even has a facility for ship repairs and dry-docking.

Maputo’s ambition is clear from the modern warehousing it has built. There is now an 18,000 square metre container depot at nearby Komatipoort plus a 1,000 square metre warehouse.

In addition, Maputo has warehousing to store 1.2 million tonnes of sugar, 250,000 tonnes of grain and 7.5 million tonnes of coal - a facility now being expanded to 11 million tonnes. In addition, a specialised new Fruit Terminal has just been built.

Maputo, in a word, seems intent on eating Durban’s lunch – and perhaps some of Richards Bay’s too. Maputo is only 544km from Johannesburg compared to 567 km to Durban, and there is no need to run the gauntlet of the truck-hijackers on the N3.

By 2022 trains were arriving regularly at Maputo Port from Botswana (via Zimbabwe) and a growing business in the export of Botswanan coal was in prospect.

Nissan switched its vehicle imports from Durban to Maputo some time ago but clearly Maputo will be increasingly attractive to a whole range of miners, manufacturers and fruit farmers in Mpumalanga and Limpopo. Indeed, with so many industries frustrated by the state of affairs at South Africa’s ports, companies all over South Africa will have to look hard at using Maputo.

The really dramatic aspect of Maputo’s growth is the role of Grindrod, a long established Durban logistics company. Indeed, Mozambican port development has turned into a major profit earner for Grindrod. By the end of 2019 more than 21 million tonnes a year were flowing through Maputo, pushing Grindrod’s revenue up to R3.9 billion a year (and profits to R1 billion), with booming exports of magnetite and chrome. Grindrod also operates Matola in Mozambique, a dry bulk handling terminal for coal and magnetite, with nearly 6 million tonnes throughput in 2019.

In addition Grindrod has further entrenched its presence in Mozambique by launching a 60,000 square metre cross-dock facility at the port of Nacala which exports 30,000 tonnes of bagged graphite containers every month. Yet further development is going on in the port of Palma where Grindrod hopes to become a major player in the export of natural gas – potentially an enormous enterprise, currently awaiting the solution of the terrorist problems in northern Mozambique.

Even so, by 2022 Grindrod’s revenue had risen to over R18 billion and profits to R1.66 billion. In a South African economy where slow or no growth was the norm, Grindrod was booming.

The irony of the situation is overwhelming. Ramaphosa and Transnet continue to struggle unavailingly to overcome the terrible mess at South Africa’s ports and yet a Durban company, Grindrod, is showing exactly how such things should be done – though next door in Mozambique.

The solution to South Africa’s port problem is quite simple: invite in MPDC and give them, say, a 20 year contract to manage the ports, using the same skills and techniques they have used in Mozambique.

Such a solution would doubtless be bitterly resisted by Cosatu. Indeed, a major showdown with the unions probably can’t be avoided. But the unions have brought this situation upon themselves and they are holding South Africa back. In the long run our ports would boom, port fees would fall and total employment at the ports would grow. There is, moreover, a certain inevitability about such a solution.

In effect union obstruction has merely provoked a major market response - in Mozambique. In the end market forces are bound to triumph in our ports too. SAA was part of an international airline market. It spurned its chances – to join up with BA or Emirates - and as a result it was overwhelmed by that market’s competitive forces. Our ports too are part of an international transport market and they cannot forever resist being dragged into the 21st century.

R.W. Johnson

This article first appeared in Rapport newspaper.