The worst ports in the world just got even worse due to the KwaZulu-Natal storm and with an economy that relies heavily on exports, this is not good news.
South Africa must improve the efficacy of its ports if we are to remain competitive on the long-term.
Economist Mike Schűssler says the country is in dire straits after the storm that damaged the road to the main container terminal at Durban harbour, but the cost will only become apparent in the next few days, as this is the start of the citrus export season, our largest or second largest agricultural product.
“The damage from the storm will amount to millions at least if not billions, but I hear we should be back on track in the next few days. If the harbour becomes accessible soon, the damage to exports could be limited. Some farmers are even exporting through Maputo.”
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Why are our ports so bad?
Prof. Stephan Krygsman, from the department of logistics at Stellenbosch University, says South African ports are not very efficient and recent research by the World Bank and other agencies rate our ports as very inefficient, costly and not really productive.
The data used to construct this index is very generally related to the time a ship spends in the port and the number of container moves (load and discharge) and not storm disruption. Port time and container movement influence costs and port efficiency and ultimately the competitiveness of the freight or cargo exported.
“Based on this and other data, our ports’ performance is very poor as it implies that ships spend longer time in our ports and we move fewer containers. All of this is related to the cost of ports, which can be significant.”
While the port of Durban is temporarily closed due to the storm, all our other ports are working, including Richards Bay, Coega, Gqeberha, Cape Town and Saldanha, but there are not really substitutes that can be used when a port is not available. This is only possible in a limited number of cases and then the cost is significant, Krygsman says.
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Export-led growth strategy
He explains that South Africa relies a lot on its export-led growth strategy for its manufacturing sector and employment.
“The primary role of ports is to stimulate trade through the handling of cargo or freight at the lowest economical cost to be internationally competitive and stimulate foreign trade.”
Highly effective handling of cargo can stimulate economic growth and is therefore very important for the country.
Krygsman says this goal is reached by:
- firstly, ensuring quick turnaround times of ships
- secondly using modern technology and equipment to ensure effective and quick cargo flows
- thirdly ensuring sufficient accessibility to ports and sufficient land area for port functions.
“We have a problem with all three of these, with ships spending a long time in ports. With the closing of a port, we will see an increase in cost as goods are moved to other ports or simply not delivered.”
He says if these problems are very short-term, we will be able to get by, but if it turns out to be a long-term issue, we really have a problem.
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What can be done to resolve these problems?
Krygsman says we have to improve the efficacy of our ports.
“There are many possibilities, but the one that will probably work here is to allow the private sector to operate ports or berths. Government can also do this, but state departments are often exposed to political influences which will not necessarily contribute to the efficiency of the port.”
State departments are also subject to universal employment practices and entail agreements, conditions of employment, responsibilities and administrative procedures which can result in anti-productive procedures, Krygsman says.
“I think government’s role should be to undertake long-term planning and the port operations should be left to the private sector. Government is often interested in job creation and rightly so, but in the transport sector jobs are created in the system by allowing other industries to produce more and access larger markets.”
Krygsman emphasises that jobs are not created in the transport system, as this is a cost and your job is to lower transport costs.
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Privatisation of ports
He says the president mentioned all the right terms in his State of the Nation speech earlier this year, such as asking for private sector involvement, but he says it needs to happen at a larger scale at all the ports and faster.
“The policy is starting to point in the right direction, we just need to get moving.”
Some citrus farmers are already exporting fruit through the Maputo port, but Krygsman says they do this because Maputo is much closer to them.
“If it allows them to lower their costs, get containers out quicker and be more competitive internationally, there is nothing wrong with this as it allows them to remain competitive internationally and earn valuable foreign currency and employ more people locally.”
Krygsman says all the port problems in South Africa is less of an issue in the short-term, but over the longer term, we will really need to increase the efficiency of our ports to remain competitive.
“We are at the southern-most point of Africa and all our trading partners, including the EU, China, the USA and the UK are very far from us. We really suffer from a distance disability and we can only overcome this with very efficient supply chains, of which ports is probably the weak link.”