The head of logistics at Investec says it is difficult to believe that Transnet will overcome its operational challenges any time soon, but hopes “constructive intervention” will take place to turn around the state-owned entity’s fortunes.
Denys Hobson, head of logistics at Investec for Business, said the logistics challenges are compounded by treacherous weather conditions, increasing fuel prices, shipping disruptions and an exodus from top management positions at Transnet.
“The current delays to sea freight shipments are costly and the extremity of these delays and disruptions are wide ranging. It is hard to have faith that the shortcomings of Transnet will be overcome any time soon, but we need to keep hope that there will be constructive intervention and that fortunes will improve,” he said.
Hobson is responsible for Investec’s international and local logistics procurement functions, consulting with clients on global trade trends, as well as logistics and supply chain matters.
The past few weeks have been anything but smooth sailing, and he expects constraints to continue into November, he said.
“Shipping lines are struggling to balance capacity demand because of vessels being delayed to and from SA, and numerous vessels have been delayed by upwards of three weeks on the return voyages. These delays can be attributed to unfavourable weather conditions along our coast, low port productivity and equipment challenges. The Far East to SA trade has experienced the most significant disruption and the outlook for the coming weeks doesn’t look brighter.”
The Far East refers to the countries of East Asia, including China, Japan, North and South Korea, Myanmar, Thailand, Laos, Cambodia, Vietnam and Malaysia.
Business Day reported on Friday that Transnet has asked that the government take on a portion of its historical debt, similar to the R245bn debt relief offered to embattled power utility Eskom, as it continues to struggle under a R130bn debt pile and operational shortcomings.
Transnet has in the past few weeks seen an exodus from the top echelons of the company, with group CEO Portia Derby, CFO Nonkululeko Dlamini and Siza Mzimela, the head of its biggest division, Transnet Freight Rail, having fallen on their swords as pressure to turn the performance of the group around mounts.
Hobson said he expected freight rates to increase on the Far East trade route because of the capacity challenges, high number of rollovers and post-Golden Week demand.
“Shipping lines may also try to recover costs with additional tariffs because of the extended anchorage and berthing delays experienced across our ports,” he said. “If the sea freight capacity constraints and schedule disruptions persist, then we can expect demand for air freight to increase and subsequently rates too.”
A lack of maintenance by Transnet on critical equipment has resulted in numerous breakdowns of equipment required to perform key functions within the port and ensure cargo moves timeously.
The Transnet board, chaired by Andile Sangqu, is expected to lay out the turnaround blueprint for the ailing entity on Monday. Public enterprises minister Pravin Gordhan this month appointed the inaugural board of directors of the Transnet National Port Authority.
“Hopefully, the newly appointed Transnet board can implement decisive strategies to turn around Transnet and, with the support of the private sector, transform Transnet into an efficient organisation that contributes positively to our economy. Opportunities for public-private partnerships are endless and anything is possible if there is a will to win,” Hobson said.
The Sunday Times reported that a road map drawn up by a committee advising the presidency on ending the logistics crisis has proposed the introduction of private players to operate alongside Transnet on all its freight rail lines, including on the lucrative coal and iron ore routes.
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