Danish integrated logistics major AP Moller-Maersk is challenging the lawfulness of the ground-breaking contract awarded by Transnet to International Container Terminal Services (ICTSI) to develop and upgrade Durban Container Terminal (DCT) Pier 2, suggesting that it presented a superior bid.
DCT Pier 2 is the crown jewel in Transnet’s port portfolio. It handles 72% of Durban port’s traffic and 46% of SA’s import and export traffic.
Maersk’s subsidiary APM Terminals, which operates ports and terminals, on Friday said it had launched an urgent application to interdict the appointment of Philippines-based ICTSI.
“APM Terminals had bid for the concession. We are confident about the bid we submitted to Transnet and about our ability to deliver what it is that Transnet, SA and all exporters and importers need.
“Our company’s mission is ‘Improving life for all by integrating the world,’ and we believe we would successfully deliver this in Durban,” said Maersk.
“As a part of AP Moller-Maersk, we have a long history of doing business in SA and have a vested interest to improve port operations. In that regard, we have in the past, and continue in the present, to assist Transnet where we can.
“It is not our intention to delay the process unnecessarily or to cause any disruption.
“Instead, we wish to ensure that a proper, fair and compliant process has been followed. It bears emphasis that this process commenced in 2022, and we only received final confirmation that Transnet would proceed with ICTSI as the preferred bidder on March 1 2024.
“This challenge will not delay the process in any real sense and will rather ensure that the process is lawful.”
Transnet named ICTSI in July 2023 as the equity partner for growing capacity at DCT’s Pier 2. The 25-year deal will involve the deepening of the North Quay berth, with the potential for extending the contract to 30 years if there are any delays. The deal will see a creation of a joint venture between Transnet Port Terminals and ICTSI.
Due diligence
The legal challenge comes a month after the Transnet board officially announced its decision to proceed with the appointment of ICTSI after the conclusion of the financial due diligence.
“Following the selection of ICTSI as the preferred bidder in July 2023, Transnet commenced with a due diligence process which included the evaluation of ICTSI’s financial soundness. The financial soundness report has confirmed that ICTSI has the financial resources to conclude the transaction,” the state-owned freight rail operator said in a statement on March 1.
The March 1 communication also indicates that Transnet will seek the consent of all bidders to extend the bid validity period to allow for the completion of the partner selection process.
Some of the outstanding issues include approval from the finance minister for exemption from the Public Finance Management Act for the NewCo — a term used to describe a spin-off, start-up or subsidiary company before it is assigned a final name — to be created to house the joint venture between Transnet and ICTSI.
The unfolding legal challenge to ICTSI’s appointment puts a spanner in the works in efforts to turn around the container terminal.
The concessioning of the terminal forms part of the push by President Cyril Ramaphosa’s administration to bring in private sector participation at the port, which has been hampered by inefficiencies, ageing infrastructure and congestion.
APM, headquartered in The Hague, Netherlands, has more than 74 port and terminal facilities in 38 countries on five continents. In Africa, APM operates container terminals in Nigeria: Apapa port (Lagos) and Onne, Rivers State, as well as a container depot in Kano.
APM has a minority stake in the Port of Pointe Noire container terminal in the Republic of Congo. The group also has a presence in Ivory Coast, Ghana, Egypt, Liberia and Morocco.
Business Day reported in October that the 25-year partnership deal with Transnet demands that ICTSI lift volumes at the terminal to an annual 2.8-million TEUs (20 foot equivalent units). DCT Pier 2 now handles about 1.7-million, short of its rated capacity of 2.1-million.
Opposition
The transaction is of significance to ICTSI as it will constitute about 13% of its global volumes.
The Manila-based ICTSI operates 32 terminals across six continents.
Transnet said it is opposing APM’s application.
“In processes of this nature, it is to be expected that a bidder would find reason to contest an outcome that is not in their favour. Transnet believes that it followed due process in appointing the preferred partner for its Durban Container Terminal Pier 2, and will allow the legal process to take its course,” Transnet said.
Hans-Ole Madsen, senior vice-president of Europe, the Middle East and Africa for ICTSI, said: “It would be inappropriate for us to comment on legal matters but we are opposing the challenge by APM Terminals, Maersk.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.