The International Container Terminal Services Incorporated (ICTSI), the preferred bidder for Durban port terminal, has been left disappointed after the high court in Durban threw out its bid for leave to appeal against the decision to halt its multibillion-rand agreement with Transnet to manage the terminal.
The decision by the court means the government’s push to bring in private sector participation at the Durban terminal will be met with further delays.
The Philippines-based ICTSI will now have to wait for the matter to play itself out in SA’s courts, to determine if it can proceed with managing the crown jewel in SA’s port system, the Durban pier 2 terminal (DCT2).
ICTSI’s initial 25-year contract with Transnet to manage the terminal was temporarily blocked by the high court in October following a legal challenge by losing bidder APM Terminals, with the main application launched by the latter set to be heard only in March 2025.
ICTSI’s regional head for Europe and Middle East and Africa Hans-Ole Madsen said the group was disappointed that its leave to appeal application was turned down by the court.
“ICTSI adequately proved its financial capacity to perform on the terms of the contract during the bidding phase. Transnet and their auditors were satisfied with this when it took the decision in July 2023 and in a second independent review in 2024,” Madsen said, adding that the company had a global turnover of about R41bn.
“We remain resolute in our belief that the main case will demonstrate the strength of our financial position.”
Transnet, which chose ICTSI as the preferred bidder for the terminal as part of President Cyril Ramaphosa’s push to turn around the performance of SA’s logistics assets by bringing in private money and expertise, did not join ICTSI in its bid for leave to appeal, somewhat leaving the company disappointed.
The denial of the right to appeal against the interdict was not wholly unexpected as Transnet unusually chose not to appeal against the Interdict.
“The interdict was granted against Transnet, stopping the state-owned entity from implementing the private-public partnership pending a full court review next year, making it challenging for ICTSI to be granted leave to appeal the interdict,” ICTSI said in a statement.
“However, ICTSI felt it had no choice but to challenge the interdict because the legal judgment which led to the awarding of the interdict contained a number of legal errors that were damaging to ICTSI’s reputation. ICTSI is a well-regarded publicly listed company successfully operating 32 terminals in 19 countries.
“Delays in setting up a private-public partnership substantially weaken the South African economy and the sooner the country addresses weaknesses at the ports, the better,” it said in the statement.
Transnet in July 2023 declared ICTSI as the preferred bidder for the 25-year joint venture to develop and operate DCT2. The DCT2 project is the cornerstone of SA’s infrastructure, pivotal for economic stability and growth. DCT2 is Transnet’s biggest container terminal, handling 72% of the Port of Durban’s throughput and 46% of SA’s port traffic.
APM Terminals, the port operating company of Danish logistics major AP Moller-Maersk, is challenging the decision, arguing Transnet unduly favoured ICTSI in the bid process.
At the heart of the legal challenge is that Transnet erred in allowing ICTSI to calculate its solvency ratio using its market capitalisation to secure the 25-year contract to develop and manage the Durban container port. This decision, which inflated ICTSI’s solvency from 0.24 to the required 0.4, was made despite internal and expert advice warning against it.
ICTSI was the only bidder to use its market capitalisation to prove it met Transnet’s solvency requirements to qualify for the tender, which saw it comfortably pass the solvency condition.
“Maersk has misleadingly argued that ICTSI does not meet a technical definition of solvency — a metric used to show its financial ability to meet its obligations. ICTSI disputes Maersk’s narrow interpretation of how solvency should be calculated and argues that its measure of solvency is adequate given the tender did not prescribe how this metric must be calculated,” ICTSI said.
ICTSI’s R11bn deal for half of DCT2 is R2bn more than that of APM Terminals.
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