A month after a South African court stymied the transfer of Durban Container Terminal (DCT) Pier 2 to its management, International Container Terminal Services Inc. (ICTSI) expressed alarm over the delay in the terminal’s privatization.
Enrique Razon Jr., ICTSI chairman, said in a statement on Monday he is getting “more and more concerned” with the ongoing delay, noting a “diminishing commitment within Transnet towards this private partnership.”
He was referring to Transnet Port Terminals, a division of the state-owned South African freight transport company Transnet which operates the Durban port.
“Transnet has not acted expeditiously and has dragged its feet at the highest levels. We believe that there are possibly elements in the organization that do not want the process to succeed, despite it not being a secret that South African businesses are suffering more than ever from inefficiencies in the ports. Volumes are down dramatically, and container port profitability is down significantly,” Razon said.
“To be blunt, it will take even more work to resurrect the value of a business that has substantially declined since the tender was launched,” he added.
Razon noted a “serious bias” shown in using Transnet’s reputation to derail the process after the Kwazulu Natal Division of the High Court of South Africa issued last month an injunction against ICTSI’s win as petitioned by Maersk unit APM Terminals.
ICTSI was declared the winner of a bidding for the terminal’s upgrade and operation in July last year, after submitting the highest bid.
The concession is for 25 years with ICTSI to set up a joint venture with Transnet Port Terminals, a division of the state-owned South African freight transport company Transnet.
The injunction is in effect until the case is heard and resolved.
“These delays will curtail the operational recovery and make it more and more difficult for any private partner to succeed. This of course all suits Maersk who have just as much interest in the process failing as they do in having their far inferior bid being accepted. Either outcome would be a dramatic step backward for the government’s economic agenda but a success for Maersk’s desire for end-to-end control of South Africa’s logistics system,” Razon said.
Razon defended the auction as a “well-run, rigorous, and transparent tender process despite what Maersk has attempted to make people believe.”
“ICTSI is one of the largest terminal operators in the world and is, from an EBITDA standpoint, larger than Maersk’s APM Terminals. We outbid Maersk by $100 million and they are attempting to use a non-essential technicality to ensure that the Government of South Africa does not succeed with part of its economic agenda,” the company said.
Touting the delay as a sign of Maersk’s desperation, Razon said the bidding rules were clear that its owner, Transnet, “could and can evaluate the bidders in whatever way was in line with the law and met the public interest.”
“Maersk is now trying to question a non-defined metric that many of the largest public corporations in the world could not meet, including Apple Computer. It is also not possible for as many as 40 percent of the top 40 companies on the Johannesburg Stock Exchange, including South Africa’s largest banks and insurers,” he added.
“Moreover, Maersk has attempted to suggest their case required urgent intervention, however, this is the same company that waited 9 months before launching a case after ICTSI’s bid was accepted as the best,” Razon also said.
He said Maersk has dominated the South African port market since it acquired SAF Marine over 20 years ago, keeping a “dominant position and strong pricing leverage in the market.”
“Maersk is desperate to prevent the entry of an independent common user terminal operator. In short, after failing to produce a strong bid, they are instead trying to delay and stop the process by using the courts,” Razon added.
A key facility in the Port of Durban, DCT Pier 2 is Transnet’s largest container terminal. It handles 72 percent of the port’s throughput and 46 percent of South Africa’s port traffic.
DCT Pier 2 is positioned to serve as a hub for containerized cargo from the Indian Ocean Islands, the Middle East, the Far East and Australia.
The privatization of the terminal is part of an effort to improve efficiencies in the South African government-owned Transnet group, which in the past year has been hit by management issues, underinvestment in infrastructure, labor unrest and theft of assets.