Why ports are hampering South Africa’s growth potential
South African companies are increasingly looking to expand abroad as opportunities at home dry up – but inefficiencies at ports are limiting exports growth.
The 8th PwC South Africa Economic Outlook said supply chain disruptions were among the factors driving local companies to seek mergers and acquisitions abroad.
South Africa’s economic growth rate slowed to 1.5% this year and inflationary pressures, rapidly rising interest rates, short-term volatility, supply chain disruptions and geopolitical tensions are all developing into longer-term trends.
South African companies have been particularly active in the UK, Mexico and India.
And while mineral exports have benefited from the commodities boom and helped drive the economy over the past year, overall exports declined 17.5% year on year due to Chinese lockdowns and the Ukraine war.
Soaring fuel prices meant prices for South African coal shipments were 48.6% higher year on year during the January-June period.
“European demand for coal has jumped in recent months and is expected to increase by 7.0% this year as the European Union reduces its consumption of Russian natural gas and increases coal-fired power generation,” said the report.
Refined petroleum products, iron and steel products and other semi-finished metal products have also seen rising prices over the last year.
However, port performance has been an obstacle to the country taking advantage of its raw materials exports.
Domestic load-shedding and flooding in KwaZulu-Natal caused exports at the Port of Durban to fall by a third during April and May compared with the same period last year.
Durban, Cape Town and Ngqura were in the bottom ten ports out of the 370 worldwide in a recent World Bank Container Port Performance Index (CPPI) for 2021.
The report said: “South African ports are beset with operational inefficiencies. For example, at the start of this year, cargo ships entering Cape Town had to wait for up to two weeks to berth before customs and offloading could commence.”
But it added that a joint initiative by the presidency and the treasury, named Operation Vulindlela, was helping to creating a “competitive and efficient” freight transport system.
So far, the scheme has established the National Ports Authority as an independent subsidiary of Transnet and finalised the white paper on national rail policy.
This month, Transnet was due to request proposals to establish private partnerships for container terminals at the Ports of Durban and Ngqura from January 2023 – which would bring in much-needed investment.
The National Assembly is soon due to vote on the Economic Regulation of Transport Bill, which could create a Transport Economic Regulator.
Transnet plans to invest ZAR 14bn ($822m) to upgrade ports over the next five years.
The report add: “All of these already-achieved reforms in the rail and port space, as well as ongoing and planned developments in these areas, are aimed at improving rail and port performance to the benefit of South African companies and their export businesses.”
Courtesy of CIPS – Full Article