South African consumers may end up bearing some of the costs of Transnet’s current Durban Port crisis if retailers are forced to increase prices to compensate for additional financial outlays to import products.
Any disruptions in the food and retail supply chain as a result of the congestion may also affect product availability, which is a concern as we enter the festive season.
More than 70,000 containers – many of which are carrying stock for Black Friday and Christmas – are reported to be stuck out at sea on approximately 60 cargo vessels that are queuing to get into the container terminal due to congestion caused by broken machinery.
Some retailers are now importing their products via air, which is far more expensive, while major freight companies like Maersk are dropping off their cargo in Mauritius and then shipping it to South Africa on smaller vessels.
This, and the fact that a number of shipping lines have begun imposing thousands of rands worth of congestion surcharges per container, means retailers are sitting with import costs way above their budgets – and they will have to recover some of their losses somehow.
Consumers should therefore brace for the possibility that retail prices could be hiked.
The Consumer Goods Council of South Africa (CGCSA) has also expressed concern about the delay in clearing goods at the ports, with its chief executive Zinhle Tyikwe telling IOL that these delays can potentially lead to disruptions in the food and retail supply chain, and possibly affect product availability.
“This is particularly worrying as we are now entering the festive season.
“However, we note the current multi-stakeholder efforts involving organised business, government, and Transnet to address this issue as expeditiously as possible. We are therefore confident that these efforts will yield positive results.”
She adds: “CGCSA has been on record pointing out the need for urgency to resolve infrastructure bottlenecks such as those being experienced at the ports, which have resulted in our members resorting to expensive road freight, to transport goods for consumer access. In this regard, we continue to urge the government to work with Transnet to improve the efficiency of both the port and railway systems, which is critical to the economy and to the movement of goods in particular.”
Mike Walwyn, a director at the South African Association of Freight Forwarders (SAAFF), is “100 percent sure” that there are still goods outside of the Durban and Cape Town ports that are not going to make it onto retail shelves in time. To counter this, retailers are resorting to bringing goods in via air freight which “costs a fortune”.
Main freight ships are also going to Mauritius and dropping their cargo off there in order to bring it to South Africa, he says, adding that all of this will ultimately “cost you and I more”.
Transnet, meanwhile, says it is implementing “a number of urgent interventions” to address the backlogs at the Port of Durban – which receives 60 percent of the country’s cargo.
“The problem of port congestion is a complex one and it is something that was due to happen at some point, as a result of many years of underinvestment in equipment and its maintenance,” says Transnet Board chairperson Andile Sangqu.
“We are working on a number of measures to turn the situation around. We need to caution that this is going to take some time as the lead times for some of the equipment is anything from 12 to 18 months,”
However, the current backlog is only expected to be cleared by February, which is far too late for retailers expecting their stock to be on the shelves before Christmas.
Peter Besnard, chief executive of the South African Association of Ship Operators and Agents (SAASOA) says the peak season for Christmas cargo imports starts at the end of July and, thus, many of the container vessels queueing at outer anchorage are carrying stock for various stores.
“The process to wheedle the number of vessels down is very difficult at this time as, by the time one ship gets cleared, another two have arrived, and others are on their way to Durban.”
For stock that is cleared on time, he says more trucks will be on the road, trying to make their necessary deadlines. But he is not sure what retailers will do with stock that arrives after Christmas.
The crisis at the ports has been developing over a long time, and although Walwyn says SAAFF has “tried to be very cooperative with Transnet”, he acknowledges that it is probably guilty of “not making enough noise” sooner.
Apart from the potential costs to consumers, he says the crisis comes at a “huge cost” to the economy.
“The situation has been bad before but I think this is the worst it has been. I don’t think it has been as bad as this...and cargo volumes are no higher than 10 years ago, so we can’t say it is due to that.”
In 2022, the World Bank’s Global Ranking of Container Ports, put Durban and Cape Town’s ports in the bottom 10, ranking 341 and 344 respectively – and this was before the current crisis. Besnard says this is indicative of “how bad” South Africa’s reputation is when it comes to its ports.
The problem is also impacting the trucking industry which is made up of a lot of SMME’s. Walwyn explains that, ideally, a truck that drops off containers for export should leave the port with containers meant for import, but now they leave empty.
“They are under immense strain. One company I use told me that it is closing its doors as it can’t make money doing one trip a day.”
IOL Business