Published on 21 Jul 2023

Philippine terminal operator secures South African port deal

ICTSI to develop Durban terminal amid rising global interest in African port infrastructure

International Container Terminal Services Inc. (ICTSI) from the Philippines has won a contract to develop and upgrade the Durban Container Terminal Pier 2. The project, set to last 25 years, will be a joint venture with Transnet Port Terminals, a division of the state-owned South African freight transport company Transnet.

The Durban container terminal manages 72% of the Port of Durban's cargo and 46% of South Africa's total port traffic. It is positioned to serve as a hub for containerised cargo originating from the Indian Ocean Islands, the Middle East, the Far East, and Australia. Transnet group chief executive Portia Derby said the partnership with ICTSI is part of its programme to bring in international expertise to improve efficiencies at its terminals and take advantage of growth opportunities. Over the past decade, Transnet has been hit by poor management, corruption, underinvestment in infrastructure, labour strikes, and vandalism and theft of its assets. In its The Container Port Performance Index 2022, the World Bank ranked Durban number 341 out of 348 ports.

With this new transaction, Transnet intends to increase the cargo handling capacity of Pier 2 from 2m to 2.8m twenty-foot containers. The Port of Durban is is undergoing a US$6.73bn upgrade. The project includes deepening the Maydon Wharf channel to accommodate larger vessels, building additional container capacity at Pier 1 and Pier 2, and developing a new container terminal in the Point Precinct. These upgrades will expand the port’s container capacity from 3.3m units to more than 11.4m TEU. Durban is ideally located as a hub for containerised cargo but its port operations have been dogged by poor maintenance, slow turnaround, ship berthing delays, and truck congestion.

As part of the ICTSI deal, a new company will be established to oversee the operation of Pier 2, with Transnet retaining majority ownership, holding 50% plus one share. The agreement will span 25 years, after which the terminal will fully revert to Transnet.

ICTSI, is one of the world's largest port operators. It secured the contract in a competitive bid in which it was one of the ten shortlisted. The competition included global players such as China Harbour Engineering Company, Guangzhou Port Co., COSCO Shipping Ports, DP World, and Abu Dhabi Ports. In Africa, ICTSI presently manages ports in Kribi, Cameroon; Port Harcourt, Nigeria; Toamasina, Madagascar; and the Matadi Gateway Terminal in the Democratic Republic of Congo.

ICTSI’s concession coincides with a surge in international interest in the development and management of African ports. Last year, a Swiss-based Mediterranean Shipping Company acquired Bolloré Africa Logistics, a French company operating over a dozen container terminals in West and Central Africa, for US$6.3bn. Chinese companies have also made inroads into Africa's port industry, with China Merchants Port Holdings establishing a presence in Nigeria, Togo, and Djibouti, and China Harbour Engineering Company undertaking dredging and marine engineering projects in nations such as Sudan, Angola, and Egypt. Earlier this year, Hong Kong-based Hutchison Ports committed approximately US$700m to two Egyptian port projects, bringing its total investments in the country to S$1.5bn. Operators based in the Gulf also recognise the potential in Africa. DP World of Dubai, which operates ports and container terminals in several countries – including Senegal, Egypt, Mozambique, Somaliland, Algeria, and Angola – is currently in negotiations with Tanzania to manage seven berths at the port of Dar es Salaam. In addition, Abu Dhabi’s AD Ports Group signed an agreement last year with the Africa Finance Corporation (AFC) to invest in ports and logistics infrastructure throughout the continent.

References

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‘MSC buys Bolloré Group's African ports division for $6.4B’, The Maritime Executive, 21 December 2021

‘Transnet shortlists respondents from the request for qualifications process for Durban Container Terminal pier 2 (DCT2) and Ngqura Container Terminal (NCT)’, Transnet SOC Limited, 22 August 2022

‘SA risks economic 'collapse' as Transnet strike hits ports with billions on the line: business’, News24, 10 October 2022

‘AD Ports Group signs collaboration agreement with Africa Finance Corporation’, AD Ports Group, 07 December 2022

‘Transnet’s crumbling rail network and debt problems overshadow its profits’, Daily Maverick, 23 December 2022

‘Hutchison Ports announces major investment of US$700 million in Egyptian port projects in Sokhna and B100’, Hutchison Ports, 16 March 2023

‘DP World in talks to expand East African coverage to Tanzania’, BNN Bloomberg, 19 June 2023

‘Philippine giant wins bid to run Durban container terminal’, News24, 17 July 2023

‘Africa’s biggest port, Durban to be partially privatised’, Daily Maverick, 17 July 2023

‘Transnet finalises partner selection for upgrade of key Durban port facility’, Transnet SOC Limited, 18 July 2023