This is the second time the logistics operator has declared force majeure in as many months. It did so in late July after a cyberattack disrupted operations across the entire company, causing damage to equipment and information.
“This is absolutely catastrophic,” says Dave Watts, maritime and ports consultant with the SA Association of Freight Forwarders. Richards Bay is a critical port for both the export and import of over 30 commodities from magnetite to ferrochrome, woodchips to aluminium and steel.
In addition, on Friday, an agri warehouse caught fire at Maydon Wharf, in the Port of Durban, while the port of Richards Bay was without power all weekend due to a fire at a substation.
Watts articulates what many are thinking. “I can’t tell you the last time that I heard about a fire at Richards Bay. While it’s always a possibility on those conveyor belts, it does not happen easily. And three in three weeks? This makes me think that there is sabotage involved here.”
A mining executive voiced a similar concern: “We have also heard of rail lines in KZN being deliberately damaged. I can’t help thinking we are seeing a low-grade continuation of the recent KZN vandalism that broke out, though there is nothing in the media about it.”
Transnet declared a force majeure at its Richards Bay Bulk Terminal following a fire that broke out on Wednesday 13 October 2021. (Photo: Supplied)
“Richard’s Bay is now horrifically congested with massive delays to most bulk exports,” said the executive, who asked not to be named.
According to Transnet the cause of the fire, which blazed for five hours, is still unknown and a preliminary investigation is currently underway. Expert assessors and investigators are onsite to establish the extent of the damage, the company said in a statement.
The port’s dry bulk commodities are handled via a computer-controlled network of conveyor belts that extend 40 kilometres to seven harbour-bound industries. There has been extensive damage to this network and Transnet has not indicated when it will be working again. In the meantime “the terminal is engaging with its affected customers and is in the process of putting the necessary contingencies in place as some routes are operational,” Transnet said.
Problems at the port have been building all year.
Two weeks ago Richards Bay Port informed customers that it would not be taking any further bookings for its dry bulk terminal until they had cleared the backlog of ships waiting outside the port. At that point 37 ships were waiting offshore, the number has since reduced to 17.
“There is little maintenance and poor planning at the port, partly as a result of the high management turnover,” says Malcolm Hartwell, master mariner, and director of Transport at Norton Rose Fullbright. “Planning is done on the basis that 20 000 tons will be loaded a day – but port operations have never, ever achieved that. Add to this the fact that Transnet has not invested in new equipment or maintenance and the problem compounds.”
Demurrage rates (charged by ships for waiting beyond the stipulated time) are $50 000 a day, resulting in one client having to foot a $1.8-million bill, after keeping a ship waiting for 33 days, he says.
The consequence is not just a financial cost for commodity suppliers or their agents. The end customer, sitting in the US or China, may grow frustrated and cancel the contract, and local suppliers are exploring alternatives like Walvis Bay or Maputo. “The consequence for Transnet is falling revenue, less tax for the fiscus, and fewer jobs for South Africans, but Transnet’s failure to deal with these long outstanding problems suggest they do not care.”
For customers, under contract to deliver to customers, poor service from Transnet — whether the ports of freight rail has already had dire economic consequences.
For instance, while the Richards Bay Coal Terminal (RBCT) has not been affected by the fires, coal exports have also been hampered by Transnet’s mounting woes.
“South Africa’s coal producers, in particular, have had a terrible time, Transnet has already dropped or delayed shipment on over 9 million tons of coal,” said Watts.
For instance, Thungela Resources, the thermal coal exporter that was recently spun out of Anglo American, said in a market update that its third party sales had fallen from 926 kilotonnes in the first half of 2021 to an anticipated 25 kilotons in the second half of 2021.
As a result, the company has been forced to make choices and has prioritised the railing of higher-margin products, at lower volumes, recognising continued rail constraints at Transnet.
The coal industry has assisted Transnet Freight Rail with improved security measures which it hopes will contribute to an improvement in rail performance. This follows several instances of cable theft and related rail interruptions.
Transnet is hardly firing on all cylinders and on Friday issued a SENS announcement regarding the delayed release of its annual financial results, which apparently hinge on it resolving “an irregular expenditure.”
“The irregular expenditure matter has not yet been resolved and Transnet still awaits final feedback from National Treasury and the Auditor General of South Africa. Transnet is confident that it will be in a position to release its annual financial statements, incorporating the outcome of the engagements with National Treasury, by 29 October 2021,” it said.
Richards Bay has also been the scene of social unrest and outright criminality not linked to the riots that swept KZN in July.
Global mining giant Rio Tinto in June declared force majeure on customer contracts at Richards Bay Minerals (RBM) and pulled the plug on the biggest contributor to the KZN economy. This was weeks after RBM General Manager Nico Swart was killed in a hail of bullets.
Richards Bay is becoming a tough place to do business. BM/DM