Transnet Port Terminals' contribution to supply chain costs is relatively low. The World Bank report found that Transnet's port charges and terminal handling fees combined make up only 15.6% of the total cost of exporting a container from Johannesburg to Rotterdam. Inland transportation and handling costs are much higher, accounting for 60% of total supply chain costs. Compared to other countries, South Africa's port charges are around 12% lower than the global average. While it is expensive to trade from South Africa due to its distance from major markets, Transnet's fees are competitive internationally and not a primary contributor to high supply chain costs from South Africa.
2. 22
• Introduction
• Transnet SOC Ltd
• TPT’s Contribution to SC Cost
• McKinsey report on SA’s Big 5 Bold Priorities for Inclusive Growth
• Transnet’s Market Demand Strategy
• World Bank’s Report on Doing Business Across Borders
• University of Antwerp ITMMA and Gain’s report on Sea Transport
• International Terminal Handling Charges from Hamburg Süd website
• Ports Regulator Global Port Pricing Comparator Study
• Conclusion
4. PAGE
Sishen
Mosselbaai
LESOTHO
Johannesburg
Gg
Port Nolloth
TRANSNET OPERATES AN INTEGRATED PORT,
RAIL AND PIPELINE NETWORK
4
Saldanha
Bulk (Export iron ore),
Breakbulk
Cape Town
Containers,
Breakbulk
Ngqura
Containers
East London
Containers, Breakbulk,
Agri-Bulk, Automotives
Richards Bay
Bulk (Export coal,
magnetite, Chrome)
Breakbulk
Durban
Containers, Breakbulk,
Agri-Bulk, Automotives
Port Elizabeth
Containers, Breakbulk,
Bulk, Automotives
20,500 Km Rail Network
220 Million Tons of cargo
4.7 Million TEU
18 Billion Liters of fuel
Port Infrastructure
• 18 container berths
• 5 automotive berths
• 27 dry bulk berths
• 37 break bulk berths
• 16 liquid bulk berths
4
5. 5
OUR TERMINALS
TRANSNET PORT TERMINALS
16 Port Terminals across South Africa:
- 4 Container Terminals with a total of 8m TEU capacity
(96% market share)
- 3 Bulk Terminals with 89m Tonnes combined capacity
(52% market share in dry bulk – 0% liquid bulk)
- 3 Automotive Terminals (100% market share of newly build)
- 6 Break-Bulk Terminals with 19m Tonnes capacity
(69% market share)
5
6. 6
PORT OF DURBAN
Third busiest
port in Africa
in terms of
container
through-put.
58 Berths.
40 commercial
vessels
berthed at
any given
time.
Busiest port in
Africa in terms
of vessel calls
(4000+ pa).
80 million
tons of cargo
60% of all
container
imports and
exports
through the
port of
Durban
120,000
Trucks,
140,000 Cars
and 200,000
Pedestrians
pm
Durban is SA’s
second most
important
economic
complex
Total land and
water area of
1 854 ha.
The distance
around the
port is 21 km.
Rail tracks
total 302 km
Third busiest
container port
in the
Southern
Hemisphere
Focus on
Containers,
Cars, Liquid
Bulk and
Cruise
Industry
6
7. 7
WHAT MUST SA DO TO REVERSE THE TRENDS
7Source: McKinsey report on SA’s Big 5 Bold Priorities for Inclusive Growth Sept 2015
South Africa is in the top quarter of countries in the world in terms of
ease of doing business. (Positioned 43rd out of 189 countries).
8. 8
WHAT MUST SA DO TO REVERSE THE TRENDS
8Source: McKinsey report on SA’s Big 5 Bold Priorities for Inclusive Growth Sept 2015
9. 9
HOW TO IMPROVE SUPPLY CHAIN INFRASTRUCTURE
9Source: TPT Growth Strategy, Market Demand Strategy.
10. 10
HOW TO IMPROVE SUPPLY CHAIN INFRASTRUCTURE
10Source: TPT Growth Strategy, Market Demand Strategy.
11. 11
COMPETITIVE SUPPLY CHAIN
11
How did companies cut Supply Chain Costs in the past?
• Cut Headcount
• Close Offices/Locations
• Consolidate
• Reduce Benefits
Global trends indicate that there has been a shift in competition from competitive
advantage (where ports could compete on strategic location and country’s factors of
endowments) to competitive supply chain (globalization has made it possible to
source goods from anywhere in the world).
12. 12
HOW TO REDUCE SUPPLY CHAIN COST
12
What are the options for TPT as State Owned Company?
• Supply Chain Risk Management Assessment
• Work with Suppliers on cost reduction
• Eliminate waste (actual waste such as energy and non-value added-activities)
• Technology (Intelli-Port)
• Business Process Improvement (Lean, Six Sigma)
• Logistics cost and efficiency (sea freight time vs. cost, container load percentage)
• Best people, procedures, communication
TPT also recognises that time is a cost. Our investment in Durban's Container Terminal
has seen it ranked as Africa's most productive port by a major shipping line calling our
ports. The same report ranks Maputo as 31st.
Source: TPT Growth Strategy, Market Demand Strategy.
13. 14
THE COST OF EXPORTING 1 TEU CONTAINER
from Johannesburg to Rotterdam according to the World Bank
14
According to the World Bank report on trading across borders found at
http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-
borders/
only $285 of the $1,830 it costs to export a Twenty Foot container from South Africa is
related to port authority’s fees and terminal operators’ terminal handling charges
combined.
No single port charge can be accurately compared purely by its name, but the World
Bank’s report is generally accepted as a standard across the world comparing the cost
of exporting a single container from the countries’ economic hub to its major port.
Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
14. PRICING: COMPONENTS OF TOTAL CONTAINER
SUPPLY CHAIN COSTS
Transnet’s cost contribute only around 15.6% to total supply chain cost. The World Bank’s
calculation includes all fees charged by government agencies and the private sector to a trader in
the process of exporting/importing goods.
- The charge for completion of documentation (19.4%) is more than what Transnet charges
for bringing a ship into port, off-loading it’s contents, storing it for 3 days and loading it on a
train or truck for transport.
- Customs fees constitute about 5% of total supply chain costs
- Transnet’s contribution to supply chain cost consist of:
- Cargo dues by the port authority (9%) for bringing a ship into port, mooring it and
taking it safely back out to sea
- Port Terminal charges (6.6%) for lifting a container off a ship, moving it into a stack,
storage within the port terminal for 3 days and loading it onto a train or truck.
- Inland transportation and handling from Gauteng (60%) is 4 times as much as port costs
15
Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
15. 16
WORLD BANK REPORT
16
Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
at an exchange rate of R11.20
Documents
preparation
Customs
clearance and
inspections
Port's Cargo
Dues
Terminal
Handling
Charge
Inland
transportation
and handling
Total Supply
Chain Costs
$355 $90 $165 $120 $1 100 $1 830
R3 977 R 1 008 R 1 848 R 1 343 R 12 320 R20 496
19.4% 5% 9% 6.6% 60%
16. PRICING: PORTS AND TERMINAL HANDLING COST
17
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
Port and terminal handling cost contribution (%) of supply chain costs (excluding sea transport)
Exports Imports Average
Relative to other countries in the world, South Africa resides on the LOWER
AVERAGE with respect to total port costs relative to total supply chain costs
It is expensive to trade with South Africa, but port costs are not the largest component
of the total supply chain costs
Source: http://www.doingbusiness.org/data/exploretopics/trading-across-borders
Total port and handling costs relative to the total supply chain costs
27.5%
15.6%
17. 18
WORLD BANK REPORT ON COST OF DOING BUSINESS
18Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
0
100
200
300
400
500
600
700
800
900
DRC
Bangladesh
Canada
Argentina
Brazil
Russia
Montenegro
Nigeria
Namibia
Angola
Australia
USA
Benin
SouthSudan
Italy
Kazakhstan
Mozambique
Tanzania
France
Germany
Belgium
Iraq
NewZealand
SouthAfrica
Turkey
Netherlands
Japan
India
Iran
UK
Mexico
UAE
Taiwan
Colombia
Indonesia
Thailand
Singapore
China
Malaysia
SaudiArabia
$323 ave
$285
Total Port charges from TNPA and TPT combined are ~12% lower
than the average charged by other Ports across the world.
18. 19
WORLD BANK REPORT ON COST OF DOING BUSINESS
19Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
0
100
200
300
400
500
600
700
800
900
DRC
Bangladesh
Canada
Argentina
Brazil
Russia
Montenegro
Nigeria
Namibia
Angola
Australia
USA
Benin
SouthSudan
Italy
Kazakhstan
Mozambique
Tanzania
France
Germany
Belgium
Iraq
NewZealand
SouthAfrica
Turkey
Netherlands
Japan
India
Iran
UK
Mexico
UAE
Taiwan
Colombia
Indonesia
Thailand
Singapore
China
Malaysia
SaudiArabia
$140
$323 ave
$285
China:
Fully government funded
port development,
economiesof scale
Total Port charges from TNPA and TPT combined are ~12% lower
than the average charged by other Ports across the world.
19. 20
WORLD BANK REPORT ON COST OF DOING BUSINESS
20Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
0
100
200
300
400
500
600
700
800
900
DRC
Bangladesh
Canada
Argentina
Brazil
Russia
Montenegro
Nigeria
Namibia
Angola
Australia
USA
Benin
SouthSudan
Italy
Kazakhstan
Mozambique
Tanzania
France
Germany
Belgium
Iraq
NewZealand
SouthAfrica
Turkey
Netherlands
Japan
India
Iran
UK
Mexico
UAE
Taiwan
Colombia
Indonesia
Thailand
Singapore
China
Malaysia
SaudiArabia
$323 ave
$285
Europe:
Significant government grants
and pricing based on depreciated assets
$260
$315 $300$310$345
Total Port charges from TNPA and TPT combined are ~12% lower
than the average charged by other Ports across the world.
20. 21
WORLD BANK REPORT ON COST OF DOING BUSINESS
21Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
0
100
200
300
400
500
600
700
800
900
DRC
Bangladesh
Canada
Argentina
Brazil
Russia
Montenegro
Nigeria
Namibia
Angola
Australia
USA
Benin
SouthSudan
Italy
Kazakhstan
Mozambique
Tanzania
France
Germany
Belgium
Iraq
NewZealand
SouthAfrica
Turkey
Netherlands
Japan
India
Iran
UK
Mexico
UAE
Taiwan
Colombia
Indonesia
Thailand
Singapore
China
Malaysia
SaudiArabia
$323 ave
$285
America:
Financially self funded
$400
Total Port charges from TNPA and TPT combined are ~12% lower
than the average charged by other Ports across the world.
21. 22
WORLD BANK REPORT ON COST OF DOING BUSINESS
22Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
0
100
200
300
400
500
600
700
800
900
DRC
Bangladesh
Canada
Argentina
Brazil
Russia
Montenegro
Nigeria
Namibia
Angola
Australia
USA
Benin
SouthSudan
Italy
Kazakhstan
Mozambique
Tanzania
France
Germany
Belgium
Iraq
NewZealand
SouthAfrica
Turkey
Netherlands
Japan
India
Iran
UK
Mexico
UAE
Taiwan
Colombia
Indonesia
Thailand
Singapore
China
Malaysia
SaudiArabia
$323 ave
$285
South Africa:
Financially self funded
Total Port charges from TNPA and TPT combined are ~12% lower
than the average charged by other Ports across the world.
22. 23
TRADE WITH SA IS EXPENSIVE DUE TO DISTANCE
FROM WORLD MARKET
23
Source: Update by GAIN on 8 Dec 2014 of a graph done originally in 2009 by Dr Theo Notteboom from
the University of Antwerp ITMMA
23. 24
WORLD BANK REPORT
24
Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
Combined with Dr Theo Noteboom’s report
Documents
preparation
Customs
clearance and
inspections
Port's Cargo Dues
Terminal Handling
Charge
Inland
transportation
and handling
Sea-leg from
Rotterdam to
Durban
Total Supply
Chain Costs
$355 $90 $165 $120 $1 100 $3 321 $5 151
R 3 977 R 1 008 R 1 848 R 1 343 R 12 320 R37 202 R 57 736
6.9% 1.7% 3.2% 2.3% 21.4% 64%
24. 25
TERMINAL HANDLING CHARGES
25
0
50
100
150
200
250
300
350
400
450
THC ($ per TEU)
Source: Terminal Handling Charges from Hamburg Süd’s website http://ecom.hamburgsud.com/
$215 ave
$132
According to a data published on the website of shipping line Hamburg Sud, the terminal
handling costs in Durban are among the lowest in the world.
The comparison shows that Durban terminal handling charges are the seventh lowest in the
world of the ports serviced by the shipping line.
25. 26
PORTS REGULATOR GLOBAL PORT PRICING
COMPARATOR STUDY
26
For years Transnet has been on the receiving end of undue criticism in the press
after a report issued by the Ports Regulator in 2010 regarding Transnet’s tariffs.
A statement by the ports regulator in April 2012 refers to people using the
information in the previous report to drive their own agenda’s.
“It is concerning that previous studies that had been published by the Regulator
were almost invariably treated in the following way:
• Quoted out of context
• Over-emphasis was placed on the prices that were higher than global averages
and those lower than global averages were ignored
• Copied without appropriate citation and used as “research” by third parties
• Not assessed in a sufficiently nuanced manner that allowed correct
interpretation of the findings
Source: Ports Regulator Global Port Pricing Comparator Study of 1 April 2012.
26. 28
SOUTH AFRICA’S PORTS ARE AMONGST
THE CHEAPEST IN THE WORLD
28Source: Ports Regulator Global Port Pricing Comparator Study – 01/04/2012
27. 29
CARGO DUES LESS THAN GLOBAL AVERAGE
29Source: Ports Regulator Global Port Pricing Comparator Study – 01/04/2012
All vessels face much lower overall costs in RSA ports than the averages in the study, ranging
from 26% below the global norm in the case of containers and 57% for iron ore vessels.
28. 36
CONCLUSION
36
South Africa is in the top quarter of countries in the world in terms of ease of doing
business. (Positioned 43rd out of 189 countries).
Transnet has been lambasted in the press for years creating the perception that our
ports are amongst the most expensive in the world. This is simply not the case. What is
true is that it is fairly expensive to do business from South Africa due to the distance
from international markets.
Total supply chain cost includes the cost of documentation, customs, road transport and
sea transport. The cost of transport, both on land and at sea outweigh port costs by far.
Transnet’s port charges contribute only ~15.6% of total supply chain costs.
Terminal Handling Charges levied by TPT are ~35% less than THC charged on average
charged by the majority of International Terminal Operators. Total Port charges from
TNPA and TPT combined are ~12% lower than the average charged by other Ports across
the world.
Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
30. 38
TABLE OF AUTHORITIES
38
Hamburg Süd website November 2014
World Bank report on Port Charges in Cost of Doing Business study
Ports Regulator’s report on Port Authority charges done (2012)
Study by New Zealand Business Roundtable on Port Terminal Productivity (2012)
Cost of sea leg transport done by GAIN from the University of Stellenbosch (Dec 2014)
Distance from Source Dr Theo Notteboom from the University of Antwerp (2009)