Court ruling paves way for container terminal investment

Finding in favour of Transnet

SOUTH AFRICA: A court ruling on Friday has paved the way for Transnet to finalise a contract with International Container Terminal Services, Inc (ICTSI) for a 25-year joint venture with Transnet Port Terminals (TPT) to develop and upgrade the Durban Container Terminal (DCT) Pier 2.

With the legal cloud now lifted, ICTSI will be able to proceed with confidence to negotiate the concession agreement with Transnet for one of the country’s most important container handling terminals.

Given the continued low ranking of South Africa’s container terminals on the global performance index, this judgement will be seen as a welcome opportunity to secure investment for long term productivity gains.

Pier 2 is the largest single container terminal at Transnet and handles 72% of the Port of Durban’s throughput and 46% of South Africa’s container volumes, making it a critical gateway of trade.

APM Terminals challenged the recognition of ICTSI as the preferred bidder and launched an urgent application in March 2024 to prevent the finalisation of the contract with ICTSI. The latest ruling notes that APM’s decision to challenge the decision was not instituted within the required 180 days.

The ruling also clarified, however, that even if the challenge had been lodged timeously, it would not have impacted on the outcome of the case – finding that ICTSI did meet the financial requirements of the tender and that Transnet had acted reasonably in its adjudication process.

“This ruling confirms the integrity and transparency of Transnet’s procurement processes and governance structures. It removes a major hurdle to the implementation of the transaction – we can now focus all our energy on executing our plan to modernise and expand DCT Pier 2,” said Transnet Group Chief Executive, Michelle Phillips in response to the verdict on Friday.

“A successful conclusion of the transaction sets the tone for future partnerships and is an important pillar of our strategy to improve operational efficiency, reduce our debt burden and share the capital investment load,” she added.

It is not clear, however, whether the publicised eight-month legal ordeal will deter future international bidders from engaging with future opportunities presented by Transnet within South Africa’s ports. Bidders may now need to factor in extended timelines and legal costs when deciding whether to bid on strategically important contracts.

Responding to questions from Maritime Review, Adhish Alawani, Sr Media Relations Manager has acknowledged the decision and confirms that APM Terminals is assessing its legal position. “We recognise the importance of operational improvements and infrastructure development in Durban proceeding without further delay and will therefore take the wider interests of the development of South African port infrastructure into account in determining any possible next steps,” he said.

“APM Terminals remains committed to South Africa and the wider African continent and will continue seeking opportunities to contribute to the growth of port infrastructure across the region,” he added.

The final judgement does show that some flexibility exists in how bidders may demonstrate or calculate their ability to meet compliance.

“It is unfortunate that our endeavours to stimulate investments at DCT have been delayed. We hope that this unwanted delay is an isolated incident that will not set a precedent for future obstacles, particularly as we move forward with vital private sector participation (PSP) transactions,” said Phillips.