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Heading heading heading Date
Transnet Port TerminalsContribution to the Supply Chain Cost
- 3 September 2015
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
PAGE
TRANSNET STATE OWNED COMPANY LTD
33
PAGE
Sishen
Mosselbaai
LESOTHO
Johannesburg
Gg
Port Nolloth
TRANSNET OPERATES AN INTEGRATED PORT,
RAIL AND PIPELINE NETWORK
4
SaldanhaBulk (Export iron ore),
Breakbulk
Cape TownContainers,
Breakbulk
NgquraContainers
East LondonContainers, Breakbulk, Agri-Bulk, Automotives
Richards BayBulk (Export coal, magnetite, Chrome), Breakbulk
DurbanContainers, Breakbulk, Agri-Bulk, Automotives
Port ElizabethContainers, Breakbulk, Bulk, Automotives
20,500 Km Rail Network220 Million Tons of cargo4.7 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
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
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
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
WHAT MUST SA DO TO REVERSE THE TRENDS
8Source: McKinsey report on SA’s Big 5 Bold Priorities for Inclusive Growth Sept 2015
9
HOW TO IMPROVE SUPPLY CHAIN INFRASTRUCTURE
9Source: TPT Growth Strategy, Market Demand Strategy.
10
HOW TO IMPROVE SUPPLY CHAIN INFRASTRUCTURE
10Source: TPT Growth Strategy, Market Demand Strategy.
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
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.
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/
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
15Source: http://www.doingbusiness.org/data/exploreeconomies/south-africa/trading-across-borders/
16
WORLD BANK REPORT
16Source: 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%
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%
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
DR
C
Ban
glad
esh
Can
ada
Arg
enti
na
Bra
zil
Ru
ssia
Mo
nte
neg
ro
Nig
eria
Nam
ibia
An
gola
Au
stra
lia
USA
Ben
in
Sou
th S
ud
an
Ital
y
Kaz
akh
stan
Mo
zam
biq
ue
Tan
zan
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Fran
ce
Ge
rman
y
Bel
giu
m
Iraq
Ne
w Z
eal
and
Sou
th A
fric
a
Turk
ey
Ne
the
rlan
ds
Jap
an
Ind
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Iran U
K
Mex
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UA
E
Taiw
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Co
lom
bia
Ind
on
esia
Thai
lan
d
Sin
gap
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Ch
ina
Mal
aysi
a
Sau
di A
rab
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$323 ave$285
Total Port charges from TNPA and TPT combined are ~12% lower
than the average charged by other Ports across the world.
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
DR
C
Ban
glad
esh
Can
ada
Arg
enti
na
Bra
zil
Ru
ssia
Mo
nte
neg
ro
Nig
eria
Nam
ibia
An
gola
Au
stra
lia
USA
Ben
in
Sou
th S
ud
an
Ital
y
Kaz
akh
stan
Mo
zam
biq
ue
Tan
zan
ia
Fran
ce
Ge
rman
y
Bel
giu
m
Iraq
Ne
w Z
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and
Sou
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fric
a
Turk
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the
rlan
ds
Jap
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Ind
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Iran U
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Mex
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UA
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Taiw
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Thai
lan
d
Sin
gap
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Ch
ina
Mal
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di A
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$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.
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
DR
C
Ban
glad
esh
Can
ada
Arg
enti
na
Bra
zil
Ru
ssia
Mo
nte
neg
ro
Nig
eria
Nam
ibia
An
gola
Au
stra
lia
USA
Ben
in
Sou
th S
ud
an
Ital
y
Kaz
akh
stan
Mo
zam
biq
ue
Tan
zan
ia
Fran
ce
Ge
rman
y
Bel
giu
m
Iraq
Ne
w Z
eal
and
Sou
th A
fric
a
Turk
ey
Ne
the
rlan
ds
Jap
an
Ind
ia
Iran U
K
Mex
ico
UA
E
Taiw
an
Co
lom
bia
Ind
on
esia
Thai
lan
d
Sin
gap
ore
Ch
ina
Mal
aysi
a
Sau
di A
rab
ia
$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.
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
DR
C
Ban
glad
esh
Can
ada
Arg
enti
na
Bra
zil
Ru
ssia
Mo
nte
neg
ro
Nig
eria
Nam
ibia
An
gola
Au
stra
lia
USA
Ben
in
Sou
th S
ud
an
Ital
y
Kaz
akh
stan
Mo
zam
biq
ue
Tan
zan
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Fran
ce
Ge
rman
y
Bel
giu
m
Iraq
Ne
w Z
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and
Sou
th A
fric
a
Turk
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Ne
the
rlan
ds
Jap
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Ind
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Iran U
K
Mex
ico
UA
E
Taiw
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Co
lom
bia
Ind
on
esia
Thai
lan
d
Sin
gap
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Ch
ina
Mal
aysi
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Sau
di A
rab
ia
$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.
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
DR
C
Ban
glad
esh
Can
ada
Arg
enti
na
Bra
zil
Ru
ssia
Mo
nte
neg
ro
Nig
eria
Nam
ibia
An
gola
Au
stra
lia
USA
Ben
in
Sou
th S
ud
an
Ital
y
Kaz
akh
stan
Mo
zam
biq
ue
Tan
zan
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Fran
ce
Ge
rman
y
Bel
giu
m
Iraq
Ne
w Z
eal
and
Sou
th A
fric
a
Turk
ey
Ne
the
rlan
ds
Jap
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Ind
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Iran U
K
Mex
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UA
E
Taiw
an
Co
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bia
Ind
on
esia
Thai
lan
d
Sin
gap
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Ch
ina
Mal
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Sau
di A
rab
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$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.
23
TRADE WITH SA IS EXPENSIVE DUE TO DISTANCE
FROM WORLD MARKET
23Source: Update by GAIN on 8 Dec 2014 of a graph done originally in 2009 by Dr Theo Notteboom from
the University of Antwerp ITMMA
24
WORLD BANK REPORT
24Source: 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 DuesTerminal Handling
Charge
Inland
transportation
and handling
Sea-leg from
Rotterdam to
Durban
Total Supply
Chain Costs
$355 $90 $165 $120 $1 100 $3 321 $5 151
R 3 977 R 1 008 R 1 848 R 1 343 R 12 320 R37 202 R 57 736
6.9% 1.7% 3.2% 2.3% 21.4% 64%
25
TERMINAL HANDLING CHARGES
25
0
50
100
150
200
250
300
350
400
450
THC ($ 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.
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.
28
SOUTH AFRICA’S PORTS ARE AMONGST
THE CHEAPEST IN THE WORLD
28Source: Ports Regulator Global Port Pricing Comparator Study – 01/04/2012
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.
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/
37
COLLABORATION
37
The key ingredients of effective, efficient
and competitive supply chains are
communication, transparency and
collaboration
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)