Posted on November 13, 2024
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International Container Terminal Services, Inc. chairman and president Enrique Razon, Jr. blasted Maersk for delaying the privatization of Durban Container Terminal (DCT) Pier 2 in the Port of Durban in Africa
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Maersk subsidiary APM Terminals challenged the Transnet-ICTSI partnership to develop DCT 2, with a South African court temporarily blocking the deal
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Razon said the bidding was a “well-run, rigorous, and transparent tender process despite what Maersk has attempted to make people believe”
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He claimed that after failing to produce a strong bid, Maersk is “instead trying to delay and stop the process by using the Courts”
International Container Terminal Services, Inc. (ICTSI) chairman and president Enrique Razon, Jr. blasted Maersk for delaying the privatization of Durban Container Terminal (DCT) Pier 2 in the Port of Durban in Africa.
In a statement dated November 11, the ICTSI boss noted that after failing to produce a strong bid, Maersk is “instead trying to delay and stop the process by using the Courts.”
It may be recalled that the privatization has been stalled after a South African court on October 9 issued an injunction against Transnet SOC Ltd.’s selection of ICTSI as operating partner. State-run Transnet in July 2023 had declared ICTSI as the preferred bidder for the 25-year joint venture to develop and operate DCT 2. Transnet owns South Africa’s railway, ports, and pipelines infrastructure.
Losing bidder APM Terminals, a subsidiary of Danish shipping giant Maersk, challenged the Transnet decision, claiming the solvency evaluation of ICTSI was irregular, which should have disqualified the Philippine-based company from the tender selection process.
Razon said bidding for the development of DCT Pier 2 was a “well- run, rigorous, and transparent tender process despite what Maersk has attempted to make people believe” and that the delays “will curtail the operational recovery and make it more and more difficult for any private partner to succeed.”
APM Terminals claims its bid, about R2 billion ($114 million) less than ICTSI’s offer, should have afforded it the right to negotiate the contract with Transnet.
Razon noted that ICTSI is one of the largest terminal operators in the world and is, from an EBITDA (earnings before interest, taxes, depreciation, and amortization) standpoint, larger than Maersk’s APM Terminals.
“We outbid Maersk by 100M USD and they are attempting to use a non-essential technicality to ensure that the Government of South Africa does not succeed with part of its economic agenda,” Razon said.
He noted that qualification rules “were very clear” and that Transnet could and can evaluate the bidders in whatever way was in line with the law and met the public interest.
He added: “Maersk is now trying to question a non-defined metric that many of the largest public corporations in the world could not meet, including Apple Computer. It is also not possible for as many as 40% of the top 40 companies on the Johannesburg Stock Exchange, including South Africa’s largest banks and insurers. Moreover, Maersk has attempted to suggest their case required urgent intervention, however, this is the same company that waited 9 months before launching a case after ICTSI’s bid was accepted as the best.”
Razon, who noted that Maersk has dominated the South African market since it acquired SAF Marine over 20 years ago and today holds a dominant position and strong pricing leverage in the market, said the shipping giant “is clearly desperate to prevent the entry of an independent common user terminal operator.
“In short, after failing to produce a strong bid, they are instead trying to delay and stop the process by using the Courts.”
The ICTSI executive also said they are “more and more concerned that as these delays continue, there is a diminishing commitment within Transnet towards this private partnership,” adding that Transnet has not acted expeditiously and has dragged its feet at the highest levels.
“We believe that there are possibly elements in the organization that do not want the process to succeed, despite it not being a secret that South African businesses are suffering more than ever from inefficiencies in the ports,” Razon said.
He noted that volumes are down dramatically, and container port profitability is down significantly.
“To be blunt, it will take even more work to resurrect the value of a business that has substantially declined since the tender was launched,” Razon said.
Moreover, the ICTSI executive said it is “extremely disappointing that further delays are forthcoming.”
“While we have great respect for the Judiciary and the strength of the South African legal system, we believe that serious bias has occurred, and that Transnet’s reputation has been used to derail the process,” Razon said.
He noted that these delays “will curtail the operational recovery and make it more and more difficult for any private partner to succeed.”
On the other hand, he said these delays “all suit Maersk who have just as much interest in the process failing as they do in having their far inferior bid being accepted.”
“Either outcome would be a dramatic step backwards for the Government’s economic agenda but a success for Maersk’s desire for end-to-end control of South Africa’s logistics system,” Razon said.
The Durban concession was seen to have been ICTSI’s largest operation in Africa, with DCT 2 expected to handle 2.8 million twenty-equivalent units (TEUs) from the current 2.1 million TEUs.
ICTSI already manages four terminals in Africa: Onne Multipurpose Terminal in Nigeria, Kribi Multipurpose Terminal in Cameroon, Matadi Gateway Terminal in D.R. Congo, and Madagascar International Container Terminal.
DCT Pier 2 is Transnet’s largest container terminal. It handles 72% of the port’s throughput and 46% of South Africa’s port traffic.
In a regulatory disclosure dated October 10, the publicly-listed ICTSI said it “will continue to pursue its legal rights.” For its part, Transnet on Oct 9 said it was evaluating its options following the court ruling and that it “is committed to concluding the transaction expeditiously in the interest of economic growth and development.”
