Transnet ‘making progress’ – but port users remain angry and frustrated

Transnet has announced that it is making “substantial progress” in getting most of its operations in KwaZulu Natal back online following the severe weather experienced last month. “The storm disrupted marine, terminal and rail operations in the Port of Durban and surrounding areas,” said Transnet spokesperson, Molatwane Likhete. “Transnet National Ports Authority, Transnet Port Terminals and Transnet Freight Rail experienced major disruptions on their service delivery commitments.” He pointed out that all affected divisions had reported damage to infrastructure, including cargo handling equipment, buildings, vehicles, railway lines and quay walls. Availability of Rubber-Tyred Gantries has increased from 11 to 15 and five out of the six ship-to-shore cranes are operational at Pier 1 of the port’s terminal, according to a statement released by the state entity yesterday (Wednesday). At Pier 2, 11 ship-to-shore cranes are back online, with four cranes still under repairs.

“The railway network also suffered damages, with both the Natal Corridor (mainline) as well as the South Coast line experiencing a number of delays as a result of the storm,” said Likhete. He noted that the Natal Corridor railway line was now fully operational, with all trains running as scheduled, but the South Coast line had yet to return to full operation. His comments have however done little to appease angry and frustrated port users. “The port was already under pressure due to congestion prior to the storm,” said Mike Walwyn, chairman of the Cape’s Port Liaison Forum. “The storm has just exacerbated the situation. There is now a massive backlog for operations out of Durban.” He said it was however not limited to Durban but affected both the Eastern Cape ports and the Port of Cape Town significantly. In Durban itself clearing agents have been requested to preclear documents timeously through customs, and ensure transporters are on hand to collect containers as soon as they are released. Sue Moodley, chair of the Durban Harbour Carriers’ Association, earlier told FTW that major efforts were under way by all stakeholders to keep the port as fluid as possible.

But with a growing backlog the impact is starting to hit home. Terry Gale, chairman of the Exporters’ Club Western Cape, told FTW Online that the Durban situation was having a “disastrous effect”. In Cape Town, he said, export boxes were stacking up fast as scheduling was uncertain. Walwyn said there was real uncertainty over when vessels would berth at which ports in the country. Gale said the situation was untenable. “The situation needs to be addressed at ministerial level and solutions found sooner rather than later. It simply cannot continue like this. We are already on the point of being downgraded and fighting for survival.”

Cautious optimism in metals sector following improved PMI – Seifsa

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) remains cautiously optimistic about the metals and engineering sector’s performance. This in light of improvements made in the Absa Purchasing Managers’ Index (PMI) in October, which Seifsa noted indicated activity improvements in the manufacturing sector. “The PMI is the first data point for the preceding month and it is very important in setting the tone for how producers and relevant stakeholders in the manufacturing sector view the month,” said Seifsa chief economist, Michael Ade. The Absa PMI increased by 2.9 points to 47.8% in October this year when compared to the previous month. “Although it has been trending below the neutral 50-point mark for the fifth consecutive month, the fact that it has been slowly improving for the better part of the period is encouraging,” he said.

“Given that the purpose of the PMI is to give an early reading on manufacturing production data, the expectation is for the continuous improvement in business activity to filter through to the upcoming manufacturing data for September 2017.” However, Ade highlighted that Seifsa continued to be apprehensive about whether the upward trend in the PMI would continue as political uncertainty continued to prevail leading to volatile data. He pointed out that while the series of temporary downward shocks in the sector were in the past, concerns around low business confidence, increased instability and poor ease of doing business were still prevalent. “While business confidence increased in the third quarter of 2017 to 35% (when compared to Q2), the confidence level is still well below the required 50%,” Ade observed.

Ongoing WC drought prompts concern over agriculture output

Concern is growing over the state of the Western Cape, where the drought is reaching critical proportions. “The Western Cape is the second biggest in terms of agriculture GDP with a share of 23% of the industry. The lack of water is a real concern as it has far-reaching consequences for not only the industry, but the consumers too, as food prices may eventually be impacted,” said Paul Makube, senior agricultural economist for FNB Business. Water levels in South Africa’s dams improved marginally on the back of recent rains in some areas, with gains in both the winter rainfall and non-winter rainfall areas of the Western Cape (WC). The weekly update from the Department of Water and Sanitation (DWS) showed a 0.7 percentage point (ppt) increase week on week (w/w) to 36.6% full relative to 61.3% during the same week last year.

“The main concern with these water levels is that at the current levels the dams are expected to hold out up to about April 2018; if the situation does not improve significantly in the medium term we will have a serious water crisis in a region that makes up a substantial portion of the agricultural sector,” added Makube. He highlighted that the impact of this on the businesses in the sector could also be quite dire. The agriculture sector is highly dependent on the reliable and sustainable supply of water for irrigation of crops and sustenance of livestock. The vegetable and fruit sectors have been hard hit, with planting for potatoes and onions in Ceres already reduced by some 80% and 50% respectively, according to industry estimates. In the case of fruit, the quality and volume will be reduced.

Makube said in the longer term, some trees might have to be replaced – with huge cost implications for the producers. “The wine industry already projects a further decline in output due to drought and recent frost damage in Breedekloof, Robertson and Worcester,” he said. Makube said the reduced output from the Western Cape was likely to slow down the rate of the decline in food prices, more so for horticultural crops and livestock. “The current short-to-medium term forecasts indicate good rainfalls for most of the country. While the short term rainfall outlook still does not look good for the WC, we hope that the summer rains will help alleviate the pressure in the months ahead. The growing concern remains that the limited availability of irrigation water coupled with the lower soil moisture levels will reduce agricultural output for the WC,” Makube commented.

Dramatic rise in African airfreight demand in September

Airfreight demand (measured in freight tonne kilometres) rose by 9.2% in September 2017 compared to September 2016 and, while it was the slowest pace of growth seen in months, it was still “significantly higher” than the five-year average growth rate of 4.4%. This according to figures released Wednesday by the International Air Transport Association (Iata) showing that freight capacity (measured in available freight tonne kilometres or AFTKs), had risen by 3.9% compared to September last year — less than half the pace of demand growth. This is positive for industry load factors, yields, and financial performance.

Alexandre de Juniac, Iata director general and CEO, highlighted that the statistics seemed to indicate that the industry had passed a cyclical growth peak, pointing out that with year-to-date demand growth of 10.1%, the Iata forecast of 7.5% growth in airfreight demand for 2017 appeared to have significant upside potential even if the peak of the economic cycle had passed. African carriers posted the largest year-on-year increase in demand of all regions in September this year, with freight volumes rising 17.7%. This is a slowdown from August but still more than twice the five-year average growth pace of 8.9%. Capacity increased by 2.6% over the same time period. Demand has been boosted by very strong growth on the trade lane to and from Asia which increased by more than 67% in the first eight months of the year.