Statement of Enrique K Razon Jr on the Durban Port privatization

This was a well-run, rigorous, and transparent tender process despite what Maersk has attempted to make people believe.

ICTSI is one of the largest terminal operators in the world and is, from an EBITDA 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.

The qualification rules were very clear: Transnet could and can evaluate the bidders in whatever way was in line with the law and met the public interest. 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.

Maersk has dominated the South African market since it acquired SAF Marine over 20 years ago and today Maersk holds a dominant position and strong pricing leverage in the market. Maersk 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.

We are more and more concerned that as these delays continue, there is a diminishing commitment within Transnet towards this private partnership. 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. 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.

It is, therefore, 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.

These delays will curtail the operational recovery and make it more and more difficult for any private partner to succeed. This of course all suits 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.