The International Container Terminal Services Incorporated (ICTSI) stated that the Durban High Court made no finding on whether the tender to run the ports was problematic.
However, the company said that there was an urgent interdict granted, stopping the process to take over the ports while the case is heard next year.
Contract granted was tainted by irregularities
ICTSI disputed that APM Terminals contended that the contract granted to the former was tainted by irregularities.
This was particularly because of a concession that enabled the winner to misrepresent its financial stability.
“There is a disagreement by the losing bidder (APM) … over how financial solvency was calculated in the tender. Also over which method to use, but there has been no evidence of irregularities. And the court has not yet ruled on the matter.
“The Durban container port is absolutely critical to the sustainability of key industries in South Africa. And if there are no significant improvements in its functioning, then South African exporters are at severe risk.
As are the providers of hinterland cargo and related services. Many of whom will, and have already begun relocating to ports in Walvis Bay or Maputo,” said ICTSI.
On Sunday, Sunday World reported on a plan by Transnet. Its plan to assign the management of a Durban container terminal to a Philippines company has hit a snag.
Court interdicted Transnet
The Durban High Court on October 9, interdicted the parastatal. It was barred from negotiating, finalising or executing any agreements with ICTSI to manage Durban Container Terminal Pier 2.
The interdict was sought by APM, a company owned by Danish shipping firm AP Moller-Maersk. APM was unsuccessful in the bidding process for the contract and went to court to challenge the decision.
ICTSI had pledged an investment of more than R11-billion through upgrading the terminal, to increase its capacity.
Tender winner was allowed to misrepresent its financial stability
APM contended that the contract granted to ICTSI was tainted by irregularities.
Particularly because of a concession that enabled the winner to misrepresent its financial stability. However, ICTSI said it remained confident.
Given the opportunity to execute on the partnership with Transnet, the Durban Port can become a critical economic hub for South Africa and the region, it said.
“As ICTSI chairman Enrique K Razon Jr recently said, shipping company Maersk is only focused on protecting its own narrow commercial shipping interests.
And not that of all users of the port. It is clearly seeking to establish an end-to-end control of South Africa’s logistics system.
“As part of their legal challenge, Maersk has tried to use a non-essential technicality. [This technicality] examined something called a solvency level. …It is trying to question a non-defined metric that many of the largest public corporates in the world would not meet. Including, for instance, Apple Inc.
It is also impossible for as many as 40% of the top 40 companies on the [JSE] to meet this misapplied metric,” said ICTSI in a statement.
Allegations of preferential treatment
AMP urged in court papers that Transnet’s choice to allow ICTSI to utilise market capitalisation as an indicator of solvency, instead of depending on balance sheet equity, resulted in a distorted perception of its financial strength.
This advantage, says APM, was not extended to other bidders. It raised questions about the rationale for this preferential treatment.
The legal case has entered its significant second phase. With APM petitioning the court to invalidate the contract.
Transnet spokesperson Ayanda Shezi explained to Sunday World the selection of ICTSI. The selection for the 25-year joint venture with Transnet Port Terminals to develop and upgrade the terminal was proper. It followed “a lawful, fair, and transparent procurement process” last year, said Shezi.
Shezi said Transnet had not bypassed the approval process with the Competition Commission. Not with Treasury and the National Port Authority.
Transnet says process was never flawed
“As the court has issued an interdict, all work on the implementation of the transaction has stopped. The Competition Commission approved the transaction prior to the court interdict being issued. The delays … are regrettable,” she said.
Sunday World understands that the continuation of the legal battle may lead to a drawn-out process. Which would adversely affect Transnet’s turnaround initiatives.
An insider within the shipping industry gave further details.
“The tender was designed to prioritise the most advantageous purchase price for the port. It was to allow the chosen bidder to determine their own terminal handling charges.
“This arrangement is anticipated to increase the costs of exports and imports. As the winning bidder will likely seek to recover the purchase price through handling charges.”
Another source revealed that the debacle would place exporters and importers in a precarious position.
“Ultimately, this could render South African ports less competitive. And lead to significant losses for businesses operating in South Africa.”
