Linsen Nambi Bunker Services’ CEO, Durand Naidoo was invited to speak at the Combined Maritime and Transport Policy (CMTP) Conference held in Cape Town recently. The intention of the conference was to bring together the captains of industry to discuss the road map to the implementation of the CMTP in South Africa. In October 2022, Durban will be hosting the International Maritime Organisation (IMO) Conference. This is the first time that the IMO conference will be held in South Africa and perfectly articulates the IMO’s support in assisting Durban in becoming a leading port city. The gorilla in the room is that in 2019 the World Bank Report rated Durban amongst the worst Port Cities globally1. “It is extremely difficult for companies to thrive when their business environment is not thriving.” Mike Brown, the CEO of Nedbank, recently expressed serious concerns regarding South Africa’s challenging business environment and highlighted the interlinked relationship between business and society, noting it is extremely difficult to run a successful business in an unsuccessful society – and for society to be successful, greater equality levels are essential2.
South Africa’s ports place great emphasis on cargo throughput being key metric and while this is very important, it should not drive the strategy for creating a leading Port City. International ports such as San Francisco and Liverpool have also placed strategic focus on cargo throughput and have both seen a decline in their global standing as leading ports. Simply put these ports have failed to innovate and declined in relevance along global trade routes. Reducing redundancies will allow us to streamline business systems to ensure that there is no slack in the process. A similar scenario is occurring currently, as Maersk has halted its service to Luderitz, leaving Namibian shippers stranded, as they had to resort to alternative means of transport i.e., road hauling. Transnet’s executive team has recently expressed that they must rethink their strategic direction and develop a framework which enhances collaboration with their customers and reviews factors which integrate inland logistics with port utilisation. I believe that the CMTP provides this robust framework.
THE CMTP declares that “A cluster approach to the management, support and advancement of the maritime industry is the best possible way of growing marine industry.” Linsen Nambi Bunker Services, agrees. Cluster theory has been used to develop the port of Shanghai, which is ranked as the busiest container terminal in the world and the port of Singapore which is ranked as the number 1 port for ease of doing business in the world. Cluster theory is widely regarded as a tool for regional industrial development and economic growth. A maritime cluster is the geographical concentration of maritime industries and supporting institutions in a certain region, where enterprises and supporting institutions link together and form a network. This is the approach we must take if we truly want to create port cities. Ports should not be regarded as an independent system as there is an intrinsic link between a port and a major city. Ports are a key link between a key our national and global economy. Successful port cities become the main nodes of national maritime industries and evolve into International Maritime Centres. The overarching intention of the CMTP is to establish South Africa as an International Maritime Centre3.
The Seafarer Workforce Report from BIMCO (Baltic and International Maritime Council) and the International Chamber of Shipping (ICS) warns that the industry must significantly increase training and recruitment levels if it is to avoid a serious shortage in the total supply of officers by 2026. The Report predicts that there will be a need for an additional 89,510 officers by 2026 to operate the world merchant fleet. The report estimates that 1.89 million seafarers currently serve the world merchant fleet. The CMTP has set an objective to implement maritime education in our local schools. We can see a world where port cities could align its schooling and higher education with accredited training so that South Africa could produce seafarers to fill this supply gap of seafarers. Traditional seafarer nations like Singapore and Panama are demanding higher wages and better working conditions, which has created a void in the supply of seafarers. This global shortage of (African) seafarers has also been highlighted as a weakness to enabling AFCFTA intra-trade. This is why Linsen Nambi Bunker Services’ talent management programme, develops learners into general purpose ratings and officers. This is conducted through a rigorous in-house training programme comprised of nautical courses and sea-time for hands on experience. In South Africa, it can take a learner up to ten years to advance to a master level, thus we provide a career path as opposed to a single job. We have chosen to make our own masters. Through this talent pipeline, Linsen Nambi Bunker Services can recruit at officer levels, due to the high youth-unemployment rate in South Africa. Talent development and retention is a key strategic theme of the CMTP, because the maritime sector is an industry which requires finger dexterity, a range of movements and off-the-cuff thinking. We see these as the human touch that no robot can compete with.
The Port of Shanghai realised that in-order to create long-term sustainable growth it needed the city administration to plan an inland transportation system that allowed unrestricted port access. This would attract maritime professional services closer to the port and support high value industries in marine manufacturing and shipbuilding. By attracting maritime professionals to work closer with the port, Shanghai enabled access for maritime start-ups to provide higher quality task specific work at a lower cost but higher volume. Supporting high value industries allowed for technical innovations and created knowledge spill-overs within the cluster. This created specific specialised knowledge that people outside of the cluster didn’t have access to. Linsen Nambi believes that knowledge on the ground is key to providing value added specialised services, such as shipbroking. Thus, knowledge spill-over delivers exponential returns by creating other high value industries such as ship broking.
The port of Singapore realised that it was facing increasing competition from Chinese ports and in order to remain relevant it had to shift its focus from cargo throughput to attracting maritime experts which could provide highly specialized services such as shipbroking. Many of the large international shipbroking firms have established offices in Singapore and many Singaporean shipbroking firms have been established.
Over 4,500 bunker and tanker vessels call on our ports a year, but less than 1% of these vessels are fixed by South African shipbrokers. The CMTP sets an overarching strategic theme to cultivate localisation in value added services through the establishment of knowledge centres within the maritime cluster. The ports of Shanghai and Singapore have grown substantially because of strong government support, because implementing clustered strategic direction requires a top-down implementation, which creates a sustainable business environment for the numerous stakeholders along the value chain to align to. The CMTP calls for increased collaboration between Transnet, SAMSA, the Ports Regulator, SARS and all other government departments by creating sub-cluster working groups. This is a welcomed approach, as currently we have fragmented industries. This has resulted in small companies and start-ups not being able to easily enter our fragmented markets because the constraints are embedded in these institutions and the opportunities come on a feast or famine basis. There are a few large companies offering all services from stevedoring, cargo handling, to clearing and forwarding and to ship’s agency. This has led to the development of fragile port systems and critical failures when these companies experience manpower issues or software issues4.
It has also led to us scoring a number of own goals. For example, a shipowner who register vessels in South Africa have to pay VAT on the value of the vessel and also pay income taxes. However, a vessel registered in a foreign jurisdiction is allowed to operate in South Africa without paying any taxes or employing any South Africans. A foreign registered bunker vessel has been operating in the port of Richard’s Bay since 2018. This vessel was intended to be brought in as a pilot project and gradually flagged in South Africa and crewed by South Africans, however four years later, this vessel is still flagged in a foreign jurisdiction and employs few South African officers. Another foreign flagged vessel started operating in the port of Cape Town in 2020. These vessels are able to compete at a lower cost structure than local companies, as they do not have to comply with our labour law and BBBEE requirements. Thus, this has created an unfair playing field for local bunker operators.
The current moratorium which is in place for new bunker license applications for Algoa Bay has had the unintended consequence of keeping local companies out of the market. This means that foreign operators have a protected market and according to research, of the approximate 120 seafarers working in Algoa Bay less than 10 are South African.
Three years ago, Linsen Nambi Bunker Services applied for bunker licenses for the ports of Saldanha Bay and Richard’s Bay, but we are still waiting for these licenses to be approved. As an innovative business we are ready to bring South African registered bunker vessels to these ports and develop associated infrastructure. This bureaucracy creates a path dependency where the same companies are given the same contracts and leases year after year, which reinforces the fragmented market and traps the potential Linsen Nambi Bunker Services could bring to our leading port cities.
- Shi, X., Jiang, H., Li, H. & Wang, Y., 2020. Upgrading port- originated maritime clusters: Insight from Shanghai’s experience. Elsevier, Volume 87, pp. 19-32