Reconstruction and deepening project at Durban’s Maydon Wharf

Transnet moves ahead with Maydon Wharf upgrade plan. (Picture credit:  Duane Daws, Creamer Media)

Transnet moves ahead with Maydon Wharf upgrade plan. (Picture credit: Duane Daws, Creamer Media)

Port Technology reports that the IMO’s stricter sulphur emission standards are likely to have a profound impact on the maritime industry. With this in mind, PTI’s sixtieth edition pays a particular focus to the challenges ahead if LNG is to become the shipping fuel of the future and if this is the most viable option for shipping lines vying to meet these new regulations. Elsewhere, we have contributions form Drewry, Liftech consultants and a host of key industry experts, engineers and analysts.

The Port of Durban is situated on the east coast of South Africa, in the KwaZulu- Natal Province. The port is the busiest on the African continent, and the biggest in terms of container capacity with 44 percent of South Africa’s break-bulk cargo and 61 percent of all containerised cargo flowing through it. In 2010 alone, the port handled 2.5 million TEU.

The port has 57 berths and is protected by the north and south breakwaters, which are 335 metres and 700 metres long respectively. It was developed primarily for import cargo but over the years, cargo flows have changed significantly and exports have become more important. Over 4,000 commercial vessels now call at the port each year.

The Maydon Wharf terminal

The Maydon Wharf multi-purpose terminal (MPT) handles a variety of containerised, break-bulk and bulk cargo, and specialises in the handling of specific commodities. The terminal also handles both import and export containers, taking it to an average of 15,000 TEU. It has an annual throughput of more than one million tonnes of break-bulk and neobulk commodities. The Maydon Wharf area consists of 15 berths and the MPT operates principally between berths eight and 13.

Transnet National Ports Authority (TNPA) has initiated an extensive upgrade of the infrastructure at the port. One of the major projects is to rebuild and deepen seven of the 15 berths in the Maydon Wharf area. The new quays will be able to accommodate larger vessels and provide suitable load-carrying capacity for the handling of cargos over the berths. Source: Port Technology

Durban awaiting arrival of 11, 660 TEU container ship reports that  the largest ever container ship to enter a South African port on 1 July 2012 to work cargo will arrive in the Port of Durban, vindicating the recent widening and deepening of the harbour entrance.

The ship is the MSC SOLA (131,771-gt, built 2008) which is arriving from Port Louis and the Far East. Although she will not be fully laden the arrival of the 364 metre long ship becomes another justification for the recent harbour entrance channel project, which saw it widened by an additional 100m to a minimum width of 222m and deepened to a working draught of -16.5m. Once work on deepening at least one of the container terminal berths on Pier 2 has been completed ships of this size will be able to arrive or sail fully laden.

A study in Corruption and Firm Behavior

Extensive literature argues that reducing trade costs can substantially increase income and improve welfare in trading countries, particularly in the developing world where these costs are highest. In 2007, a shipping a container from a firm located in the main city of the average country in Sub-Saharan Africa was still twice as expensive, and six times more time-consuming, than shipping it from the US. It was also twice as expensive and just as time-consuming as shipping a similar container from India or Brazil, according to the World Bank. As a result, a significant portion of international aid efforts has in recent years been channeled to reducing trade costs and improving logistics in the developing world. Evidence is growing on how corruption in transport networks can significantly increase the cost of moving goods across borders.

A recent paper “Corruption and Firm Behaviour” investigates how different types of corruption affect company behavior. Firms can face two types of corruption when seeking a public service: cost-reducing, “collusive” corruption and cost-increasing “coercive” corruption. Using an original and unusually rich dataset on bribe payments at ports matched to firm-level data, the authors observe how firms respond to each type of corruption by adjusting their shipping and sourcing strategies. Cost-reducing “collusive” corruption is associated with higher usage of the corrupt port, while cost-increasing “coercive” corruption is associated with reduced demand for port services. Data suggests that firms respond to the opportunities and challenges created by different types of corruption, organizing production in a way that increases or decreases demand for the public service. This can have important implications for how we identify and measure the overall impact of corruption on economic activity. The data further allows us to understand the bribe setting behavior of different types of public officials with implications for the design of anti-corruption strategies.

In our setup, firms have the choice to ship through two ports: Maputo in Mozambique, and Durban in South Africa. The majority of firms in our sample are equidistant to both ports while a subset of firms will be significantly closer to the more corrupt port of Maputo. Survey data revealed that the choice of port is driven primarily by the interaction between transport and corruption costs at each port. Transport costs are linear to the distance between each rm and the ports, while corruption costs are determined by the type of product the firm ships. Our main measure of the distortion caused by corruption is how rms shipping products that are more vulnerable to corruption will opt to go the long way around to avoid a closer, but more corrupt port. We also nd suggestive correlations between the level and type of corruption rms face at each port, which directly affects the cost of using port services, and firms’ decision to source inputs from domestic or international markets.

Source: Corruption and Firm Behavior (December 2011) by Sandra Sequeira and Simeon Djankov.

Related articles

Trade costs and corruption in Ports of Durban and Maputo

Recent years have brought an increased awareness of the importance of trade costs in hindering trade, particularly in the developing world where these costs are highest, says a report in the latest edition of Port Technology. The most salient type of trade costs have often been tariff duties and costs associated with the physical transportation of goods. As a result, several countries embarked on extensive programmes of tariff liberalisation and a significant portion of aid effort was channelled to investments in hard transport infrastructure, such as rebuilding railways and ports (the World Bank alone devotes more than 20 percent of its budget to transport infrastructure projects worldwide).

More recently, new light has been cast on the importance of a different type of trade cost: the cost imposed by the soft infrastructure of transport, defined as the bureaucratic infrastructure handling the movement of goods across borders. While there are many possible sources of inefficiencies stemming from the soft infrastructure of transport, recent research is beginning to document the role played by corruption in transport bureaucracies in driving trade costs. This article provides an overview of this research.

Research into corruption

Corruption can take many forms and emerge in many different phases of the process of clearing goods across borders. Sequeira and Djankov (2011) documented in great detail the ways in which port corruption emerges in Durban and Maputo in Southern Africa – this report is featured in my next post. This research was based on a unique dataset of directly observed bribe payments to each port bureaucracy for a random sample of 1,300 shipments.

The study began by defining two broad categories of port officials that differed in their administrative authority and in their discretion to stop cargo and generate opportunities for bribe extraction: customs officials and port operators. In principle, customs officials hold greater discretionary power to extract bribes than regular port operators, given their broader bureaucratic mandate and the fact that they can access full information on each shipment, and each shipper, at all times. Customs officials possess discretionary power to singlehandedly decide which cargo to stop and whether to reassess the classification of goods for tariff purposes, validate reported prices of goods, or request additional documentation from the shipper.

Regular port operators, on the other hand, have a narrower mandate to move or protect cargo on the docks, and at times even lack access to the cargo’s documentation specifying the value of the cargo and the client firm. This category of officials includes those receiving bribes to adjust reefer temperatures for refrigerated cargo stationed at the port; port gate officials who determine the acceptance of late cargo arrivals; stevedores who auction off forklifts and equipment on the docks; document clerks who stamp import, export and transit documentation for submission to customs; port security who oversee high value cargo vulnerable to theft; shipping planners who auction off priority slots in shipping vessels, and scanner agents who move cargo through non- intrusive scanning technology.

The organisational structure of each port created different opportunities for each type of port official to extract bribes: the high extractive types -customs agents- or the low extractive types -port operators. These opportunities were determined by the extent of face to face interactions between customs officials and clearing agents, the type of management overseeing port operations, and the time horizons of each type of official.

Durban and Maputo

In Durban, direct interaction between clearing agents and customs’ agents was kept to a minimum since all clearance documentation was processed online. In contrast, all clearance documentation was submitted in person by the clearing agent in the Port of Maputo. The close interaction between clearing agents and customs officials in Maputo created more opportunities for corrupt behaviour to emerge in customs relative to Durban.

In Maputo, port operators were privately managed but in Durban, most terminals (for containerised cargo) were under public control, with very lax monitoring and punishment strategies for those engaging in corrupt behaviour. Private management in Maputo was associated with fewer opportunities for bribe payments due to better monitoring and stricter punishment for misconduct. As a result, the organisational features of each bureaucracy determined that the high extractive types in customs had more opportunities to extract bribes in Maputo, while the low extractive types in port operations had more opportunities to extract bribes in Durban. While corruption levels were high in both ports, bribes were higher and more frequent in Maputo relative to Durban.

Finally, port officials with opportunities to extract bribes at each port differed in their time horizons. Customs in Maputo adopted a policy of frequently rotating agents across different terminals and ports, and since bribes varied significantly by the type of terminal at the port, customs agents were aware of the risk of being assigned to terminals with lower levels of extractive potential. On the other hand, port operators in Durban had extended time horizons given the stable support received from dock workers’ unions. Customs officials were therefore the high extractive types with the shortest time horizons, the broadest bureaucratic mandates and more opportunities to interact face to face with clearing agents. As a result, they extracted higher and more frequent bribes, relative to port operators in Durban (the low extractive types) who had longer time horizons and narrower bureaucratic mandates. Source: Port Technology.

Vetch’s Pier – a relic of floored planning

With recent developments regarding the proposed Durban dug-out port, a colleague of mine shared this gem of an article.

Vetch’s pier (Durban, South Africa) has redeemed itself by becoming a marine sanctuary. Historically, however, it is an expensive relic, a monument to flawed planning, poor workmanship and economic frustration.

Although potentially a major seaport, Durban’s bay was little more than an inaccessible lagoon before dredging and the construction of the north and south piers over a century ago unlocked its real worth. Nature guarded its entrance in the form of shifting sandbanks which made access to the safety of the inner harbor unpredictable and hazardous. As a result entry was restricted to small vessels drawing less than three metres of water. All other shipping had to anchor offshore and endure the extremes of wind and sea. Not surprisingly 66 ships were blown ashore on Durban’s beachfront between 1845 and 1885.

It was obvious from the outset to the British settlers that Natal’s economic prospects depended on the development of Durban harbour. For almost 50 years from 1850 the ‘harbour issue’ was the hardy annual of Natal politics and the correspondence columns of newspapers. Various plans were put forward, that of Captain James Vetch gaining the approval of Governor John Scott in 1857. Vetch, an engineer attached to the Admiralty in London, never actually visited Durban, yet he produced a report and plan to improve the harbour. Despite misgivings, it was rushed through the Natal legislature in October 1859 along with its hefty price tag -£165,000.

Vetch’s solution was to enclose the natural entrance to the harbour by means of two breakwaters, one curving northwards from the base of the Bluff headland and the other curving southwards from present day Ushaka beach. Besides the engineering challenge which that posed, Vetch’s plan ignored the prevailing wind an ocean current directions. But in August 1861 when construction of the northern breakwater commenced, such concerns were lost amidst the optimism of a growing economy and the belief that Vetch’s plan would resolve the frustrations of navigating the entrance to the harbour. A comment in the Natal Mercury on 13 July 1861 summed up the buoyant mood of colonists when it stated that Vetch’s plan would herald ‘new circumstances and be the scene of a busy, all pervading and prosperous industry.

The site engineer, George Abernethy, encountered difficulties with Vetch’s plan from the outset. The method of construction was impractical: sections of wooden framework filled with rubble simply collapsed in the surf, moreover, the contractor, Thomas Jackson, lacked the capacity to carry out the construction. Early in 1863 it was apparent that the six year project was stalled. Yet £90,000 of the budgeted £165,000 had been spent while less than ten percent of the work had been completed. Financial reasons and poor construction methods saw  Vetch’s pier abandoned in 1864. In time the ocean reduced it to what it is today. Both in design and placement, the small craft harbour now being proposed ignores the same natural forces that made Vetch’s plan impractical. Besides, it specifically ignores the pounding effects of the cyclone swells which emanate occasionally from the Mozambique channel.

In May 1864 a furious Natal Legislative Council demanded a detailed report on the Vetch project. In June the contractor walked off the job and left Natal. The Report tabled in August proved an embarrassing indictment. It found that no oversight had been exercised by Treasury officials on certificates for amounts payable and that the contractor had received payments in excess to that which he was entitled. It was also noted that freight for some materials had been paid for twice; that material had been ordered which was in excess of actual needs. To top it all, £113,500 or 70 percent of the allocated budget, had been spent on a project that was scarcely 20 percent complete and the problem of accessing Durban harbour was no closer to resolution.

Far from invigorating Natal’s economy, the submerged finger of an incomplete pier named after its designer, Captain Vetch, proved a drain on the colonial treasury for years to come, interest on the loan for the project amounting to about 17 percent of total revenue. A project born out of economic frustration left a legacy of even greater economic frustration. Until the 1880s Durban harbour languished having gained a reputation as a port of high charges and long delays. But from 1886 when dredging operations began, followed by extension of the breakwaters, the depth of the entrance channel improved. By 1892 it averaged over four metres allowing larger ships to cross the bar.

But the way forward was dogged by controversy. Two camps developed: one which saw the solution in dredging, the other in the extension of the north pier. So great was the agitation that it led to the fall of the government of Harry Escombe in October 1897. Ultimately, a combination of the scour facilitated by the north and south piers and the effects of dredging resolved access to Durban harbour. In 1904, the Armadale Castle, drawing 6,7 metres of water, became the first mail-steamer to enter the port.

Although incomplete and a non-starter, the remains of Vetch’s pier should serve as a reminder of the power of the ocean and the need for fearless scrutiny of public projects. Source: Duncan Du Bois (Ward Councillor) and Facts About Durban