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With some qualifications, the South African ports and shipping industry should have a moderately good year in 2012. In terms of the wider South African economy, the current recovery will continue to progress, although the global economy has taken something of a turn for the worse. Both the US and Europe, important export markets, will experience slower growth. On the political front, the five-year suspension of maverick youth leader Julius Malema from the ruling African National Congress (ANC) party in November 2011 has improved President Jacob Zumas chances of winning its backing for reelection in 2014. The Presidents victory over Malema will also reassure private sector investors worried by the latters demands for nationalisation of parts of the mining industry. BMI now forecasts 2012 GDP growth of 2.7%, following an estimated 3.1% expansion in 2011. Our outlook for 2013 is for growth to gather pace to 3.1%.

Headline Industry Data

- Following a small contraction in 2011, Richards Bay Port tonnage throughput in 2012 is forecast to increase by 1.2%. Over the mid-term we project a 1.5% average annual increase.

- Port of Durban container throughput is forecast to remain vigorous in 2012, with 7.4% growth, comparable to 7.1% in 2011. Growth will average 8.2% per annum in the medium-term forecast period to 2016.

- 2012 total trade growth is forecast at 6.0%, slightly down on the estimated 6.7% expansion registered in 2011.

Research by BMI shows that both the US and South Africa are poised to gain an increasing share of coal exports to Asia, at the expense of Indonesia and Australia. The finding is good long-term news for South African ports and dry bulk shipping. If the country is to make the most of the opportunity, increased public and private investment will be required in the coal supply chain, in both freight rail links and in the main coal terminals. Huge amounts of money are to be made by effectively exploiting resources wealth. While we note that governments are keen to moderate expenditure in the current volatile economic climate, the cutting of funding to transport development should be avoided where possible, given the likely revenue realisation from increased coal exports.

Efficiency Of Port Operations Questioned

While throughput at South Africas ports has been growing, the industry has not been short of criticism recently. A study by Mihalis Chasomeris for the National Ports Regulator revealed that port tariffs for container vessels in Durban are two times higher than the average of 12 international ports. Gordon Metter, deputy president of the Cape Chamber of Commerce, claimed that South African port tariffs are loaded with hidden taxes, while operations are suffering due to inefficiency. Durban earlier received complaints from several shipping companies including Maritime Carrier Shipping and Mediterranean Shipping Company over a decline in efficiency due to various problems such as inflexibility, congestion, labour disputes and lack of equipment.

Phase 2 To Get Go-Ahead At Ngqura

The Port of Ngqura, which completed the first phase of its expansion project at the end of 2009, has become the third busiest container terminal in the country, after Cape Town and Durban. In late 2010, Phase 2 of the expansion was delayed owing to the global economic crisis. The decision to proceed came after Ngqura was selected to handle manganese exports ahead of the Atlantic Port of Saldanha. Upon completion of the project, the port will have a container capacity of 2mn twenty-foot equivalent units (TEU) a year, compared with its current capacity of 800,000TEUs.

Key Risks To Outlook

The major downside risk for South Africa is the potential break-up of the eurozone. While previously an extreme and improbable scenario, by late 2011 the possibility that the eurozone countries might split into different groups with separate currencies could not be entirely discounted. Most analysts believed an enforced currency realignment would be accompanied by recession, which would have a negative impact on South African exports (Europe represents around one-fifth of South Africas total exports). In this scenario, shipping demand would clearly be lower than our current projections.