APMT, ICTSI legal battle stalls Durban port DCT2 concession

By Gboyega Oni

More than 9 months after International Container Terminal Service Incorporation (ICTSI) won the $618 million bid that concessioned Port of Durban DCT2 to it, an injunction from a South African court case instituted by APM Terminals has stalled the privatisation. APM Terminals had alleged inconsistencies and insolvency on the part of ICTSI which should have disqualified the Philippine terminal operators even from the early stage of Request for Quotation.

ICTSI however disagreed with APM Terminals position as Enrique Razon Jnr, ICTSI President, noted that the privatisation was a well-run, rigorous and transparent tender process in which ICTSI met all requirements. He said APM Terminals-Maersk has dominated and monopolised the South African route and trade for over twenty years and is fearful of competition.

DCT2 is Port of Durban most prolific terminal and handles over seventy percent of the port’s throughput and indeed 46 percent of the entire cargo volumes in South Africa. 

ICTSI, a Philippine headquartered organisation, had in July 2023 been declared the preferred bidder of DCT2 with a bid of $618 million over the $515 million submitted by APM Terminals. The concession was expected to partner ICTSI with Transnet Port Authority to develop the terminal technically, upgrade and increase volumes from 2 million TEU to 2.8 million TEUs over the next twenty five years. All seemed to have gone well until the court order stopping the bid.

APM Terminals had alleged inconsistencies in the bid process, noting that ICTSI should not have been allowed to participate in the bid process and should not have gone beyond the stage of Request for Quotation.

APM Terminals seemed to have presented genuine arguments before the jurist and, with Transnet ambivalence and foot dragging, the court slammed the injunction and postponed further hearing till March 2025.

Meanwhile, it is now a season of arguments and counter arguments by both parties on who should be perfect fit to manage DCT2 and help grow South African port and trade. Both of them have reached out to PortNews with near convincing arguments.

Enrique K. Razon Jr of ICTSI said since APT Terminals initiated the court case, business activities in the port have substantially declined.

According to ICTSI President, “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.”  

On the danger the court case poses to the privatisation, Enrique K. Razon Jr lamented “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.”

Also speaking with PortNews, Hans-Ole Madsen, ICTSI Senior Vice President and Head of EMEA, said ICTSI produced the winning bid and Transnet declared ICTSI the ‘Preferred Bidder’ back in July 2023 but APM Terminals, disappointed of losing the tender and desire to control the South African container ports, approached the court.

Hans-Ole Madsen said the court case would affect the progress of development in the port by at least 3 years. “This court action by Maersk will significantly delay the port development progress by at least another 3 years,” said he.

Dismissing ICTSI’s accusation, A.P. Moller – Maersk said it instituted the case to highlight and right the wrong done by the waiver and lack of transparency in the bid process in which ICTSI emerged the winner.

Speaking to PortNews, Adhish Alawani, Senior Media Relations Manager, Indian Subcontinent, Middle East & Africa, A.P. Moller – Maersk, “As a long-standing partner in Africa’s maritime development, APM Terminals is deeply committed to South Africa’s future prosperity and economic growth. Our vision for South Africa’s ports goes beyond business – it’s about creating a lasting positive impact for South Africa’s economy, communities, businesses, and workers. With our proven track record of operating 6 of the world’s top 10 most efficient ports, we offer unparalleled expertise to serve South Africa’s maritime ambitions. We understand the critical importance of this decision for South Africa’s future, which is why we believe some key concerns about the tender process must be addressed transparently and honestly. While ICTSI’s financial offer was higher, precisely 20% more than APM Terminals’, we believe our comprehensive proposal offers superior long-term value for South Africa’s development goals.

“APM Terminal’s challenge is done in good faith based on the rules applicable to the tender. Competition to enter the terminal market took place through a tender, which requires that all bidders be considered using the same metrics to ensure an equal/fair comparison. APM Terminals appealed against the decision as rules had been waived, and there was a lack of transparency. APM Terminals was one of many who flagged that ICTSI did not satisfy the RFQ and RFP requirements. Transnet’s internal audit committee and external advisors reviewed and confirmed this issue. The Presiding Judge of the Durban High Court concurred with this reading. With the judicial review matter set for March 2025, ICTSI’s highly unusual decision to appeal against the interdict puts a swift conclusion to the matter at risk.”

Justifying APM Terminals’ stand, Adhish Alawani, informed “Transnet defined the tender requirements because they were important to them, as evidenced by the RFQ-RFP documents. APM Terminals has not invented the metrics. If a particular bidder doesn’t meet the minimum criteria of an RFQ, that bidder should naturally be disqualified.

“Upon learning of Transnet’s decision in July 2023, APM Terminals immediately requested transparency and raised questions. However, Transnet asked not to start a legal procedure because it claimed the process was not finalised. When the decision was announced in April 2024, APM Terminals appealed against its lawfulness and transparency within 10 days.

“Although APM Terminals is part of AP Moller – Maersk, the port operator decided to appeal independently. Maersk operates in container ocean transportation, while APM Terminals is a port operator. These are two distinctly different businesses, and hence, two separate markets; therefore, questions about dominance don’t arise.

“Maersk is the second biggest user of the port and, as such, has a strong interest in efficient port operations, and a status quo situation is undesirable for Maersk. Maersk fully supports the privatisation of DCT2 and relies on improved operations to help improve the country’s economy through efficient global trade.

“Looking ahead, we remain committed to being a trusted partner in South Africa’s development journey. We are ready to invest in infrastructure and people to create sustainable economic opportunities. We believe in South Africa’s potential and stand ready to help realise it through world-class port operations that benefit all stakeholders.”

Maritime observers across Africa watch keenly as this story develops as the two terminal giants flex muscles. Meanwhile, clearly, the port users and the economies of South Africa and adjoining nations suffer.