Maersk’s APM terminal challenged Transnet’s decision to award the tender for Durban’s busiest port to Philippines-based ICTSI. Maersk contended that Transnet ignored internal audit and external expert advice regarding the solvency of the competing companies. Specifically, Maersk had provided solvency ratios, while ICTSI used its market capitalisation, potentially inflating its “solvency” metrics. This raises concerns about potential corruption and biased decision-making by Transnet’s management. If the courts rule against ICTSI’s tender due to these irregularities, it could necessitate a new tender process, further delaying the port’s privatisation. This situation exacerbates frustrations about government influence and delays in improving port operations.
In the meantime, the economy continues to suffer due to SOE inefficiencies at the port. Manufacturing production data for July are expected to reflect that. Recall that manufacturing output declined by a striking -5.2% y/y in June as all but two manufacturing categories reported worse outcomes than in May, led by a -8.4% y/y contraction in iron, steel, & other metal products. The absence of load-shedding did not seem to have a marked impact on manufacturing output during the months. June’s outcome was disappointing as production levels remained well below pre-pandemic levels. The upcoming July print is likely to report only a slight improvement to +0.9% y/y, given that July’s PMI reading improved into expansionary territory.