THE%20ECONOMIC%20VALUE%20OF%20A%20PORT%20CITY%20Presentation%20to%20Maritime%20Summit%20Durban%2026%20October%202011%20Trevor%20Jones%20University%20of%20KwaZulu-Natal

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THE ECONOMIC VALUE OF A PORT CITYPresentation
to Maritime SummitDurban26 October 2011Trevor
JonesUniversity of KwaZulu-Natal

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Outline way forward

• Context of the discussion
• The economic value of a port
• The Port of Durban in a regional context
• The Port of Durban and the Ethekweni economy
• Employment impacts
• Expenditure impacts
• Port users and the trading community
• Port costs and productivity/competitiveness
• Port capacity and congestion
• The future size shape of the Port of Durban
• Capacity expansion the DIA dig out option
• Who will pay and how much?
• Who will manage/operate and how well?

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The economic value of a portValue to whom?

• Value to the host city/region (eThekweni), in
  terms of jobs, investment opportunities, spending
  etc
• Value to the community of port users, in terms of
  user costs, time etc..
• The economic function of a port is to lower the
  generalised cost of through transport (Goss)

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Durban as a regional port

• Colossal by African standards (i.t.o
  infrastructure and traffic base)
• Very large by Indian Ocean Rim standards
• Very large by southern hemisphere standard
• Modest by global standards

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Durban as the leading southern hemisphere port?

• No, i.t.o. aggregate cargo volumes
• Not quite, i.t.o. container volumes (teus) 3
  behind Jakarta and Santos
• Very likely, yes i.t.o. depth diversity its
  related port community (cluster)
• Emphatically no, i.t.o. productivity
  competitive cost to port users

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Value of Durban port to Ethekwini?

• What does handling 70 million tons of cargo
  annually do economically for the metropole?
• or handling 2.6 million teus annually?
• not a simple relationship, because..
• 1 ton crude oil ? 1 ton anthracite ? 1 ton
  fruit in pallets ? 1 ton containerised computer
  components ? 1 ton bagged rice

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• Direct Port Ancillary
• establishments
• Service providers to
• port ancillary firms
• (indirect relationship)
• Port-using cargo
• Owners (importers
• and exporters) linked to
• the port in varying
• degrees of intensity

• Port Activities
• generate
• employment and
• spending in
• Plus INDUCED or MULTIPLIER
• Effects on EMPLOYMENT
• EXPENDITURE

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Port-related employment

• 1995/96 and 2006 estimates, suggesting
• 35,000 local jobs in DIRECT port-ancillary
  activities
• 10-12,000 in INDIRECTLY port-related activities
• plus not quantified but very substantial in
  family of local port-using cargo owners
• All FIRST-ROUND activity without MULTIPLIER
  effects

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• Main suspects would include
• Transnet (TNPA, TPT TFR)
• Private Terminal operators
• Clearing Forwarding
• Warehousing, depots, logistics (key area Durban
  as a distribution platform)
• Road haulage
• Ships Agency
• Stevedores (shrinking)
• Ship repair ( shipbuilding?)
• Security (growing)
• Ship chandlers, suppliers
• Bunker industry

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Port-related expenditure

• Main estimated first-round elements are
• R2.2 billion wages salaries in port-ancillary
  cluster (2010 prices)
• R1.4 billion in local non-wage spending
  (indirectly port-related), or
• R3.6 billion in aggregate first-round
  port-related spending in the local economy

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INDUCED spending?

• Local economy multiplier values of 1.7 to 1.9
  plausible (Brisbane, Oakland, Durban, etc..)
• Aggregate annual port-related local expenditure
  of R6.0 to R6.9 billion
• All on a NARROW view of the port
• without considering cargo owners

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Expenditure impact of gains or losses in port
traffic?

• Consider the spending per call of
• 32,000 grt container vessel
• Working 1550 boxes at the DCT,
• Port time 2 days
• 500 tons bunker fuel purchased
• 2010/11 harbour tariffs
• 650 full imported boxes, 400 full exports, 250
  empties, 250 transhipped

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Profile of container vessel spending, excluding
cargo dues, 2010 traffic and tariff levels
Item/Service Expenditure R total
TNPA marine infrastructure services 172,750 2.9
TPT Terminal charges 1,164,753 19.8
Stevedoring Lashing/Securing1 26,800 0.5
Ships Agency 44,000 0.75
Ship Chandlers 60,000 1
Clearing Forwarding and Warehousing 1,123,500 19.1
Container depots, logistics etc 340,000 5.8
Road haulage2 720,000 12.2
Rail charges2 140,000 2.4
Ship repair services 95,000 1.61
Bunkers fuel 1,954,000 33.2
Miscellaneous medical, crew transfers etc 40,000 0.7
TOTAL EXPENDITURE PER CALL PER VESSEL DIRECTLY RELATED SPEND 5,880,803 100
1 Container carrying lines pay an all-in terminal
charge that include stevedoring, with the latter
in turn offering their services to TPT. For the
purposes of this exercise, these charges have
been unbundled to separate out the (small)
stevedoring component. 2 Based on a 80/20
road/rail split of cargo distribution and 35/65
split of container volumes across
Durban/non-Durban cargo owners. Local cartage
activities and 20 of Durban-inland transport is
assumed to be controlled by service providers in
the eThekwini metropole.
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• IMPLICATIONS
• Substantial local spending gains from increased
  port activity and obviously
• Significant potential expenditure losses from
  failure to attract additional traffic or loss of
  traffic
• Broad spread of benefits across public and
  private players
• Importance of maintaining genuine
• TERMINAL port status

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Port value from users perspective

• Overwhelming evidence of
• High user-costs across a broad range of
  activities (Moving South Africa, Ports Regulator
  data, etc.)
• Low productivity indicators (container moves per
  gantry hour, cargo clearance rates etc.)
• Inability to cope with sea trade demand (vessel
  waiting time, congestion etc.)

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Comparative port authority costs Durban,
Rotterdam, Sydney, Melbourne

• Vessel MSC Charleston
• Type Cellular container vessel (gearless)
• Tonnage 89,954 gross registered tons (GT)
• Draught 12 metres on arrival and departure
• Time in port 96 hours (4 days)
• Cargo activity 2,000 teus discharged (imported
  cargo)
• 1,600 teus loaded (exported cargo)
• 400 empties loaded

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In terms of PORT AUTHORITY charges, Durban a
massively high cost port, but not in all respects

• Charges for MARINE INFRASTRUCTURE (Port dues) and
  MARINE SERVICES not the main problem
• Port dues generally below those of competitor
  ports in EU, Oz
• Pilotage costs modest by international standards
• Some good things happening in terms of marine
  services delivery, but.
• Charges for CARGO-HANDLING INFRASTRUCTURE
  outrageously high
• Cargo dues still the real tariff bugbear
• Still price/costs distortions (Ad Valorem
  Wharfage ghosts not laid)
• A disastrous situation in terms of attracting
  additional, marginal cargoes
• Militates against attainment of strategic hub
  port status

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Costs worsened by chronic congestion, vessel
queuing

• Small exercise
• 115 container vessels
• 43 days (daily Sapref reports)
• August-September 2011
• Daily timecharter rates imputed
• Average delay of 3.28 days
• Time cost of R40 million (R1 million/day)

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Whither Durban port?

• DIA dig-out port site the front runner
• Right choice
• Less saturated immediate port area
• Good intermodal links (rail focus to inland
  clearing house Cato Ridge?)
• Real capacity enhancement and hub port basis

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Future challenges who will pay for new
capacity and how much and who will manage and how
effectively?

• A pairing of a municipal and a national port
  site? (fanciful)
• A more powerful partnership with private
  investors?
• MUCH STRONGER TRANSNET/CITY/
• PORT USERS RELATIONSHIPS THE WAY
• TO UNLOCK PORT VALUE