The storm ain't over: logistics legal head warns of financial fallout from KZN floods

30th May 2022

By: News24Wire


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Ongoing delays and congestion, as businesses scramble to meet their obligations to clients, mean the overall losses resulting from recent flooding in KwaZulu-Natal keep piling up. 

Earlier this week, Transnet sent an internal memo to stakeholders in Durban's regional logistics sector advising them that its technical team was making progress in clearing the backlogs caused by April's flooding in KwaZulu-Natal and heavy rains during the past weekend.

However, the lingering after-effects are expected to prove just as detrimental to business operations and the fate and finances of many businesses in the logistics sector. While Bayhead Road by the Durban Port is carrying usual volumes, repairs to its fourth lane continue.

In many ways, the progress made by Transnet and the government to clear impediments on logistics due to the flood has been substantial. Businesses speaking to Fin24 have noted the restoration of key parts of Durban's logistics network.

Outbound lanes leading to the Durban port terminal have now been opened to cater for both directions of flow, although capacity has effectively been halved. Trucks on this network feed the container terminals and the coal export terminal, and the liquid bulk sector.

Bowmans' head of ports, transport and logistics, Andrew Pike, told Fin24 that the lasting impact of the flood would leave many businesses in logistics, road freight and trucking the worse for wear long after obstructions to the networks have been cleared.

While this is less than ideal, Pike said there was some notable recovery among service providers in warehousing and storage. He also said debris that flowed from rivers into the port was cleared in a reasonable amount of time.

"From a regional point of view, a lot of service providers have recovered. I am talking about people like warehouses and container depots. Many were flooded, and at some point, there were only two or three out of ten depots that were functional," said Pike.

'Mortified by inefficiency'

Pike said while warehouses were cleaned up and depots restored containers that had collapsed, what has not yet fully recovered is the infrastructure feeding the port's support services, particularly road and rail.

"One of the biggest issues with the port is Bayhead Road, with two incoming and two outgoing lanes. It is notorious for congestion when trucks are loading there. Many are mortified by inefficiency that is being caused on Bayhead Road, where trucks do one or two loads a day instead of five or six.

"However, the capacity which existed before the floods, which was already constrained, has been halved by the floods because the two inbound lanes were washed away at a point where they cross a canal," Pike said.

Pike warned that there had been a slowdown in delivery to the liquid and dry bulk areas of the port, and in the dry bulk sector, trucks would be delivering coal to the coal terminal at a rate as low as 80 trucks a day.

"Because of the congestion, they will have far fewer trucks coming in to deliver cargo to the bulk terminals. As a result, fewer empty outgoing trucks are then available to get to areas where other dry bulk is stored which needs to be carried to the hinterland," he said.

He said with the delays in collecting cargo, logistics businesses have seen increased storage costs, with the knock-on impact on the economy being difficulty in managing increased costs in the value chain.

"A warehouse would charge say R20 to R30 per metric ton a week. If you have 50 000 tons of product stored for a week extra, you are looking at a million rand a week. It's not small potatoes. Those are the sort of volumes on the bulk side. Containers cost far less to store, but if you're talking about a lot of containers, the numbers pile up quickly," said Pike.

Pike said the overall losses keep increasing because, on top of the logistics losses, there are supply contracts between importers, producers and end-users, and if they do not get their products, it stops the operation of entire factories. He said the varying interpretations of the force majeure legal principle, aimed at protecting businesses from loss due to a disaster, meant it was not a full-proof way for businesses to get a reprieve to affected businesses as most of the flooding was over a month ago.

"Clients have had to look at their contracts and see if they can be excused from performance through force majeure clauses. People think that a force majeure clause has standard wording, but sometimes it refers to losses caused directly by the force majeure event.

"Once flood damage has been repaired, and a warehouse is back in operation, the force majeure stipulation then technically falls away in some contracts, despite the fact that there is still fall-out from the damaged road and rail infrastructure and the on-going bottlenecks," he said.

He said he hoped that Transnet would do their best to fix Bayhead Road and get the port fully back on track. The government might be able to subsidise asset finance, so people paying for transport get temporary or relief on payments by way of a deferment of payments, he proposed.

Transnet told Fin24 that, based on the scale and nature of the infrastructure damaged from the flood, the estimated time for repairing the single rail line is June 2022. According to Transnet, the estimated time for repairing the second line is October 2022.

"Our engineers have assessed which sections of the double rail line can be restored in the shortest possible time in order to ramp up operations as soon as reasonably possible. Two lanes of Bayhead Road were opened on 18 April, which enabled the movement of cargo to and from the Port of Durban. The third lane was opened on 7 May," Transnet said.

Transnet said Bayhead Road remained stable and operational following the past weekend's rains, and repair work on the fourth lane continued. The entity said it put in place contingency plans for mass evacuation by rail to the Bayhead terminal to ensure that there is no congestion.

"This is over and above the fact that Bayhead road is now carrying the same traffic volumes as it did prior to the initial flooding. The port is currently operational, with no major damage reported since the past weekend's heavy rains and winds. There are currently no long-term delays expected as a result of the flooding in the Port of Durban," Transnet said.

Edited by News24Wire




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