Interview: South Africa Faced with Shortfall in Investment

Image Courtesy: GAC
Image Courtesy: GAC

While still developing as a shipping hub, South Africa is well positioned to become a major centre for the shipping industry. World Maritime News spoke with Eric Barnard, Managing Director at GAC Shipping, about the current situation in the country’s port and maritime industry along with the major challenges it faces in this respect.

GAC South Africa is part of the privately-owned GAC Group, a global provider of integrated shipping, logistics and marine services.

The shipping office was established in 1998 in Cape Town and now has branches in all the major ports in South Africa, including representation in Walvis Bay, Namibia. GAC Laser is the logistics arm of GAC South Africa, and has offices in all of the country’s main transit hubs.

WMN: Being a ship agent in South Africa, how would you assess the current development stage of South Africa’s port and maritime industry in general?

Barnard: There’s no doubt that South Africa is a highly competitive and challenging market. It’s not without its challenges, of course, but those challenges are matched by the outstanding potential the country offers as a major player in the global shipping industry. There are already a number of well-developed ports along South Africa’s coasts incorporated into the extremely strong transit links with the rest of the country and beyond.

There is a shortfall in investment in South Africa

GAC South Africa has shipping offices at the country’s main ports: the major transit hub of Cape Town; Durban, South Africa’s second largest city and a major shipping hub; Richards Bay, home to one of the country’s largest natural harbours and the world’s largest coal export facility; and Saldanha Bay, from where much of the iron from the Northern Cape is exported globally.

South Africa’s port network gives it a number of entry/exit points with the infrastructure in place to accommodate Capesize vessels that are too large to transit the Suez Canal, as well as ships bound for West Africa or South America.

WMN: From your experience what are the key challenges the maritime industry in South Africa faces?

Barnard: The typical challenges of managing large-scale ship services and logistics operation exist everywhere and are not country specific – port infrastructure, local politics and economics, for example.

In the case of South Africa, however, there is currently a shortfall in investment, equipment and infrastructure to support the rampant growth of the region’s oil and gas sector. As a result, business is leaking away to other regions. To avoid South Africa being overlooked, GAC South Africa underlines the importance of sustained investment in the country’s maritime infrastructure to help to make it more attractive as a hub for ship services and repair.

Apart from this, we find that the greatest limiting factors are those beyond our control, such as the price of services which has spiked in the country.

There are, however, signs of a turnaround. The industry is now receiving wide-spread government support through programmes such as Operation Phakisa, which will more closely integrate the country’s energy sector with the maritime sector to improve infrastructure and productivity.

GAC Interview

WMN: Based on your clients’ feedback, which sector has been the most interesting for your clients? 

Barnard: We have seen a spike in demand for ship repair, given the country’s position on the Cape of Africa and the increase in imports and exports to the steadily growing economies of neighbouring countries.

Capesize vessels that cannot traverse the Suez Canal, or those heading for South America and West Africa, will see the country as a perfectly located calling point on their voyages.

South Africa is also a growing hub for the burgeoning oil and gas sector, despite the fact that the country in itself does not have any reserves of its own. Cape Town is becoming more and more prominent as a location for dry-docking and repair services thanks to the boom in demand for ship services from Asian charterers, who see the country as a key entry point to greater investment in Africa’s Central and South Central regions.

A spike in demand for ship repair in South Africa

Rig projects come to South Africa for five-year inspections and surveys, as well as more extensive ten-year repairs. In such cases, a rig might come to dry-dock for a month to six weeks with GAC South Africa acting as the ship agent, but also taking on a role as project manager to oversee all aspects of the repair and refurbishment activities.

We have also handled oil and gas projects globally since 2000, giving us 16 years of experience and a proven track record that means our team can now confidently handle any size of project, if the infrastructure is in place.

GAC South Africa is a one-stop supply chain solution – with vessels always being followed by cargo – ensuring that industry demands are met with a seamless flow between ship agency and logistics.

WMN: How has the overall slump in the container/bulk shipping and offshore energy industries affected your services/operation?

Barnard: The shipping industry is still recovering from the financial downturn. The impact on the offshore sector of the oil price slump, the collapse of the dry bulk market, the chronic imbalance in vessel supply and demand and the slowdown in the Chinese economy are all, in different ways, driving ship owners and operators to be ever more stringent about cost savings.

Every ship owner is prioritising cost savings and for some this is a no longer a question of maximising profit, but of stemming losses in a bid to survive. Indeed, the one silver lining from the fall in oil prices is the welcome relief that it has provided to ship owners in the form of significantly lower bunker bills. However, the intense competition in the ship service industry means that it is often a prime target for a reduction in spending by ship owners, operators and managers.

For GAC South Africa, this slump has not affected our operating standards. Indeed, for us, quality simply cannot be compromised. For South Africa to truly establish itself as a global hub for international shipping, the entire sector must unite in a bid to maintain great high service and resist the temptation to engage in a ‘race to the bottom’ that would only serve to bring down standards. Any compromise in standards comes with a cost – other nearby regions will swoop in to take the prize that is already sitting in the country’s lap.

WMN: Looking ahead what are the plans for 2016?

Barnard: Looking ahead for 2016 and the next 5 years, technology and technological developments are leading the way for GAC South Africa to ensure continuity of service. Developments in this arena will give us the necessary information and integration capabilities to be market leaders.

As shipping turns towards the benefits that ‘big data’ can offer, it will also be important for companies like ours to embrace the data revolution and ensure that we continue to provide the best quality of service to our customers.

World Maritime News Staff