South Africa’s port infrastructure is being developed to accommodate the offshore oil and gas industry. Operation Phakisa, which was launched in mid-2014, provides an aggressive set of timelines to position the country’s ports as premium destinations for rig and offshore support vessel repairs and maintenance. South African ports remain well-placed to provide other oil and gas related services to the growing industry on the east and west coasts of Africa.
There is a real opportunity for South Africa to leverage its infrastructure, location, expertise and existing downstream industry to create permanent hubs to service the African oil and gas industry. Download our Latest Tariff Increase Letter.
South African Ports - An Overview
South Africa’s eight commercial ports all offer facilities for ship or boat repair and maintenance, but Saldanha Bay, Cape Town, Durban and Ngqura currently present the best options to support the needs of the offshore sector. Aggressive plans to further develop facilities in Saldanha Bay and Richards Bay will see these ports become destinations of choice for rigs, jack-ups and related vessels in future. The South African ports can accommodate the following, via available facilities to varying degrees:
- Floating or wet repairs: in the bay
- Quayside repairs: some multi-purpose terminals, repair quays
- Dry repairs: drydocks, floating docks, syncrolifts, slipways
Current capacity constraints based on available facilities are being addressed by new infrastructure developments primarily under Operation Phakisa initiatives.
Saldanha Bay is one of the largest and deepest natural harbours in southern Africa with dredged depths to 23 m below chart datum. An artificial breakwater improves the conditions within the bay. Future developments will centre around the oil and gas industry and the natural draft make Saldanha Bay ideal for the sector.
The Port of Cape Town is a full service, general cargo port, operating 24 hours a day, seven days a week. It is well equipped for ship repair and ideally suited to serve the offshore oil industries on both the west and east coasts of Africa. The facilities include a 200 tonnes SWL floating crane, two graving docks, a syncrolift as well as onshore and quayside areas dedicated to this activity.
Situated half way between Cape Town and Port Elizabeth, Mossel Bay is the home of Mossgas (PetroSA) and other oil industries projects. Mossel Bay is the only South African port that operates two off-shore mooring points within the port limits. Marine engineering firms are available for all classes and types of onboard repairs. A slipway of 250 tons capacity is available.
Port Elizabeth is geographically well-positioned to operate as a multi-cargo port. The port is equipped to handle dry bulk, bulk liquid, general cargo and container cargo. It is, however, not well developed in terms of offering dedicated ship repair facilities.
The Port of Ngqura is South Africa’s newest port. It is capable of handling container, dry and liquid bulk vessels and is able to accommodate rig repairs and surveys. The port has been identified as a potential service provider to the offshore oil and gas sector and has already welcomed a number of rigs for servicing. Bordered by the country’s largest IDZ, the Coega Industrial Development Zone, the area is being developed for economic upliftment.
The Port of East London is the only commercial river port on the South African coastline. Centrally located both nationally and internationally, it is strategically positioned to act as the gateway between Africa and the global market. Private contractors undertake repair and maintenance in the East London Graving Dock and at the repair quay, which is adjacent to the drydock.
The Port of Durban is South Africa’s premier multi-cargo port and is counted among the busiest ports in Africa. Strategically positioned, the port offers itself as a potential service point for the offshore sector with a number of ship repair yards and facilities. Durban regularly attracts repair, maintenance and survey work from the offshore sector.
The Port of Richards Bay was established in 1976 primarily for exporting coal. Today it is one of the world’s leading bulk ports. Repairs are generally accommodated within the Small Craft Harbour at the Repair Berth. Future plans, under Operation Phakisa, will see more opportunity to develop the repair sector in this port with strategies in place to provide additional infrastructure within the port as well as capitalise on the benefits of the Industrial Development Zone.
The launch of Operation Phakisa by the State President in July 2014 resulted in an analysis of the economic potential of South Africa’s oceans. Operation Phakisa’s main objective was to assess how the oceans’ economy can contribute to increased GDP growth and increased employment within the marine transport and manufacturing sector, aligned to the priorities of the National Development Plan.
The recommendations highlighted the opportunity for South Africa to achieve GDP growth and job creation by pursuing the development of new port repair facilities and ensuring that existing repair facilities are maintained to promote further growth in the vessel repair market. Operation Phakisa’s recommendations strongly underlined and supported the role of Transnet National Ports Authority (TNPA) as set out in Section 11 of the National Ports Act 12 of 2005, which indicates that TNPA must plan, provide, maintain and improve port infrastructure.
Operation Phakisa also demonstrated that growth within the oceans’ economy cannot be realised unless the proposed new port facilities are delivered as integrated Industry solutions, with strong partnerships between the ports, IDZ’s and the repair Industry. TNPA is committed to the delivery of Operation Phakisa. To deliver Operation Phakisa, new vessel repair facility opportunities will be pursued at the ports of Saldanha Bay, Richards Bay and East London, whilst maintenance and refurbishment of existing vessel repair facilities have been prioritised at the ports of Durban, East London, Port Elizabeth, Mossel Bay and Cape Town.
The repair facilities to be established at the Port of Saldanha, aimed to position the port as an offshore oil and gas services complex with dedicated rig and other vessel repair capabilities, will be developed and aligned with the Saldanha Bay Industrial Development Zone (SBIDZ). The SBIDZ has already attracted global interest and will provide land-based facilities to support offshore operations in terms of logistics, equipment servicing, rig repair and fabrication, as well as companies interested in dedicated infrastructure and quayside access for vessel fabrication, logistics and repairs.
Operation Phakisa will create opportunities for the private sector to invest in port facilities. The investment in new facilities has been projected at R13 billion, to support both the oil and gas industry and expanding marine manufacturing within ports. Growth and development of the South African oceans’ economy can only be realised by ensuring capacity at the South African ports; and execution and delivery of Operation Phakisa will position the country to capture its share of these economic opportunities.
Port Initiatives under Operation Phakisa
Offshore Oil & Gas Supply Base: Development and extension of the General Maintenance Quay – this facility will be operated as an offshore oil and gas supply base with a berth length of 280 m and a water depth of -8.5 m. The supply base will, amongst others, be a service hub to offshore rigs to supply food, materials and collect waste.
Berth 205: The construction of a new deep-water dedicated oil rig repair facility at a new berth 205 will provide a 380 m long berth with a water depth of -21 m.
Jetty: Lengthening the Mossgas Quay through the construction of a jetty structure of 500 m and a water depth of -8.5 m will enable repairs and maintenance to rigs and supply vessels not requiring deep water. Pockets of water depths of -12 m will accommodate floating docks to enable these type of repairs.
Repair Facility: The port will pursue the establishment of a vessel repair facility utilising the existing repair quay or potential new sites to facilitate vessel repairs. Further studies will be conducted to assess the type of facility, which could include a floating dock or drydock.
Boat-building Hub: The refurbishment of the slipway and backup area as a boat building hub has been identified at the Port of East London. Detailed studies will be undertaken to determine how a boat-building hub at the port will complement the existing boat-building facilities at the ports of Cape Town and Durban.
Maintenance: Existing repair facilities are located at Durban, East London, Port Elizabeth, Mossel Bay and Cape Town. Extensive refurbishment and maintenance are planned at these facilities. This will ensure that facilities are safe, operational and that capacity can be utilised to sustain existing repairs and allow ship yards to pursue new business opportunities.
Ports Act Section 56 Process
TNPA is tasked with the responsibility to enter into agreements with any person to allow the design, construction, rehabilitation, development, financing, maintenance and operation of a port terminal or port facility. This must be done in accordance with a process that is fair, equitable, transparent, competitive and cost effective.
The new facilities at the Port of Saldanha, Richards Bay and East London will follow a Section 56 process. The process requires bidders to respond to a request for proposal. Bids are evaluated taking into account the New Growth Path/Supplier Development/BBBEE criteria as well as the technical fit, with threshold targets for each of the two stages.
Only if the bid passes the required thresholds, will the financial evaluation be done. Negotiations will then follow with the successful bidder and an agreement concluded.
Special Economic Zone Incentives
The Department of Trade and Industry (DTI) offers investors in South Africa’s Special Economic Zones a new set of incentives as listed in the Taxation Laws Amendment Act No. 43 of 2014:
- A 15 percent corporate income tax rate for businesses who qualify and contribute through value-added activities within the zone;
- An employment incentive allowing for a tax deduction for employment of workers earning less than R60,000 per year as per the Employment Incentives Act;
- Accelerated depreciation allowance for buildings in the zones based on the existing rates for urban development zones, to encourage developers to invest in industrial premises;
- Donation to public-benefit organisations: Currently deductible up to 10 percent of taxable income and current proposal allows donations of more than 10 percent to be rolled over in future years.