The KwaZulu-Natal High Court in Durban has dismissed an urgent application by APM Terminals BV to set aside the awarding of the R11.1 billion Durban Container Terminal Pier 2 (DCT2) concession to International Container Terminal Services Inc (ICTSI).
The ruling, delivered on Friday by Judge Mahendra Chetty, upholds Transnet SOC Limited’s decision to award the 25-year contract to ICTSI, dismissing an application by APM Terminals BV, part of the AP Moller-Maersk Group, to have it reviewed and set aside.
The dispute centred around the tender process launched by Transnet in February 2022 to secure a private partner for DCT2, a critical hub handling 46% of South Africa’s port traffic.
Nine bidders, including APM and ICTSI, competed, with the process involving a Request for Qualifications (RFQ) and a Request for Proposals (RFP) stage. ICTSI, ranked eighth globally in terminal capacity, emerged as the preferred bidder with a bid of R11.1bn, outpacing APM’s R9.2bn offer.
According to court papers, the contention arose over ICTSI’s solvency calculation during the RFQ stage. Clause 5.2(d) required a solvency ratio of at least 0.4, typically using total equity over total assets.
While other bidders, including APM, used audited financial statements, ICTSI employed market capitalisation, achieving a ratio of 1.28. APM argued in court papers that this breached the tender’s requirements, citing ICTSI’s 2022 statements showing a 0.24 ratio.
However, Judge Chetty disagreed.
"No advantage accrued to ICTSI by virtue of the score recorded in the solvency ranking. This was essentially a vetting stage to ascertain the responsiveness of the bidders,” he said in his ruling.
Transnet’s third-party verifier, Sycip Gorres Velayo & Co, confirmed ICTSI’s approach in October 2022, and further due diligence by GrowthStone Assurance in March 2024 supported ICTSI’s financial capacity.
In his ruling, Chetty said “perfection is not demanded” and that not every procurement process was “entirely without flaw", referencing the Supreme Court of Appeal’s (SCA) stance in an earlier Altech Radio Holdings matter.
“There will seldom be a public procurement process entirely without flaw. But perfection is not demanded and not every flaw is fatal. Nor does every flaw in a tender process amount to an irregularity, much less a material irregularity. Public contracts do not fail to be invalidated for immaterial or inconsequential irregularities. Indeed, as it has been put, "[n]ot every slip in the administration of tenders is necessarily to be visited with judicial sanction,” he said, citing the SCA judgment.
"The question which arises is whether a slip in the process of the award of a contract of national economic importance should be reviewed and set aside at the instance of an aggrieved bidder,” Chetty said.
ICTSI had supplied letters from three major banks confirming over $400 million in credit facilities.
The RFP, a "straight price shootout", saw ICTSI score 100%, securing a 49% stake in the NewCo vehicle managing DCT2, with Transnet retaining control. APM, scoring 83%, challenged the process, but the court dismissed claims of material irregularity.
"The slip in question pertains to the successful bidder not meeting a solvency threshold (under the minimum financial criteria section) contained in the responsiveness phase of the tender,” Chetty said.
The ruling emphasised Transnet’s compliance with the Constitution and the Promotion of Administrative Justice Act (Paja).
The judgement highlighted DCT2’s chronic underperformance, ranked 348th out of 370 ports in the 2022 World Bank Container Port Performance Index, and its impact on the economy.
“There is no dispute that DCT2 has been plagued for decades by limited operational capacity, resulting in freight backlogs and congestion of vessels entering and leaving the port,” Chetty said.
Transnet’s process, approved on December 12, 2023, aimed to address this through private partnership. Despite APM’s reservations and a Paja review launched on October 26, 2023, Chetty found no basis to overturn the award.
The decision clears ICTSI to proceed, pending suspensive conditions like share purchase and project agreements.
Transnet’s letter of July 6, 2023, confirmed ICTSI’s selection, with APM notified as the second-ranked bidder. This ruling concludes a protracted legal battle, affirming ICTSI’s role in revitalising DCT2.
