How accurate are Transnet’s growth forecasts?

The accuracy of Transnet’s statistical forecasts of container volume growth – and consequently its substantial investments – have been called into question. The reason, says Dave Watts, maritime director of the SA Association of Freight Forwarders (Saaff), is because the current Transnet estimates are being used to justify investments of more than R75 billion on port development to cope with this expected growth. Watts gave a comparison from his recent study visit to the Port of Los Angeles on the West Coast of the US. “Long-term forecasts for the San Pedro ports (LA and its sister port of Long Beach) see container volumes more than doubling over the next 17 years – growing from the current annual total of 14.2 million TEUs to well over 30m in 2030,” he told FTW. “How to increase capacity without extraordinary development costs is under investigation. This is something that should also be borne in mind here, where a similar lack of capacity exists.” Part of this future expansion to meet growing demand here in SA is the proposed R75-billion digout port on the site of the old Durban international airport – which on its own has already cost Transnet R1.85bn. Mark Gregg- Macdonald, Transnet’s group executive for planning and monitoring, told FTW that the group’s estimates showed that demand for container capacity in the current Port of Durban was expected to grow from the current 2.5m TEUs a year to more than 12m TEUs by 2040. “Container volumes have grown five-fold over the past 30 years,” he added, “and are forecast to grow again by five-fold over the next 30 years.” He also highlighted that the new dig-out port was vital to keep up with these projections. But five-fold growth far outstrips LA’s doubling of volumes by 2030. To account for the 10-year difference we used Gregg-Macdonald’s own figures. He reckoned that volumes would grow by 4% per annum from 2030 to 2040. That would be a total of less than 50% growth in that decade – well below what would be required to take LA’s ‘more than doubling’ by 2030 to Gregg-Macdonald’s ‘quintupling’ by 2040. Who’s right? The LA authorities took a much more conservative approach – tempering their earlier estimates with the current, rather sour, global economic conditions. According to Watts, a consulting economist group employed in December 2007 by the two ports in San Pedro Bay estimated that TEU volumes would increase from the current 14.2m and reach 65m by the year 2030 (that’s almost quintupling). “But, in 2009, they reduced that estimate to 35m (more than doubling) due to what they described as six to seven ‘lost years’ between 2008 and 2014 – and the long-term consequences of the recession. Their estimate for 2013 appears to be on target. “We need to be sure that we have also not drastically overestimated the potential for volume increases over the next 25 years.” Watts was also told that the Port of Los Angeles had investigated and priced a new terminal based on the volume increases forecast. “But,” he added, “when presenting the final cost estimates to carriers and terminal operators, the reaction was that the consequent level of tariff increase would be unsustainable.” INSERT Has Transnet overestimated the potential for volume increases over the next 25 years?