Transnet cyberattack could have serious consequences, says Investec
The Transnet cyberattack throws more fuel on the fire for importers and exporters in SA after July’s social unrest and supply chain disruptions
Trucks backed up outside Durban harbour are experiencing turnaround times exceeding 14 hours to collect or offload containers as a result of the manual processes implemented as Transnet struggles to contain a cyberattack that brought the ports, rail and pipelines operator to a standstill.
Labelling the incident as “an act of cyberattack, security intrusion and sabotage”, the Transnet Port Terminals division declared force majeure at SA’s major container terminals, including those at the ports of Durban, Ngqura, Gqeberha and Cape Town.
Denys Hobson, logistics and pricing analyst at Investec, says if the hack is not resolved quickly, it could have serious implications for importers and exporters: “There could be far-reaching effects in terms of lost sales and cash flow issues, and potentially a catastrophic congestion that forces shipping lines to start diverting their vessels away from SA ports.”
Trucks are queuing up due to the port operator having to shut down several IT systems and replace them with an inefficient manual process for the loading and discharge of containers. Bottlenecks can be expected on road and rail movements.
The impact of the disruption is illustrated by the fact that Durban Port, which handles 60% of all SA’s trade, is only operating at about 10% of capacity, says Hobson. “If nothing can move in and out of SA, there will be serious economic ramifications amplified by all the supply chain disruptions we experienced from the recent civil unrest, global container and capacity shortages, and the lockdowns. This just adds fuel to the fire.”
The worst-case scenario, says Hobson, is that SA ports are bypassed altogether: “Should this system downtime be protracted, and port congestion becomes extreme, shipping lines may decide to temporarily blank or reroute sailings to/from SA until the situation improves.”
Maritime cyber hacks up by 400%
The situation in SA is the latest in a series of sophisticated cyberattacks on the global shipping industry as it goes digital. With more reliance on online platforms during the pandemic, attempted cyberattacks on the maritime industry spiked by 400% between February and June 2020, according to Israeli cybersecurity specialist Naval Dome.
All four major container shipping lines have been hit by a cyberattack, including Maersk, CMA CGM, MSC and Cosco Shipping. And it’s not just shipping lines that have been affected — other related supply chains have been targeted too.
Black Friday could be blue for SA retailers
Continuous supply chain delays can be expected in the next few weeks and months which will place further pressure on importers sales and cash flow when SA companies are hoping to improve sales and turnover over the upcoming Black Friday and festive season period.
“This shutdown will affect pending import orders which could not have come at a worse time,” says Hobson who believes some retailers may simply cancel Black Friday to mitigate their risks. “If a retailer misses the opportunity to receive goods in time for the promotion period, they will sit with excess stock that they may have to discount down the line. This results in margin pressures on business, cash flow constraints and potentially having to cut jobs.”
It all depends on how long it takes for Transnet to recover from the cyberattack.
“For importers waiting for critical stock such as PPE equipment, they may be forced to air freight more stock in at higher freight costs. Freight rates have already started increasing as demand soars,” says Hobson.
This affects everything from cars to oranges
The Transnet shutdown has also come right in the middle of the peak citrus export season.
“If citrus doesn’t ship within a certain time frame it becomes obsolete stock, resulting in lost revenue, wastage and reputational issues, which could have a negative impact on future contracts.”
If this happens, shipping lines could also consider cutting capacity from an export point of view from SA in the future as returning vessels will not give them the expected yields and their capacity could be used better on other global trade routes.
Automotive manufacturers will also feel the repercussions of the chaos at the ports, says Hobson. “The impact of automotive production line stops due to component shortages is significant, and they’re already under pressure to meet demand due to delays caused by the global microchip shortage and the Covid-fuelled delays of other components.”
SA also exports vehicles, so if manufacturing and shipments are delayed, that can affect monetary inflows the country desperately needs. Commodity prices are soaring globally, and these delays could hinder exporters from participating in the boom. “You are essentially strangling the economy when you can’t import and export, especially in SA where we have been enjoying a consistently strong trade surplus with good momentum there.”
‘Gateway to Africa’ closed for business
Durban harbour was ranked in the bottom three of the world’s 351 container handling facilities in the World Bank’s Container Port Performance Index 2020. The Transnet cyberattack will only add to the port’s woes and gives competitors an opportunity to step in, says Hobson.
Hobson’s advice to war-weary importers and exporters? “Unfortunately, it’s about being patient and working closely with your customers, supply chain and financial service providers. Transnet is very slow at coming forward with the detailed information that’s required. There’s a severe lack of visibility of where the containers are and what the time frames are to be able to start getting access to these containers.”
Investec is taking a proactive approach to uplift and deliver containers to its clients as soon as they are released for collection. Its valuable transporters have trucks on standby, waiting to make deliveries, even if it requires making deliveries over the weekend to clear up backlogs and ensure its clients receive their shipments at the earliest possible opportunity. Investec is conscious of the impact these delays could have on its clients and continues to work closely with them to support their businesses during these difficult times.
This article was paid for by Investec.
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