Transnet cyberattack could have 'catastrophic' consequences

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Denys Hobson, Logistics and Pricing Analyst at Investec. (Image, supplied by Investec)
Denys Hobson, Logistics and Pricing Analyst at Investec. (Image, supplied by Investec)

Trucks backed up outside Durban harbour are experiencing turn-around 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 cyber-attack, security intrusion and sabotage", the Transnet Port Terminals (TPT) division declared force majeure at South Africa's major container terminals, including those at the ports of Durban, Ngqura, Port Elizabeth and Cape Town.

Denys Hobson, Logistics and Pricing Analyst at Investec, says that if the hack is not resolved quickly, it could have serious implications for importers and exporters: "The impact is going to be far-reaching both in terms of lost sales and cash flow issues, and potentially, there could be catastrophic congestion that actually forces shipping lines to start diverting their vessels away from South African ports."

Trucks are queuing up due to the port operator having to shut down several IT systems and replace them with a highly inefficient manual process for the loading and discharge of containers. Bottlenecks can be expected on both road and rail movements.

The stark impact of the disruption is illustrated by the fact that Durban Port, which handles 60% of all South Africa's trade, is currently only operating at around 10% of capacity, says Hobson. "If nothing can move in and out the country, there will be serious economic ramifications that will be amplified by all the supply chain disruptions we've already experienced from the recent civil unrest, the global container and capacity shortages and the lockdowns. This just adds fuel to the fire."

Hobson says that depending on how long the downtime lasts, shipping lines may decide to omit ports and re-route cargo which will add to the lead time.

The worse-case scenario, says Hobson, is that SA ports are bypassed all together: "Should this system downtime be protracted, and port congestion becomes extreme, shipping lines may decide to temporarily blank or re-route sailings to/from South Africa until the situation improves."

Maritime cyber hacks up by 400%

The current situation in South Africa is the latest in a series of increasingly sophisticated cyberattacks on the global shipping industry as it goes digital. With increased 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

In fact, all of the 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 impacted, other related supply chains have been targeted too.

Black Friday could be blue for SA retailers

Continuous supply chain delays can be anticipated in the coming weeks and months which will place further pressure on importers sales and ultimately cash flow at a critical time, especially for SA companies who are hoping to improve their sales and turn-over over the upcoming Black Friday and festive season period.

"This shutdown will have a consequential impact on pending import orders which could not have come at a worse time," says Hobson who believes that 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 ultimately 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 like 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 impacts 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," warns Hobson.

If this happens, shipping lines, he says, could also consider cutting capacity from an export point of view from South Africa in the future as returning vessels will not give them the expected yields and their capacity could be utilized far 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-fueled delays of other components."

South Africa also exports vehicles, so if manufacturing and shipments are delayed, that can impact monetary inflows that the country so desperately needs. This all comes at a time when commodity prices are soaring globally, and these delays, could hinder exporters participating in the boom. "You are essentially strangling the economy when you can't import and export, especially in South Africa 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 cyber attack 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 with very 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 times frames are to be able to start getting access to these containers."

Investec is taking a proactive approach in order to uplift and deliver containers to our clients as soon as they are released for collection. Our valuable transporters have trucks on standby waiting to make deliveries even if it requires making deliveries over the weekend in an attempt to clear up backlogs and ensure our clients receive their shipments at the earliest possible opportunity. We are very conscious of the impact that these delays could have on our clients, and we continue to work very closely with our clients to support their businesses during these difficult times. All our teams are aligned and available to ensure we offer the service and support required.

This post was sponsored and supplied by Investec.

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