Shipbuilding & Repair Lease Review of South African Ports

Lumec conducted a review of the Transnet National Ports Authority (TNPA) shipbuilding and repair lease terms and conditions for the Aerospace, Maritime and Defence Industries Association of South Africa (AMD). The study aimed to present well considered recommendations for lease terms and conditions to grow the shipbuilding and repair industry in South Africa. 

Challenges

The shipbuilding and repair industry is important to the economy of South Africa because it is labour intensive, is less vulnerable to the trend of automation, and has large potential for transformation. However, major ship building and repair companies state that they have not yet been able to achieve the impact the industry could have. This is partly due to the lease conditions being imposed by TNPA . The nature of shipbuilding activities requires them to operate in ports. Therefore, the lack of alternative land options means that companies have little leverage to negotiate better lease terms.

Challenges with lease terms include:

  • The short lease period with no option to renew,
  • Inconsistent termination clauses,
  • Non-transparent and inefficient lease application processes,
  • High rental prices and annual escalations,
  • Terms that penalise tenants for making improvements to the site,
  • Lack of maintenance, and
  • Ineffective dispute resolution.

Recommendations

The report makes several specific recommendations. However, industry insists that a culture shift is required within TNPA for these recommendations to be effectively implemented. Tenants should be treated as collaborators in the goal to develop business, attract new customers and let the market grow. If this collaboration occurs, the best lease terms and conditions would be arrived at through a common goal.