Court slams Maersk unit’s ‘wait and see’ gamble over R11.1bn Transnet port tender

The High Court in Durban has thrown out APM Terminals’ bid to overturn a crucial R11.1 billion Transnet port tender, ruling that the company waited too long to launch its legal challenge and that its case lacked merit.

The judgment hands a major victory to Transnet and the Philippine-based International Container Terminal Services (ICTSI), allowing a vital project to revitalise South Africa’s busiest container hub to proceed.

The case centred on a high-stakes legal and financial tussle for the 25-year contract to upgrade and run Durban Container Terminal Pier 2 (DCT2).

This pier handles 46% of the country’s container traffic.

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At the heart of Netherlands-based APM’s argument was a single, critical “slip”. It argued that ICTSI’s failure to meet a specific financial solvency ratio in the initial bid phase.

APM, part of the Danish logistics giant Maersk, which had put in a lower R9.2 billion bid, argued that ICTSI’s measurement artificially inflated its financial health.

It was accepted among all parties that, had ICTSI used the correct formula, it would have failed this initial hurdle.

Faced with ICTSI's failure to meet the mandatory solvency threshold due to an incorrect calculation, Transnet commissioned an independent financial review. 

The firm, Growthstone, concluded that ICTSI was a “robust participant” with a “strong balance sheet” and high leverage capacity, positioned to be a “strong and reliable strategic partner.”

However, Judge Chetty found that APM’s own delay was also fatal to its case.

Despite first raising red flags with Transnet as early as 14 July 2023, APM only launched its review application in March 2024 – a nearly eight-month “wait-and-see” approach that the court found “unreasonable”.

The court rejected APM’s argument that it was waiting for Transnet to provide adequate reasons, stating this was not a justifiable basis for delay. This hesitation proved to be a critical misstep.

“The explanation that APM was holding out until it received better or fuller reasons from Transnet is neither satisfactory nor convincing,” the judge wrote.

The ruling added that, despite the apparent commercial urgency and knowing the consequences that delays have for various industries associated with the port, the failure to launch the review application timeously is fatal”.

But the court went further, also dismissing APM’s case on its merits.

It found that Transnet had acted rationally and lawfully by looking beyond the initial solvency ratio. It also noted that the solvency ratio was actually not a point of contention.

“The point repeatedly emphasised during argument is that the solvency ratio played no role in the determination of the successful bidder.”

The judge concluded that Transnet’s exercise of discretion was fair.

Disqualifying ICTSI over the technical slip, the court reasoned, would have undermined the very purpose of the tender and Transnet’s financial objectives.

“Transnet contends that what APM is seeking to achieve, via the review application, is to unseat ICTSI’s bid worth R11.2 billion and impose APM as the preferred proponent with an offer of R9.2 billion. This would undermine the fundamental purpose of the tender and cannot be said to be rational,” the ruling said.

The court held that Transnet’s award to ICTSI did not constitute a reviewable irregularity and dismissed the application.

In a final note, each party was ordered to bear its own costs.

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