Expansion options for the Port of Durban : an examination of environmental and economic efficiency costs and benefits.
The port of Durban is currently suffering under severe capacity constraints. This has negatively affected efficiency resulting in queuing and berthing delays. If Durban wishes to remain the premier hub status port of the region and Southern hemisphere, then it needs to adequately address the current supply constraints. Shipping vessel operators and owners will not tolerate these inefficiencies indefinitely and if the port does not seek to address the situation, it runs the very real risk of losing patronage in the medium to long term. The obvious response to the supply side constraint is to increase container handling capacity. This dissertation will analyse the expansion options available to the port in this regard. Beside simply increasing capacity, the port needs to increase draught depth at the berths since container vessels are continually migrating to larger sizes to benefit from economies of scale. A key challenge is the fact that the port serves other purposes beyond that of being a gateway for traded goods such as ecological functions and subsistence fishing. This is compounded by the significant environment degradation which the bay has suffered over the last century or so. The port, however, generates significant economic benefits for the city in terms of economic linkages and employment, and for its wider national and regional hinterland, by holding down the generalised cost of the transport of goods. By not expanding capacity, there are significant opportunity costs for Durban and for the port’s wider hinterland. The best way of analysing the benefits and costs of the various options is to conduct a public CBA analysis which monetises and discounts streams of benefits and costs to arrive at a NPV. Several expansion options are examined and include Bayhead, the old DIA site and Richards Bay. An NPV was calculated for each option where environmental externalities were included. The CBA yielded three options with positive NPV’s out of the seven examined. The Southern Access routes, 3CA and 3DA, were both rejected since the effective removal of port sites used presently for the handling and storage of petrochemicals was considered infeasible. One of the Northern Access routes, 1AB, was also rejected since the option yielded a negative NPV. Even though DIA1 had a positive NPV; it was rejected based on mutual exclusivity with option DIA2. Richards Bay was rejected since it had a penalty cost of R89 billion over Durban, due primarily to higher logistical costs. On balance the Bayhead option 1AA and airport option DIA2 were chosen as the projects of choice primarily on the basis of the CBA results. Both these options yielded significantly positive NPV’s and the port should seriously look into their construction as they would provide several years of spare capacity as well as being able to accommodate Post Panamax vessels.