Over the past seven months, shipping traffic through the Strait of Hormuz has dwindled to a trickle, with Iran effectively closing the critical maritime chokepoint ever since the U.S. and Israel launched attacks against it. Consequently, major global shipping companies rerouted their vessels via South Africa’s Cape of Good Hope, with traffic around the southern tip of Africa having doubled since the war erupted in February. Unfortunately, the projected Southern African economic windfall in the form of surging demand for bunkering (fuel), port calls and maritime services has largely failed to materialize. Indeed, there has been no significant increase in vessel arrivals at main ports like Durban or Cape Town, with the vast majority of diverted cargo ships and tankers simply transiting South African waters rather than stopping for bunkering, repairs or cargo handling thanks to a mixture of logistical and economic challenges.
First off, the South African detour is around 5,000 miles longer, adding up to 14 days and more than a million dollars in extra fuel costs per trip compared to standard Middle East and Suez routes. Quite naturally, shipping companies prefer to minimize extra costs and further delays, with many choosing to sail past the coast to reach their European or Asian destinations.
Second, South Africa's critical maritime gateways continue to struggle with serious operational inefficiencies and aging infrastructure. Indeed, in the latest global Container Port Performance Index (CPPI) co-published by the World Bank and S&P Global Market Intelligence, Cape Town was ranked dead last out of 400 evaluated global ports. The World Bank attributed this to persistent seasonal weather disruptions such as high winds, equipment failures, and low berth utilization, causing ships to spend nearly half of their total port time stuck waiting outside productive berths. The Port of Durban hasn’t fared much better, receiving a 398th ranking.
Tanzania is pursuing an even larger investment. Its proposed $42-billion Lindi LNG project, involving Shell (NYSE) and Equinor (NYSE), would commercialize some of the country’s more than 47 trillion cubic feet of offshore gas resources. The planned $3.5-billion Dangote Southern Africa Corridor Pipeline, meanwhile, would connect Namibia, Botswana and South Africa and move more bulk fuel distribution away from road transport.
Those investments could bring export revenue and infrastructure spending into the region, but they also put billions of dollars of new energy infrastructure along a coastline facing greater security and shipping risks. Mozambique has already demonstrated the danger: the insurgency in Cabo Delgado forced TotalEnergies to halt its LNG project for years. More tanker traffic around Southern Africa adds another layer of maritime security and environmental risk as these projects move forward.
By Alex Kimani for Oilprice.com
