APM Terminals BV v Transnet SOC Limited ZAKZD 3052/2024 Review of the Durban Container Terminal Pier 2 Concession Award

On 10 October 2025, the KwaZulu-Natal High Court (Chetty J) delivered judgment in APM Terminals BV v Transnet SOC Limited and Others, a judicial review application challenging Transnet’s award of a long-term concession for the Durban Container Terminal Pier 2 (“DCT2”) to International Container Terminal Services Inc (“ICTSI”).

The case raises important issues in public procurement law, particularly the application of PAJA to contracts of national economic significance and the balance between procedural compliance and substantive fairness in tender evaluation.

At its core, the judgment examines Transnet’s compliance with Section 217(1) of the Constitution, which requires that organs of state contract for goods or services “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.” This standard is mirrored in Section 51(1)(a)(iii) of the Public Finance Management Act 1 of 1999.

The review was brought under the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”), with the Court applying the materiality test formulated in Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency and Others (No 2) [2014] ZACC 12; 2014 (4) SA 179 (CC). Allpay established that judicial review in procurement disputes turns on the purpose-linked materiality of any irregularity rather than on a rigid distinction between “mandatory” and “directory” requirements.

This decision carries significant implications for port-concession and PPP practitioners, providing guidance on assessing the materiality of procedural deviations and the importance of prompt review proceedings under PAJA’s 180-day rule.

i) Background: 

The Project and Procurement Process: The dispute centred on the tender issued by Transnet for the development and operation of the Durban Container Terminal Pier 2 (“DCT2”), which serves as South Africa's main cargo and container hub, handling 46% of the country's port traffic. 

DCT2 had been plagued for decades by limited operational capacity, resulting in chronic underperformance, congestion, and negative impacts on the local economy and supply chains. The tender aimed to secure a private partner over a 25-year period to raise necessary capital, address infrastructural crises, upscale technical skills, and reduce Transnet's debt. The structure involved transferring the business of DCT2 to a special purpose vehicle (“NewCo”), in which the successful bidder would hold a 49% stake.

The tender process involved two stages:

1. Request for Qualifications (RFQ): Intended to "pre-qualify" bidders by assessing responsiveness, operational capability, and minimum financial criteria; and 
2. Request for Proposals (RFP): This stage involved a competitive element, referred to as a "straight price shootout," where the highest bidder was awarded the tender.

The Key Irregularity: The central issue arose during the RFQ stage regarding the Minimum Financial Criteria detailed in clause 5.2(d). This mandatory requirement specified in full that: 

“…
(d) Minimum Financial Criteria 
Respondents must show that they have sufficient financial capacity to attract the required 
funding for the envisaged investment in DCT2. 
Each respondent must submit its most recent five (5) years' audited, consolidated financial 
statements (including auditor's report and notes). 
A respondent is deemed to have sufficient financial capacity, when the following criteria are 
met (at latest financial year ending): 
1. Solvency is equal to or exceeds 0.4, as calculated by the following formula: 
Financial Minimum Criteria 1: Solvency: total equity/ total assets equal to or exceeds 0.4. 
2. Liquidity Ratio is equal to or exceeds 1.2, as calculated by the following formula: 
Financial Minimum Criteria 2: Liquidity: Source of funds / Uses of Funds equal to or exceeds 
1.2 
For which the Sources of Funds include: 
• Closing Bank Balances 
• Closing Balance of Short Term Liquid Investments 
• Closing Balance of Short Term Committed Unutilised Facilities 
• Long Term Committed Unutilised Facilities 
For which the Uses of Funds include: 
• Loan and Bond Redemptions for 12 months after latest financial end 
Respondents are required to provide the information required for the Sources of Funds and 
the Uses of Funds in the Statement of Qualification. 
2. The profit, earnings before interest, taxes, depreciation and amortisation (EBITDA) and 
operational free cashflow of each of the last five years were positive. Where the impact of 
COVID has resulted in a negative result, Transnet will concede the requirement for positive 
results in the affected financial years provided sufficient explanation of the COVID impact is 
provided. Transnet reserves the right to admit Respondents that can provide a convincing 
explanation for a negative profit, EBITDA or operational free cashflow.

...”

The Applicant, APM Terminals BV (“APM”), strictly adhered to the prescribed formula. The successful bidder, International Container Terminal Services Inc (ICTSI), a Philippines-based global competitor, did not.

• ICTSI's Conduct: ICTSI assured Transnet of its solvency by using market capitalisation (which is dependent on the share price) as the numerator, rather than "total equity" (which is based on verified audited financial statements). Using this alternative metric, ICTSI achieved a solvency ratio of 1.28. Transnet later conceded that, had ICTSI used total equity/total assets, it would have scored 0.24, failing the 0.4 threshold.
• The Award: ICTSI progressed to the RFP stage (along with APM and nine others) and prevailed by offering approximately R11.1 billion, exceeding APM’s second-ranked offer of R9.2 billion by almost R2 billion. APM challenged the decision to award the contract to ICTSI, arguing that ICTSI failed to comply with the mandatory tender specifications.

ii) Issues: 

The court dealt with two main categories of issues, namely, the materiality of non-compliance and the timeliness of the review application. 

1. Materiality of Non-Compliance:

Did ICTSI’s failure to meet the solvency threshold using total equity constitute a material irregularity justifying disqualification?

• APM argued that Transnet acted outside the parameters of the tender by relying on criteria (such as overall financial capacity and balance sheet strength, supported by the Growthstone report) different from those in the RFQ, thus violating the fairness requirement of s 217 of the Constitution.
• The core question was whether Transnet was obliged to disqualify ICTSI simply for failing to comply with a solvency ratio calculated solely on the basis of total equity over total assets.

2. Timeliness of the Review Application: 

Could APM challenge the award seven months after the decision to select the preferred bidder without condonation?

• The court had to determine which decision constituted the definitive "administrative action": the short-listing decision of 12 August 2022 (rejected by the court as having no external effect on rights); the selection of ICTSI as the "preferred bidder" on 6 July 2023; or the letter providing detailed reasons and confirming the intent to proceed on 1 March 2024.

iii) Legal Considerations and the Decision:

Legal Considerations: 

PAJA Timing and the Administrative Action: The court found that the true target of the review was the decision of 6 July 2023, when Transnet conveyed to the bidders that ICTSI had been selected as the preferred bidder. This decision had a "material and adverse effect" on APM as a participant. The subsequent letter of 1 March 2024 was merely "detailed and explanatory in nature" and did not possess a greater capacity to affect legal rights than the 6 July 2023 decision.

Under Section 7(1) of PAJA, any proceedings for judicial review in terms of Section 6(1) must be instituted without unreasonable delay and not later than 180 days after the date on which the “person concerned” was informed of the administrative action, became aware of the action and the reasons for it (or might reasonably be expected to have become aware of the action and the reasons). Section 9(1)(b) provides that the 180-day period may be extended for a fixed period: “by agreement between the parties or, failing such agreement, by a court or tribunal on application by the person or administrator concerned." Section 9(2) also provides that: "such an application may be granted where the interests of justice so require." 

APM launched its application in March 2024, seven months after the 6 July 2023 decision. APM’s argument that it was entitled to delay proceedings until "adequate reasons" were furnished was rejected. The court held that waiting until better reasons were supplied is not a justifiable basis for delay, especially where APM had articulated its grounds for review immediately after 6 July 2023. A delay exceeding 180 days is deemed per se unreasonable.

On the basis of the above, the court considered that APM's delay is per se unreasonable, if the correct target decision to be reviewed is the decision of 6 July 2023. An applicant would have to show that it would be in the interests of justice to grant condonation.

Materiality and the Allpay Test: The Constitutional Court's approach requires the court to link the question of compliance to the purpose of the provision. The purpose of the solvency ratio requirement (clause 5.2(d)) was to demonstrate that the bidder possessed "sufficient financial capacity to attract the required funding for the envisaged investment in DCT2".

• Irregularity Found: The court accepted that Transnet committed an irregularity by progressing ICTSI despite its failure to strictly satisfy the required solvency ratio formula.
• Materiality Assessment: Transnet demonstrated that it acted diligently upon APM’s complaint, obtaining external opinions from Mettle and Growthstone. The Growthstone financial due diligence concluded that ICTSI was a "robust participant" with a "strong balance sheet and high leverage capacity," and was in a sound financial position to raise the necessary capital. The court noted that the Joint Minute concluded between the parties confirmed that ICTSI had "sufficient capacity to attract the funding required for the envisaged investments in DCT2".
• Discretion and Deference: Transnet was granted latitude by the tender document itself (clause 5.3) to be the "sole judge" of conformity and to "waive any requirements" of the RFQ. Furthermore, the Framework guiding the bid assessment aimed to maximise market interest and "minimise the risk of unwarranted disqualification and preserve maximum flexibility for Transnet". The court concluded that to disqualify ICTSI merely for the technical non-compliance, given its financial capacity and higher bid (R2 billion difference), would be to "unjustifiably elevate form over substance". This would contradict the constitutional value of "competitiveness". Courts generally show deference to public entities making complex commercial and strategic infrastructure decisions.

iv) Decision: 

The court delivered the following order on 10 October 2025:

• Application Dismissed: APM’s review application was dismissed.
• Condonation Denied: The delay in challenging the decision of 6 July 2023 was found to be unreasonable and APM’s reasons for the delay were not satisfactory; therefore, condonation was denied, which was fatal to the application.
• Merits: Even if condonation were granted, the review would have been dismissed on the merits. The non-compliance with the specific solvency formula was found to be immaterial given that ICTSI fulfilled the overall purpose of the requirement, sufficient financial capacity, and Transnet acted fairly and rationally.
• Costs: The parties were ordered to bear their own costs. The court applied the Biowatch principle, noting that the challenge hinged on whether Transnet, as a public entity, adhered to Section 217 of the Constitution and the rigours of Allpay, classifying the matter as one of significant public interest.

The judgment reinforces that form should not override substance in financial assessments, especially in complex, high-value tenders, and that prompt action is essential for bidders wishing to preserve their rights under PAJA.