South Africa: Transnet seeks private sector investment
The privatisation of the country’s ports, railways, roads and other transport infrastructure has proved a thorny issue in South Africa over many years. Attempts to encourage private sector operation have generally produced a great deal of opposition.
Transnet’s proposals, therefore, carry political connotations. Yet at a time when the parastatal is being asked to do more and more but government finances are weak, it may have more success in gaining official backing for its policy.
In addition, its revenues have been affected by a three-year downturn in the price of the main dry bulk commodities it carries: coal and iron ore. Prices may have recovered somewhat but the outlook is still uncertain. Transnet is certainly one of the biggest companies on the African continent, although it is difficult to make a precise comparison because it is entirely state owned.
It is important to remember that one of the country’s biggest port facilities is already privately owned. Richards Bay Coal Terminal (RBCT) is owned by some of South Africa’s biggest coal mining companies, with smaller stakes held by empowerment interests.
Private sector companies also provide a wide range of logistics services, with Grindrod, in particular, developing a network covering the whole country and beyond. Grindrod is also expanding its own coal terminal at Richards Bay.
Transnet CEO Siyabonga Gama first announced the policy at the eThekwini Maritime Cluster’s annual maritime summit in Durban in early April and the approach has been fleshed out since then. Gama said that the country needs R400bn ($30.25bn) in new logistics infrastructure but Transnet was unable to pay for it alone, so at least 25% should come from the private sector, which he believed had the required capital at its disposal.
Transnet has been criticised in recent years for its high port charges in comparison with many other countries around the world. However, Gama says that his company merely prices according to market conditions, while many other ports benefit from government subsidies. Indeed, according to the World Bank Global Logistics Competitiveness Report, South Africa is regarded as more competitive than China, India, Russia or Brazil.
Focus on Durban
By far the biggest planned Transnet project is the construction of a brand new container port on the site of the old Durban International Airport, about 25km south of Durban. However, given current financial constraints and lower than expected trade volumes, there is no fixed timetable for its development. At present, Transnet is focusing on improving its infrastructure elsewhere.
Work will begin this year on deepening three berths at Durban Container Terminal Pier 2 from 12.8 metres to 16.5 metres. This will allow access for the new generation of Super Post Panamax vessels at low tide as well as high tide.
The chief executive of TNPA, Richard Vallihu, said: “The continued investment in infrastructure and modernisation of our flagship Port of Durban is pivotal in meeting the ever increasing demands of the maritime industry, in particular, the ever increasing size of container vessels pulling into our ports.”
The company is also seeking to improve the efficiency of its operations in ways that do not require capital outlay. For instance, at the start of April it introduced an appointment system for the delivery of containers at Durban’s Pier 1.
Haulage companies are required to book a slot for delivery in order to spread activity over the course of the week, avoid congestion and reduce allegations that drivers pay bribes to avoid the queues that build up at peak times. Transnet has set a goal of ensuring that all trucks are processed within 35 minutes.
Some freight forwarders oppose the policy, arguing that they cannot be so precise as they are subject to delays from their own customers. Transnet Port Terminals’ general manager for container operations in KwaZulu-Natal, Julani Dube, said: “We have done the necessary research and tracked all movements and transactions over the past year to know where the problems are and what is realistically achievable if we get the necessary buy-in from stakeholders to implement the container appointment system.”