By Chris Hattingh, executive director, Centre for Risk Analysis
THE ongoing process to introduce private sector investment, skills, and capacity across Transnet’s various divisions and facilities might hit a few more bumps before full implementation and adoption.
It was hoped that Philippines-based company International Container Terminal Services Incorporated’s (ICTSI) partnership with Transnet National Port Authority (TNPA) to manage and operate Durban Port’s Pier 2 would be concluded by April; this has now been pushed to May or June.
At the same time – as part of wider reforms envisioned in the Freight Logistics System roadmap and other documents – Transnet Freight Rail (TFR) (the overall state-owned entity’s largest division) will be separated into an infrastructure manager and a rail operating company.
A twist in the tail, however; the proposed tariff for private operators seeking to access the rail network might simply prove to be too high – meaning the reforms that are desired will ultimately not result in substantial improvements.
On the TFR side, a 19.7c per gross ton kilometres tariff is proposed. Emeritus professor in macrologistics at Stellenbosch University Jan Havenga said, “it will make it impossible to get our low-value high-volume commodities to the sea for export, make domestic industrialisation impossible and there will be no chance for a clawback of rail market share.”
Brendon Hubbard of ClucasGray Investment Management told Business Times, “To give you an idea, the 65Mt iron ore line of 860km would bring in R11-billion of toll fees. The coal line, with a capacity of 81Mt and 580km long, would bring in R9,2-billion in toll fees. Now add the container corridor, the north corridor from Zimbabwe, the Cape corridor and the manganese corridor and you are probably heading for R30-billion in toll fees. That’s an outrageous toll fee.”
Of course, the tariff is merely a proposal – not final. And hopefully industry and other stakeholders will provide their respective concerns and feedback, such as the tariff is readjusted and moderated. Nonetheless, it is concerning – and might signal that the kinds of deep reforms needed in South Africa’s trade-infrastructure and -policy areas, could well be a long way off from the kind of shape in which they need to be for the ailing ports and railway network to be turned around.
On the ports side of things, it appears that matters have stabilised somewhat since the major disruptions and bottlenecks experienced in November and December 2023, especially at Richard’s Bay, Durban, and Cape Town.
But ‘stabilised’ is not necessarily a good thing, given the perennial underperformance of the country’s ports, especially as measured yearly in the World Bank’s Container Port Performance Index. It will take a lot to improve the ongoing downward trend that has taken hold over the last few years.
The deal between Transnet and ICTSI touched on above could now begin in May or June this year. Durban Port’s Pier 2 is the largest port terminal on the continent; persistent equipment problems, digitalisation problems, and more consistently inhibit the port’s potential – with negative consequences for various importers, exporters, manufacturers, farmers, and others across South Africa.
In March Transnet indicated that due diligence on this deal had been completed. The following matters remain outstanding: approval from TNPA for the subcontract and subleasing of the port; the exemption of the partnership from Public Finance Management Act; tax advice on the transaction structure; the parties reaching a consensus for the terms and conditions of project agreements; and finally (and possibly the most difficult), agreement from unions for the transfer of employment.
ICTSI global corporate head Christian Gonzalez has sent positive signals, “Following the successful conclusion of third-party due diligence on ICTSI, the process continues to move forward positively, and we are excited to get started to deliver improvements.”
In a broad sense there is positive momentum towards reforms in South Africa’s trade infrastructure space. But – given the devil in some of the details elucidated here – that momentum might yet be squandered.
There are ample opportunities for the private sector to get involved; provided the government is held to account, and clear requirements and concessions are communicated and then held to.
