Global firms eye Transnet’s call to invest in ailing SA ports and terminals
The private sector has responded to Transnet’s call for help in unleashing investments worth R100bn over the next 10 years to redevelop and modernise the state-owned company’s port and terminal facilities in Durban and Ngqura (Coega) in the Eastern Cape.
Transnet’s request for help from the private sector to modernise its ports and terminals to improve their efficiency and competitiveness has attracted logistics companies from Dubai, Saudi Arabia, China, the Netherlands and South Africa.
A year ago, Transnet announced that it would seek investments worth R100-billion from private sector logistics companies to expand its port and terminal facilities in Durban and Ngqura (Coega) in the Eastern Cape. This is part of President Cyril Ramaphosa’s structural reform programme to boost private sector investments and grow the economy.
The investments are set to be made over the next decade and will expand facilities at Transnet’s terminal and port facilities — especially in Durban — that have been plagued by inefficiencies, congestion and ageing infrastructure. The April floods in KwaZulu-Natal made a bad situation worse.
To get an idea of how unproductive Transnet’s terminal and port facilities in Durban are, a World Bank study in 2021 rated these facilities in the bottom seven of the world’s 370 competent container handling facilities. In the World Bank study, Transnet’s Durban facilities were listed at number 364.
For many years, Transnet shifted its focus to investing billions of rands in locomotives (often used to transport coal and iron ore via its rail networks from mines to end users) while failing to invest enough in maintenance or expansion initiatives for its ports and terminals.
Transnet realises it needs to plough money into redeveloping and modernising its ports and terminals as they are a crucial cog in South Africa’s economy. It’s these facilities that ferry most of the iron ore and coal that SA produces to countries around the world. At Durban alone, the port handles more than 60% of South Africa’s container traffic and is strategically located on one of the country’s busiest trade routes.
If Transnet’s facilities are not efficient in speedily moving containers or cargo, South Africa’s export levels are held hostage. Inefficient terminals and ports increase costs for importers and exporters as they have to find alternative ways to get their cargo into countries, often diverting their containers to competing ports and terminals in other countries.
But Transnet, with a smothering debt of R129-billion and no bailouts or guarantees lined up from the South African government, cannot afford to upgrade its Durban and Eastern Cape terminals and ports. So, it has roped in the private sector.
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Cosying up to the private sector
In August 2021, Transnet launched an open-ended request for information to test the appetite of private sector logistics companies to partner with it to modernise its port and terminal facilities. And the appetite seems strong. Transnet has already shortlisted potential private sector partners for its Durban facilities:
- APM Terminals AMI Management DMCEST, which is based in the Netherlands but also operates at Transnet’s Gqeberha terminal.
- China Harbour Engineering Company, a subsidiary of the Chinese state-owned China Communications Construction Company.
- Guangzhou Port Company, a Chinese state-owned company.
- COSCO Shipping Ports Limited, a Hong Kong-based ports operator.
- DP World Limited, a Dubai-based logistics company that recently bought South Africa’s Imperial Logistics.
- Global Ports Services, a container terminal operator in the Russian market.
- International Container Terminal Services, a global port management company headquartered in the Philippines.
- Red Sea Gateway Terminal and MMC Port Holdings Sdn Bhd, port and terminal operators and owners of the Sea Gateway Terminal in Jeddah (Saudi Arabia).
- Terminal Investment Limited (a developer and manager of container terminals around the world) and Remgro (a JSE-listed investment holding company chaired by businessman Johann Rupert).
These shortlisted candidates have until December 2022 to further outline their plans on how to improve efficiency at Transnet’s Durban facility. The candidates have to demonstrate how they will make infrastructure changes so that the facility can handle increased vessel and cargo traffic in the coming years.
Through the changes, Transnet has estimated that Durban’s port can handle more than 11 million containers by 2032, up from the current three million.
The final and preferred candidates will be announced in February 2023.
Transnet aims to create a 25-year special purpose vehicle between Transnet Port Terminals (a Transnet division that operates its ports) and the winning bidders. Over the next 10 years, the special purpose vehicle will be involved in investing and operating the ports with Transnet. The winning bidders also stand to benefit from this arrangement because, with improved Transnet ports and terminals, the bidders can move their goods in and out of South Africa without delays. And after 25 years, the terminals would be returned to Transnet Port Terminals.
Port of Ngqura
Transnet also released a shortlist of possible private sector partners for the Port of Ngqura in the Eastern Cape. The shortlist of candidates, all of whom are also shortlisted for the Durban port, include APM Terminals AMI Management DMCEST, Red Sea Gateway Terminal, MMC Port Holdings Sdn Bhd, Star Classic Investments Limited, Abu Dhabi Ports, Terminal Investment Limited and Remgro Limited.
The Port of Ngqura is known as a transhipment port. It handles a lot of cargo, which is usually moved from one vessel to another while in transit to the final destination.
Transnet wants the port to service east and west coast African traffic, as well as traffic from South America to Asia. But, like Durban, Transnet didn’t invest enough in maintenance or new capital expenditure at the Port of Ngqura. Hopefully, this will soon change. DM/BM