State-owned ports owner and operator Transnet says it will seek R100bn in private investment to expand its facilities in Durban in KwaZulu-Natal and Ngqura (Coega) in the Eastern Cape.
The announcement on Monday marks ground-breaking reform in the government’s approach to state-owned companies, in which private investment has not previously been possible, except for rare examples. It signals that President Cyril Ramaphosa’s economic reform agenda is gathering momentum.
The investments are intended to be made over the next 10 years and will expand facilities at the ports, which — particularly in the case of Durban — have been hampered by inefficiencies, ageing infrastructure and congestion. A recent World Bank study rated Durban at rock bottom among 351 ports surveyed across the world.
Transnet CEO Portia Derby told a briefing that the process will begin this week with an open-ended request for information to test the appetite of the market for the assets of the state-owned ports operator.
The final bid evaluation process is scheduled to be concluded by June 2022, followed by the completion of the upgrades to the port by 2023.
Neither Derby nor public enterprises minister Pravin Gordhan, who also addressed the briefing, could say how the final ownership of the new infrastructure would be split between public and private partners. Private participation in public infrastructure is controversial within the ANC and its allies, some of whom argue that it constitutes privatisation.
“Let’s see what the request for information comes up with. The government will make its choice together with the board,” Gordhan said.
Transnet chair Popo Molefe said the announcement is part of the broader plan by the government to reform state-owned entities.
“There has always been a lot of noise when we talk about private sector participation, with people saying we are privatising public assets. In reality, that is not what we are doing. We will continue to own those assets, but what we are doing is to invite the private sector to participate on key infrastructure projects,” said Molefe.
“We are dealing with this in a context in which the country has been downgraded and funding has become very expensive. We are using creative ways to unlock capital from inside our country,” he said.
Derby said the company is in discussions with unions on the proposal. “We are still in negotiations so it’s a constant discussion, working with the unions to arrive at ultimately [what] would be an ideal partnership that we were able to get and the appropriate responses and partners who are able to help us deliver on our strategy for Durban as a hub port and Ngqura as a transport hub,” she said.
The expansion of Transnet’s ports and the establishment of its Transnet National Ports Authority (TNPA) subsidiary are items on the priority list of Ramaphosa’s plans to kick-start the economy through increasing the efficiency of network infrastructure and increasing infrastructure spending.
The Durban port handles more than 60% of SA’s container traffic and is strategically located on one of the country’s busiest trade routes. The expansion of the Durban port facility includes making structural changes so that it can handle the envisioned increase in vessel and cargo traffic over the next few years. By implementing the changes, the port owner estimates that the hub will handle more than 11-million containers by 2032, up from the current 2.9-million.
The expansion and reform comes as there is an envisioned increase of demand for SA’s commodities, which will boost much-needed revenue for the country, according to Gordhan.
“The direct impact of this will be to boost job creation, to provide training for the youth in maritime skills and to create opportunities for black businesses where there are many professionals who are looking for opportunities to make their entrepreneurial spirits more effective in the climate that we find ourselves,” he said.
Gordhan spoke on other issues affecting the entity, including the theft of critical rail infrastructure, which has left many of its stakeholders stranded, and the cyber attack after the July riots in parts of Gauteng and KwaZulu-Natal, which paralysed its IT systems and forced the entity to declare force majeure.
He said the entity’s systems are now 95% operational after intervention from the company’s IT department. Gordhan, however, added that there remains “further work going on in terms of ensuring that some of the lessons learnt are implemented as far as the IT system is concerned”.
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