With some help from its customers, Transnet has gone ahead and invested in new equipment at the Durban Port’s container terminal 2, rather than wait for the outcome of the court battle over the new global operator it chose for the terminal in 2023.
Transnet CEO Michelle Phillips said that if the court ended up throwing out the private deal with Manila-based International Container Terminal Services (ICTSI) and judging that the tender process had to be restarted, she would like to see the new private partnership unit that has been set up in the department of transport to take charge of the process. The business case would have to be reviewed.
“Everyone thought that we were going to wait for this thing to happen and only then were we going to invest but there’s no way. We needed to do something, and we’ve invested and you see the equipment being delivered now,” Phillips said, adding that the performance of the terminal had improved.
There were now no vessels waiting at anchor for the first time since 2023. This is a contrast to the crisis in late 2023, when an estimated 79 vessels were waiting to berth.
But Phillips said that the recent half-year results, which showed port and rail volumes were still running behind Transnet’s recovery plan targets, were a ‘bitter pill”.
The court is due on March 25 to hear the main part of the application by losing bidder AP Moller Terminals (APMT) to reverse Transnet’s choice of ICTSI as its preferred partner for the terminal, which handles almost half of SA’s port traffic.
The flagship deal, concluded by Phillips’ predecessor, Portia Molefe, was widely welcomed in the market as a big step towards the private sector participation the government wants to see in the sector. It would also have netted Transnet about R11bn-R12bn, helping to reduce its R136bn debt burden.
But APMT took it to court on the grounds that Transnet had unduly favoured ICTSI. Late last year, the high court in Durban upheld an interdict barring Transnet from implementing the deal pending the main case, and threw out ICTSI’s attempt to challenge this.
Ironically, shipping giants such as Maersk and MSC, which also operate port terminals globally, are among the customers said to have helped Transnet to source equipment such as straddle carriers and ship-to-shore cranes, which usually take up to two years to be delivered.
Phillips said customers had been very helpful, and the original equipment manufacturers had been “amazing”.
The group’s disappointing half-year results showed that its port and rail operations achieved only modest increases in volumes, despite the effort that has gone into implementing Transnet’s 2023 recovery plan and despite the high-level collaboration with business, which has invested resources in assisting the recovery through the national logistics crisis committee.
Phillips said performance at all the container ports had improved, with full-year volumes expected to be 100,000 TEUs (20-foot equivalent unit) better than last year but still 100,000 TEUs worse than the recovery plan target.
On rail, the group would push to achieve 160-million tonnes to 165Mt for the full-year, up from 152Mt last year. But it was unlikely to make its 170Mt target for the year. Of the shortfall relative to target, about 4Mt was because of issues with locomotives while 3.2Mt was lost due to the poor state of the rail network infrastructure.
The government gazetted the long-awaited network statement in December that opens the way for new private train operators to come on to the rail network. Transnet has said it needs to invest R70bn over the next five years to get the network infrastructure up to standard and it’s not clear where the funds will come from.
Phillips notes that elsewhere in the world governments subsidise rail infrastructure, and in SA government subsidises road infrastructure. But the Treasury has made clear its reluctance to inject cash into Transnet.
Phillips told Business Day last week that the large customers on the group’s iron ore and coal lines were willing to co-invest with it in upgrading the infrastructure, and it was looking at how to structure this. The group has also applied to the Treasury’s budget facility for infrastructure to finance certain specific projects.
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