The high court interdict against the R11bn Transnet-ICTSI deal is the latest episode in SA’s public-private partnerships (PPPs) narrative that underscores the shaky foundation of President Cyril Ramaphosa’s ambitious initiatives to enlist business to lead SA’s economic recovery effort.
The legal snag, rooted in an unfair tender process, highlights the systemic issues plaguing these partnerships, which are the cornerstone of Ramaphosa’s plan to reinvigorate floundering state-owned enterprises (SOEs).
Judge Robin Mossop’s ruling spotlights how Transnet’s decision to allow International Container Terminal Services (ICTSI), a Philippines-based container terminal operator, to use its $15bn-plus market capitalisation to meet solvency requirements skewed the playing field and disadvantaged other bidders.
This is not a procedural hiccup; it reveals deeper flaws in the execution of PPPs under the stewardship of Ramaphosa, who has staked his reputation on putting millions of unemployed South Africans into jobs.
The private sector’s involvement in the container terminal at Ngqura also faced significant hurdles. The port was developed to involve private investors to boost container handling capacity. However, the tender that was set in motion in 2022 to maintain, run and invest at the port and container corridor is being reworked after bidders complained the conditions attached to it lacked commercial logic. The initiative, scheduled to have been completed by this year, has been postponed by three years.
The SAA debacle serves as another glaring example. The government’s attempt to offload a controlling stake to a group of investors led by Tshepo Mahloele, a Mamelodi-raised billionaire dealmaker, was marred by commercially unacceptable delays and widespread deceptive coverage about the nature of the deal. The transaction’s collapse was another false dawn and a missed opportunity to showcase it as a symbol of a new era in which private investment could resuscitate failing parastatals.
These examples paint a troubling picture. The promise of PPPs is to capitalise on the private sector’s efficiency and capital to bolster public services and invest in SA’s infrastructure. But the reality has been a series of missteps and controversies. It is a painful reminder that the path to reform is fraught with ideological battles and vested interests that can ground even the most well-intentioned plans.
The SAA-Takatso deal, for instance, had the potential to send taxpayers a powerful signal of intent to wean SOEs off the government’s dwindling fiscal reserves and reassure potential investors about the stability and predictability of SA’s policy environment. Takatso had agreed to inject R3bn into SAA, providing much-needed financial stability and operational expertise. The deal was supposed to be a tale of triumph and a testament to Ramaphosa’s commitment to structural reform. Instead, it has turned into a cautionary saga of what happens when political rhetoric collides with the harsh realities of market dynamics and shareholder interests.
In the same way, the Transnet-ICTSI deal promised benefits. The 25-year joint venture with Transnet’s port terminals unit aimed to reposition Pier Two of the Durban Container Terminal for best practice performance and jack up volumes throughput, as well as bolster operational and commercial support to access global shipping routes.
Few know how crucial the partnership is in restoring SA’s image as a reliable international trade partner better than readers of Business Day. The latest World Bank container terminal performance index ranks Cape Town and Durban among the worst ports in the world. The Pier Two terminal in Durban is Transnet’s largest, handling nearly three-quarters of the port’s cargo and nearly half of SA’s total traffic.
It is a critical asset that is crying out for capital injection — the one thing Transnet cannot provide as it chokes under hundreds of millions of rand in debt.
This editorial is not only a commentary on the symptoms of deep flaws in the execution of involving the private sector in solving the socioeconomic problems that threaten our future, but also a call to action for the government to navigate the stormy waters of privatisation with greater foresight, stringent adherence to processes, transparency and a commitment to the long-term viability of national assets.
Can we afford to let the Transnet-ICTSI dispute drag on in a protracted legal battle? No. With stakes this high, the country needs an “adult in the room” to facilitate a swift resolution. Prolonged uncertainty will further undermine confidence in Ramaphosa’s promises to put millions of unemployed South Africans into jobs.
“Business creates jobs,” Ramaphosa declared in his 2022 state of the nation address, a truthful statement that unfairly drew flak from some quarters. But words are cheap. Actions speak louder. His office must learn from these setbacks and implement stricter oversight and clearer guidelines in its PPP strategy.
Only then can we hope to harness the benefits envisioned by these partnerships.
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