It would be churlish to diminish the significance of the weekend announcement that the government is on the verge of inviting the private sector to participate in the state-monopolised rail and ports sectors. But no-one should rush to pop champagne bottles yet.
On Sunday, Barbara Creecy, the transport minister, announced that a private sector participation (PSP) unit would be set up within the Development Bank of Southern Africa (DBSA). The unit, which would manage the introduction of private sector competition in these sectors, is a joint initiative between Creecy’s department and Treasury. The Treasury is in charge of licensing private-public partnerships.
Business has welcomed the announcement. This is understandable. Still, it is worth remembering that execution remains the true test. The process is likely to drag on for years before yielding the desired results. After all, the government and Transnet aren’t known for their urgency.
Creecy, who oversees Transnet with the presidency while the state-owned holdings company is being set up, seemingly believes the DBSA could replicate the success of independent power producers.
The first phase of this complex process will be to issue a request for information in major commodity corridors and ports of Transnet, which are handling a fraction of the volumes they once railed and handled. This information phase will clarify how to package the PSPs. The next phase would be to invite binding proposals from the private sector.
In theory, setting up a dedicated unit should speed up the process by streamlining decision making such as procuring approvals from Treasury in terms of the Public Finance Management Act. These approvals are notoriously difficult to secure.
What should give some hope to the private sector is that the process is part of Operation Vulindlela, a presidency-driven initiative that has been a major success to date and is one case study of the business-government partnership. Taking the process out of Transnet’s hands should also assist in keeping statists at the rail freight and logistics monopoly from sabotaging the process.
Since the mid-2000s, successive Transnet executives have paid lip service to PSPs. The closest Transnet came to implementing them was during Brian Molefe’s tenure as CEO. Even he was cautious and never went the whole way.
It’s not hard to see why PSPs failed. Most of Transnet’s executives — such as Maria Ramos, Molefe, Siyabonga Gama and Portia Derby — were recruited from the public sector by ANC ministers who look at the private sector with mistrust.
The only PSP to have been attempted by Transnet inside SA is mired in court battles. Transnet is being challenged for awarding the Durban port concession to a Philippine company. As a civil suit, this dispute is unlikely to be concluded any time soon. New civil cases are unlikely to be heard before 2031.
The DBSA has the capacity but is not completely insulated from ideological interferences. ANC politicians may yet scupper the PSPs, which are deemed as merely another form of privatisation. The current process could risk the private sector accelerating its plans of making alternative arrangements that exclude Transnet. A far more efficient and effective way of doing this would have been to appoint a transaction adviser, create a data room and evaluate bids.
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