Philippines-based International Container Terminal Services Inc (ICTSI), Transnet’s joint venture partner to upgrade Pier 2 at the Durban Container Terminal (DCT), is optimistic about the project's ability to unlock the economy’s potential.
Hans-Ole Madsen, ICTSI senior vice-president, regional head for Europe, Middle East and Africa, told Business Times the port has a solid foundation and good infrastructure despite challenges in energy, crime and logistics.
“People, rightfully so, are disappointed at some of the things that have happened to South African infrastructure, but the reality is ... it is a good port, it is a good terminal.
“The roads and connections around there need to be maintained and they need to be managed, the locomotives need to be moving, but the core infrastructure is there. You cannot let yourself be clouded by the power crisis and by the security crisis. If those are resolved the potential that it can unlock is tremendous. That is why we would like to be here.”
As part of the partnership a new legal entity will be established to manage the operations of DCT's Pier2. Transnet Port Terminals will have 50% plus one share and ICTSI will have 50% minus one share in the new entity.
Madsen said the company can stand on its own. “We have met all the big banks in South Africa, and everyone willing to support the venture when it is required.”
In July, Transnet named ICTSI as the equity partner for growing capacity at DCT's Pier 2, which handles 46% of South Africa’s port traffic. The 25-year deal will see deepening of the North Quay berth, with a possible extension of the contract to 30 years if there are delays.
Transnet said on Thursday it anticipates that the contract with ICTSI will be signed by the end of this financial year, “once the due diligence and other processes have been concluded”.
“The NewCo will begin operating as soon as the transaction reaches financial close, which is anticipated to be in the start of the new financial year, which commences on April 1 2024,” Transnet said.
At the time of the announcement, unions opposed ICTSI as the strategic partner, citing lack of consultation by Transnet. Madsen said it was natural for people to be concerned about change. “It is our job to very quickly develop a level of trust.”
He said the group aims to improve the port's reputation, which has been tainted by inefficiencies. “We are aware of the terminal’s bad reputation; this is one of the things we are going to address. It is not something that can be done in one day. We hope we can address the situation by clarifying what needs to happen and time frames so everyone who works there can also feel they are on the right track.”
Madsen said ICTSI’s immediate focus will be on the refurbishment and repair of equipment.
“The refurbishment and repair ... is a short-term focus and is related to the spare parts not being there, not because you do not have the mechanics to do it, but simply because there has not been a process to do the repairs. This will be done to make sure the handling capacity increases, which is required for improved service delivery.”
He said the company would then embark on a review process to simplify how things are done at the terminal, a common feature in the private sector.
“This is a process that is very much focused first on the clients, then you get to the internal processes later on. For us this is what we do, we have a lot of experience. It is about getting quick wins; we want to make sure everyone who works at Durban Container Terminal will be proud of working there. We want to change the perception, by doing that people will be happier, and more committed.”
ICTSI is the world’s eighth largest container operator, working in 19 countries.
Leadership changes normally do not change the direction of any company. What we hope for is that it will not delay things
— Hans-Ole Madsen, ICTSI
Chris Gonzalez, global corporate head at ICTSI, said DCT's Pier 2 was a gateway to the Southern African hinterland, including Zambia, southern Congo and Zimbabwe. “Our interest is driven by the promise and potential we see in South Africa.”
Despite the leadership ructions at Transnet with the resignations of CEO Portia Derby, CFO Nonkululeko Dlamini and TFR CEO Sizakele Mzimela, Madsen said ICTSI has the full backing of the new board.
“Leadership changes normally do not change the direction of any company. What we hope for is that it will not delay things. The concern more is a delay rather than stopping the process.”
Madsen said privatisation was not the right word to describe the partnership with Transnet.
“We [are] commercialising the use of a government asset. It is like you have a government building and you pay rent on the building, but the building is still the government's, it does not become yours.”
This week minister of private enterprises Pravin Gordhan announced the appointment of the inaugural board of directors of the Transnet National Port Authority.
The plan to appoint ICTSI to run Pier 2 is in line with other plans the government has to boost efficiency in the logistics system by roping in the private sector.
According to a Bloomberg report on News24 the Presidency's plan to address South Africa's logistics problems, detailed in a " Roadmap for the Freight Logistics System in South Africa”, includes a programme for an improvement in performance on key rail lines to be formulated this month.
The plan is to make significant progress in concessioning two container terminals to private operators by April, and allocating third-party access to freight rail lines by July. By the end of this year, the possibility of concessioning the coal and iron ore line will have been explored.
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