Transnet group CEO Michelle Phillips says the entity is unfazed about customers channelling their products through ports in neighbouring Mozambique and Namibia as bulk mineral customers look for other export outlets for their products.
“Maputo [in Mozambique] is there, Namibia is there. Our customers prefer not to have a single port strategy ... then they are able to mitigate their risks themselves,” she said.
In its latest 2023 Container Port Performance Index, the World Bank named Cape Town the world's worst-performing port among 405 assessed around the globe. Other South African ports — Ngqura, Port Elizabeth and Durban — were also ranked in the bottom 10.
Phillips said that while Transnet does not struggle for customers, its operations must improve significantly to be able to service them efficiently.
“We do not have a demand problem. What we have to figure out is how best to get the cargo on rail. You need to provide the necessary equipment, you need the locomotives, you need the wagons, you need your network to be in the state it should be”.
She said steps taken to improve efficiencies at Transnet's ports include appointing an original equipment manufacturer (OEM) to refurbish and service locomotives. To keep up with demand in the long run, new locomotives are under construction in Durban. There are also long-term OEM agreements for ports, with equipment scheduled to be delivered to ports over the next 18 months.
Phillips said Transnet is focusing on its turnaround plan to improve performance and regain customer confidence. The entity has set an ambitious target of railing 170-million tonnes in the next 12 months.
“We have a transformation leg together with a recovery leg; it is not an easy space to be in. There is a lot of work to be done. We are by no means out of the woods, but certainly we are beginning to see some green shoots and we are beginning to see an improvement across the board, both financially and operationally.”
Speaking at a briefing on Wednesday on the work done to address the logistics crisis, the head of the project management office in the Presidency, Rudi Dicks, said energy and logistics have been the largest constraints on economic growth over the past few years.
“Last year we were able to do 149-million tonnes. Of course, that is from a relatively low level of what we peaked at in 2017, which was about 240-million tonnes. What we did see at the end of the last financial year was an ability just to, slightly, uptick the amount of volumes on the rail network,” Dicks said.
“If we are not able to get that volume up, and specifically above 200-million tonnes per annum, then we do sit with a significant challenge where we begin to see the impact on critical sectors that are dependent on both the port and the freight rail system — mining in particular.”
Dicks said much of what has happened over the past few months has been the ability to procure and provide operational efficiencies in improving security on the logistics network, and maintenance.
The next major task is increasing private sector participation in the rail and port networks.
We do not have a demand problem. What we have to figure out is how best to get the cargo on rail
“We are going to have to ensure that there is a high degree of competition. We have to allow private sector third-party access to rail. Private sector participation is going to be quite critical for us to build a more efficient logistics system.”
Phillips said theft and vandalism remain a major threat to state infrastructure.
“We need to ensure that as a country we do something about the theft and vandalism of all our infrastructure. It is a problem that Eskom is facing, it is a problem Prasa is facing, it is a problem Transnet is facing. We do not have sufficient resources to be able to protect this network. We are spending a lot of money on security and on innovative ways to protect it. When we protect the network, everybody wins,” she said.
In December, the National Treasury granted Transnet a R47bn guarantee to help fast-track reforms in the logistics sector.
Phillips said the guarantee had helped them “borrow more money”, but she noted that the entity's debt was a problem and said it was renegotiating to get into long-term debt agreements that were cheaper.
“Our interest is upwards of R1bn a month; it is difficult to run a business like that. I make the example of saying I am paying my bond with my credit card. Nobody wants to be in that space.”
She said Transnet was fully compliant with the conditions of the guarantee. This includes completing the corporatisation of the Transnet National Port Authority, which is expected to be concluded by April 2025, and the separation of Transnet Freight Rail into an infrastructure manager and freight rail operations, both of which are under way.
