Domestic and international investors looking to operate Transnet’s Richards Bay Dry Bulk Terminal (RBDBT) will have to put at least R5.2bn on the table to be considered for selection.
Private sector partners will help to increase export capacity at the facility by 45%, boosting the fiscus.
The terminal is one of South Africa’s largest and most strategic multicommodity dry bulk facilities, playing a critical role in supporting the export of commodities such as chrome, magnetite, coal, woodchips, chloride and alumina.
Despite its strategic importance, the terminal’s performance has been constrained by ageing infrastructure, limited operational flexibility and rail bottlenecks on the Richards Bay corridor, all of which have restricted its ability to handle growing export demand efficiently.
The terminal has an annual export capacity of 18.5-million tonnes (Mt), with plans to increase it to 26.9Mt with a primary focus on chrome and magnetite, commodities that account for nearly 50% of the terminal’s existing export throughput.
The two commodities have a robust long-term outlook due to global trends in steel production, stainless-steel consumption and the transition toward low-carbon, green steel manufacturing.
The private sector partner Transnet is looking for will have a 49% stake in the terminal, with Transnet retaining a 51% stake in the venture as the state-owned entity moves at pace to introduce private sector expertise to bolster the country’s logistics infrastructure.
The Port of Maputo has emerged as a strong competitor for chrome and magnetite volumes, particularly for road-hauled cargo, with South Africa looking to wrestle back the initiative from its neighbours.
To get out of the starting blocks, Transnet wants prospective partners to show evidence they have at least R5.2bn in available capital, either from their own resources or banking facilities.
The main pull factor in Transnet’s bid to increase capacity at Richards Bay is the investment case for chrome, of which South Africa has the world’s largest reserves.
The request for qualification documents states that global demand for ferrochrome is forecast to increase steadily over the next decade, driven by infrastructure investment, construction growth and manufacturing activity in emerging markets, particularly in Asia and the Middle East.
“The long-term market is also being shaped by the shift toward higher-grade ores and energy-efficient smelting technologies, which favour South Africa’s high-quality chrome deposits,” it reads.
“The RBDBT is strategically positioned to serve this market. By expanding handling capacity, improving reliability and reducing logistics costs, the terminal can reclaim lost market share from alternative routes such as Maputo, where South African chrome exporters have increasingly diverted volumes due to rail and port inefficiencies.
“With restored corridor reliability and upgraded infrastructure, RBDBT could handle an additional 4Mt-6Mt of chrome exports annually, reinforcing South Africa’s role as preferred global supplier.”
While Transnet sees a big lift in ferrochrome, South Africa’s industry is weighed down by high energy costs.
Since 2005 South Africa’s electricity tariffs have increased 947%. These costs have made production unprofitable, particularly for high-cost smelters, with South Africa ceding its competitive advantage to China, whose electricity is 50% cheaper than that of domestic players, with the Asian economic powerhouse now the world’s leading beneficiator of chrome, despite South Africa’s vast reserves.
Appealing proposition
Finding a long-term viable energy framework for the ferrochrome and chrome industries will present an appealing proposition to investors looking to participate in the private sector participation of the terminal.
Eskom recently granted a request by chrome miners for a 54% reduction in their electricity costs for a year.
The proposed expansion of the terminal is expected to see the facility accommodate up to 10Mt per annum of magnetite exports, supporting new mining developments and beneficiation initiatives in the corridor.
The request for qualification closes at end-August.
Transnet last year signed a landmark 25-year contract with International Container Terminal Services (ICTSI) to operate DCT2, a centrepiece of the country’s most far-reaching logistics reforms in a generation.
The Philippines-based ICTSI is expected to inject R11bn in investment in upgrading the container terminal and increase its capacity from 2-million to 2.8-million 20-foot equivalent units, representing a big lift for South Africa’s trade with the rest of the world.
DCT2 is Transnet’s biggest container terminal, handling more than 65% of the Port of Durban’s throughput and 40% of South Africa’s port traffic.
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