Master plan or merely promises
Minister presents Master Plan for Port of Durban
The announcement of a Master Plan for the Port of Durban this week should create a sense of relief especially as it follows close on the commitment to separate Transnet National Ports Authority (TNPA) from Transnet SOC to form an independent subsidiary. Editor, Colleen Jacka, takes a closer look at these declarations, and debates whether maritime stakeholders can hold the relevant departments, ministers and boards accountable for delivering on these promises.
Let’s start with the press statement issued by the Department of Public Enterprises on Monday this week, decrying the establishment of a master plan to expand the Port of Durban. The first paragraph of the statement notes that R100 billion will be needed from private investments. That’s not a plan – that’s a wish – especially in the current economic climate.
The very next paragraph admits that the master plan is still currently undergoing a consultation process. Perhaps the announcement is just simply premature – but to splash out on a headline declaring that you have a master plan implies that definitive, workable and accountable solutions are already on the table and ready to be implemented.
I watched the full announcement made by Minister Gordhan with input from Transnet executives and, while the impact of state capture (corruption) within Transnet was acknowledged as well as the inefficiencies of our ports – the Minister glossed over these very significant investment detractors. In fact, he lavished praise on the parastatal for much of his statement.
Certainly, Transnet deserves some acclaim for the way in which the recent cyber-attack was handled – it could have been significantly worse. And yes, COVID-19 can be used as a viable justification for some port inefficiencies.
However, there is a large “but” at the end of those commendations. And if you have scrutinised the TNPA presentations delivered at the annual Port Consultative Committee engagements, you may agree that our Minister’s praise needs to be tempered by the reality of the historic as well as prevailing situation.
In the 1990’s when I first started reporting on the maritime sector, industry conferences were abuzz with the notion of privatisation within the port system. Privatisation soon became a blasphemous expression as unions naturally weighed in and expressed concern about the impact on port workers. The fear centred around the notion that private companies would seek improved efficiencies by increasing automation and laying off staff.
International companies were eager to present their expertise and experience in port operation and were lining up to sponsor conferences and use these platforms as advertorials. And even as the tone of the conversation shifted from privatisation to concessioning, these companies continued to express their interest in the investment opportunities. Build Operate Transfer (BOT) strategies were conceptualised by well-paid consultants and transaction advisors, but there was modest traction.
Moving forward or stuck in place?
Now we are pinning our hopes on Public Private Partnerships (PPPs) and Minister Gordhan used words like “hopeful” that there will be an appetite for foreign investment. The extent of state capture currently being uncovered by the Zondo Commission as well as the recent unrest that spilled over into the entire logistics network should make him less than hopeful. In addition, the recent decline in certain port volumes may also further dash that hopefulness.
“We need to work harder to create an investment climate to attract investment,” said Gordhan acknowledging the critical need to instil the right expertise and “bold leadership”. The Transnet Chair conceded that access to funding was becoming increasingly difficult and that “creative ways are needed to unlock capital to attract foreign investment and funding”.
Gordhan added that investment in the economy from Transnet, from South Africa and from overseas is important to demonstrate confidence in our logistic infrastructure. It is needed to boost job creation particularly for youngsters; to fund maritime skills training for youth and create opportunities for black entrepreneurs.
Reform and reconstruction within Transnet is not going to happen overnight. Not even the long-awaited separation of TNPA can be seen as a magic elixir that will boost the relevant investment and efficiencies within the ports.
The expectation is that, once undertaken, this will free up revenue created within the ports for the development of port infrastructure; to undertake regular maintenance and provide for expansion. This may be an accurate assumption – but it fails to take into consideration what all those TNPA presentations at PCC meetings have made glaringly obvious. Even the current capex available is not being effectively disbursed to approved projects timeously to meet the needs of port users.
It is also does not address the fact that TNPA and Transnet Port Terminals (TPT) are not sweating their assets to their full capacity. Comments from port users at the PCC engagements stress that, even without massive investment, port efficiencies and capacities can (and should) be achieved with existing equipment and infrastructure.
Minister Gordhan, however, understands one vital truth. Transnet is a vital cog in the logistics network of South Africa. Reforms are absolutely vital and can no longer purely be the domain of workshops, announcements and promises. And at the same time, it should be remembered that ports are not simply hubs for enabling trade – they offer opportunities for marine services that also require Transnet intervention or facilitation.
Getting back to the plan
So, there is a master plan on the table and it is undergoing consultation. Answering questions at the end of the session, however, speakers admitted that “nothing was cast in stone” and that there are still many decisions to be made. “It is all still in the works and as the package is ready there will be more announcements,” they conceded.
Part of the ongoing consultations are with the unions and this is likely to be the sticking point for fasttracking this package to present to market. According to Gordhan transactional advisors will be appointed to ensure that the best value for the assets is established. In addition, the unions will appoint their own advisors to ensure a fair deal that the minister assures will be transparent.
Nevertheless, it seems that we can expect imminent Requests for Information (RFI) to be issued for both Durban and Ngqura. The rationale is to develop Durban as a hub port with strong connectivity to inland markets via reliable corridors.
Following the issuing of the RFI, a Request for Proposals (RFP) should be available between November this year and January 2022. According to Gordhan bid evaluation will be undertaken in February 2022 and finalisation and approval of bid winners should be completed by June next year.
“In ten years time, if things work well there will be a massive increase in Durban throughput and 60 percent of containers into and out of South Africa (will use this port). It is crucial for authorities in KwaZulu Natal to create conditions necessary for investment to take place,” said Gordhan.
The session with the department also confirmed that plans to create a dig-out port at the old Durban airport site have been shelved. The land is still owned by Transnet and is currently being earmarked for the establishment of a logistics hub.
Investment opportunities in the Port of Ngqura will centre around capacity expansion and not include waterside development. Transnet is seeking a partner that will not only invest, but also help grow volumes into the port.
Given the current world rankings of South Africa’s ports, however, any constructive action should be lauded. The key is for it to actually materialise and make the anticipated improvements port users have been promised for years.