Corporatisation hangs on tender hooks

TNPA separation ambitions dismissed for 2026

The corporatisation of TNPA is not merely some strategic goal, it is a stipulated requirement of the National Ports Act and is seen as necessary for addressing the underlying competitiveness of the country’s ports. Promulgated in 2005, this means that the process is some 21 years behind schedule.

The good news is that the release of two tenders this week calling for consultants to address specific challenges within the process towards corporatisation has provided some much-needed visibility to the status of these aspirations. The bad news is that, given the time frames allotted to the scope of work in one of the tenders, the industry will not see the corporatisation of TNPA finalised within the current year.

That’s a travesty. Consider how the government has framed the importance of this reform. Despite describing the initiative as “crucial” Operation Vulindlela quarterly reports have dragged the topic from one quarter to the next with scant reference to actual progress being made.

This is why the two tenders are so interesting. OV’s reflections on its own progress has been congratulatory on the one hand and disturbingly vague on the other. Reading through the scope of work required from contractors highlights the underlying issues, what has not been done and the hurdles that still need to be addressed.

Like so many of the government-led initiatives to champion reform, OV announced itself with the expected flourish and kicked into gear with some early gusto. The progress report from the first quarter of 2022 eagerly announces the establishment of the National Ports Authority as an independent subsidiary of Transnet, rather than an operating division.

This was heralded as the first step toward corporatisation and celebrated as a listed achievement over the course of several subsequent quarterly reports. An almost flippant reference, however, to the corporatisation in the first quarter report the following year notes a “next step” in the process: “Appoint a permanent board for the National Ports Authority: This will replace the current interim board and complete the process to corporatise the TNPA.”

Readers of the report could be forgiven for assuming that corporatisation was a simple cabinet appointment away. A previous report had suggested that the appointment was mere months away, but nothing had transpired.

“By separating the port owner and the port operator into independent subsidiaries, incentives will be created for greater efficiency and private sector competition. Further, corporatisation allows for an independent board to make decisions regarding investment in ports rather than being made by the Transnet group. In the medium to long term this is expected to contribute to port efficiency and alleviate supply chain bottlenecks.” (Operation Vulindlela Quarterly Report Q3 2022/2023)

In fact, both Q1 and Q2 of 2023/24 reports highlight that no real progress was being made in real time. The Q1 report noted that the appointment of a permanent board would be “prioritised” over the coming period, and the Q2 report merely echoed platitudes from 2022: “The appointment of a permanent board, to be concluded in the coming months, will complete the process to corporatise the TNPA.”

The very latest OV report released this week provides the following update: “Following the conclusion of the technical assessment on the corporatisation of the Transnet National Ports Authority (TNPA), a detailed implementation plan has been developed for consideration by the Minister of Transport. This will guide the process and timeframes for the establishment of the National Ports Authority as an independent entity, in line with the National Ports Act.”

A tender process

That brings us to the release of the two tenders. The first calls for a consultant to provide financial advisory services to support the corporatisation of the authority over 12 months, while the second seeks to appoint a service provider to undertake a review of the Treasury requirements for a corporatised TNPA over a period of three months.

The realisation that the latter is still an unknown is, quite frankly, surprising. Surely their technical assessment and detailed implementation plan would have revealed these requirements? Surely these Treasury requirements have not been lurking unknown for more than two decades?

But let’s look at the scope of work associated with the firm contracted to provide financial advisory services, which also clearly highlights the problem that has plagued the progress of corporatisation from the outset.

It’s about debt management, lenders, refinancing, guarantees and shaping TNPA’s future debt profile. As such the contractor will have to develop a TNPA-specific debt-raising and lender engagement strategy that is aligned to the proposed buy-out structure. As a stand-alone borrower post corporatisation, TNPA will be required to service all of its debt from its regulated revenues.

Taking into account a 12 month plan to deliver the full scope of the tender as well as the time required to appoint a service provider and the existence of a further three-month work scope associated with the second tender, the actual corporatisation of TNPA is not likely to be finalised before the second half of 2027 at the very earliest.

According to information in the second tender document, the National Ports Act provides for two distinct options for the potential corporate structure that results from the corporatisation process:

◼︎ Incorporation of TNPA into a subsidiary of Transnet or the National Ports Authority Pty (Ltd) (NPA) with Transnet as the sole member and shareholder. This restructuring involves the transfer of all assets, liabilities, and employees from TNPA to the NPA.

◼︎ Conversion of TNPA into a public company named National Ports Authority Limited with the state being the shareholder of the Authority.

The successful bidder will need to define the requirements and model for an independent Treasury service for both of these options. The company will also be tasked with identifying specific cost drivers that impact staffing levels, systems, funding, compliance and governance.

This includes a review of the internal structure of the resulting entity and could influence how the future National Ports Authority is staffed to cover key competency requirements. Deciding whether to focus on internal competencies or rely on outsourcing high-level functions could have a significant impact on how the new Authority is positioned to undertake port planning and port reform in the future.

The detailed scope attached to both of the tenders highlight that there are still a good number of unknowns ahead. It’s also clear the completion of the tasks associated with each contract will not magically create a corporatised TNPA.

At the very least the release of the tender documents confirms that the completion of the corporatisation cannot be included on any calendar deadline for the current year.

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