Transnet breaks new ground in privatisation of SA’s ports
Philippines-based multinational port operator named as an equity partner for joint venture to run flagship Durban container terminal
SA took a major step towards opening up its ports to private investment, selecting a Philippines-based multinational port operator as an equity partner for the joint venture to run its flagship Durban container terminal.
In a statement on Monday, Transnet announced that international terminal operator, International Container Terminal Services Inc (ICTSI), a R140bn-plus operator straddling six continents, as a partner in the 25-year partnership to also expand Pier 2 of the terminal.
The port of Durban is Africa’s biggest harbour, handling almost half of SA’s port traffic. Pier 2 is the largest container terminal in the port, with a current capacity of 2-million 20-foot equivalent units (TEUs), a measure of trade volumes at container ports.
The decision to appoint ICTSI comes nearly two years after President Cyril Ramaphosa’s administration announced that it would allow for private sector participation at the port which have been hampered by inefficiencies, ageing infrastructure and congestion.
The deal is the first port privatisation for Transnet, which has faced criticism for the poor performance of its ports, which rank among the worst in the world in terms of efficiency and reliability. In a 2021 World Bank index of container port performance, Durban ranked 364th out of 370 and two other Transnet ports were in the bottom 10.
“Private sector participation in Pier 2 is a key catalyst for repositioning the Port of Durban as a container hub port. We are delighted to have a global player of ICTSI’s standing on board to drive this process,” said Transnet CEO Portia Derby.
The government, which is hiving off Transnet National Ports Authority from Transnet, has identified private sector participation in the ports as a key reform under its Operation Vulindlela programme, which aims to raise economic growth and create jobs. Transnet is also seeking a private partner for another container terminal in Ngqura, in the Eastern Cape.
ICTSI was one of six bidders who submitted proposals after being shortlisted from 17 potential equity partners who responded to a request for interest in August 2021.
ICTSI, the eighth-largest container terminal operator in the world by TEU, operates in six continents and four African countries.
The expansion of the Durban facility includes making structural changes so that it can handle the envisioned increase in vessel and cargo traffic over the next few years. By implementing the changes, the port owner estimates that the hub will handle more than 11-million containers by 2032, up from the current 2.9-million.
Both Durban Container Terminal Pier 2 and the Ngqura in Gqeberha are operating below their capacities of 3.3-million TEUs and 1.3-million TEUs, respectively.
Transnet will establish a special purpose vehicle (SPV) together with ICTSI to run the Durban port for an initial 25 years, with the option to extend the contract to a maximum of 30 years in the event that the berth deepening of the North Quay at Pier 2 is delayed.
Transnet will own 50% plus one share of the SPV and non-current assets of the port will be transferred to the new company, which will also be required to adhere to the government’s BEE transformation targets.
It did not specify whether ICTSI will pay for its stake or whether it will have to fund the expansion.
“DCT Pier 2 employees will be seconded to the new entity. There will be no retrenchments, and employees will retain the same terms and conditions before and after the introduction of the private sector partner,” Transnet said on Monday.
The deal, which was announced by Transnet on Monday, follows approvals from the government in terms of the Public Finance Management Act.