EDITORIAL: Transnet’s concession a start, but no silver bullet

News that Transnet has at last chosen a private partner with an extensive international footprint to upgrade and operate SA’s largest container terminal is welcome.              

Transnet’s container ports are among the world’s worst, scoring in the bottom five of the 370 ranked in the World Bank’s latest Container Port Performance Index. They are way below global norms in terms of efficiency and waiting times. They are rapidly losing market share to other more efficient African ports such as Maputo and risk falling off the radar for global shipping lines.

Though the Transnet National Ports Authority (TNPA) owns and manages SA’s ports, it has long had some private terminal operators alongside Transnet Port Terminals (TPT). The exception, however, is in container terminals, where TPT has a monopoly.

Transnet has claimed for a while that it is committed to bringing in private partners, in line with government policy on rail and ports. But last year’s move to bring in private rail operators for slots on Transnet’s general freight lines seemed designed to fail, offering just two year-long concessions under onerous conditions. In the end there was just one successful bidder for a minor railway line. Transnet said earlier this year it would concession out the key Durban-Gauteng corridor, but we have yet to see this happen. 

The container terminal tender has also been long in the making since it was first announced almost two years ago. But it seems to have some of the key ingredients for success. TNPA wants to triple the capacity and lift the efficiency of Durban’s container terminals. The 10 companies it shortlisted as potential partners included the world’s leading terminal operators. It has picked Manila-based International Container Terminal Services (ICTSI), which operates 32 terminals in 19 countries across six continents, including in Africa where it has partnerships in Nigeria, Democratic Republic of Congo and Madagascar. It has a track record of turning terminals around and of operating in difficult environments. It has the financial clout to make the investments the Durban container terminal needs and has committed to ploughing in significant cash.

It can hardly do any worse than Transnet and signs are it will do significantly better. But there are some big concerns. The tender conditions gave the new private partner operating control of the partnership entity, which is crucial, but it required that Transnet be the majority owner. It is important that Transnet keeps strictly out of operations and management. It has however insisted that the employees of the partnership entity be seconded by Transnet, under the same terms and conditions of employment, rather than being employed by the new partnership. That could surely constrain ICTSI’s ability to implement much-needed efficiencies, especially given the aggressive stance trade unions at Transnet tend to adopt towards change.

Another constraint is that even if the terminal itself is turned around, it is still dependent on TNPA’s infrastructure and operations, and can do nothing, for example, if ships sit out at sea endlessly or trucks cannot get in to deliver or collect the containers, and trains don’t arrive. So, while the private partnership marks huge progress towards a better outlook for the many kinds of freight that are transported in containers, it also highlights the need for a much more fundamental and urgent restructuring of Transnet itself, to ensure it gives way to efficient private sector operators across the logistics landscape.