Transnet on the move!

Transnet on the move!

Can Transnet be fixed? This won’t happen overnight, but CHRIS HATTINGH reveals that some positive steps are finally being taken.

On 1 March, Transnet indicated it had approved the finalisation of the contract for Philippines-based International Container Terminal Services (ICTS) to run Durban Container Terminal 2. The terminal is Transnet’s biggest container terminal, responsible for 72% of throughput at the Port of Durban and 46% of all container traffic in South Africa. 

The deal will span 25 years, with the development and upgrading of Terminal 2 as the central focus. While this move by no means fixes all the issues plaguing Durban port – and indeed the country’s other ports – it could mark a significant start on the road to introducing some level of noteworthy competition and progress in turning around the ports’ woeful performance. 

The ICTS deal remains subject to the approval of trade unions. Additionally, final tax advice on the structure of the transaction, and final non-substantive negotiations to reach consensus on the Terms and Conditions of the project agreements, are two of the last remaining items to take care of. But the deal is almost through the door.

The Transnet Ports side of things, then, appears to be on a somewhat more positive trajectory. From an overall Transnet management point of view, there is stability after Michelle Philips moved from caretaker to permanent CEO, and Russell Baatjies was appointed as CEO of Transnet Freight Rail. Entities such as BUSA have indicated that they are working well with Philips, and that her appointment as permanent CEO is a good sign.

Philips no doubt has her work cut out for her. Transnet’s port and rail struggles serve as a hard cap on South Africa’s growth potential. Speaking of which, GDP data for 2023 indicates 0.1% growth in the fourth quarter of 2023. For the whole of 2023, South Africa’s GDP grew by 0.6%. Such rates are nowhere near where they need to be to realise real progress in reducing unemployment. When basic trade infrastructure such as ports and rail do not function as they should, numerous job creation and investment opportunities are left untapped. 

Whether Philips and others in Transnet are able to succeed might well not be totally within their control. Depending on political pressures (which could increase in intensity, given the higher stakes in an election year), interference could yet scupper necessary market-focused decisions. That political aspect, whether overt or more indirect, has over time made even basic functions and decisions at most of the country’s state-owned entities exceedingly difficult to carry out. Time will tell if the new Transnet management is allowed to do what is best for the company itself, as well as the country’s trade space more generally. Nonetheless, the moves made by Transnet management can either aid or delay the potential progress in improving the long-term performance of the country’s rail networks and ports. 

The 2024 Budget confirmed that National Treasury will afford Transnet a R47 billion lifeline. While not a direct bailout or cash injection, it is nonetheless some assistance and breathing room that the entity can choose to utilise or squander.

Transnet’s operational, administrative, and management problems cannot be fixed overnight. But things can definitely be put on a better path relative to where they are currently. Sending the right messages and signals is crucial in this regard, but even more than that, the daily decisions and management choices need to attain the necessary level and diligence. Hard, grinding work is difficult and does not receive the same fanfare as grand presidential statements and promises. In the long run, however, that work will mean much more for Transnet’s future than anything else.  

Published by

Chris Hattingh

Chris Hattingh is executive director at the Centre For Risk Analysis (CRA). Chris has a special interest in trade, economic, healthcare and investment policy. He is a member of the Global Trade and Innovation Policy Alliance, sits on the advisory council of the Initiative for African Trade and Prosperity, and is a senior fellow at African Liberty. Chris holds an MPhil degree in Business Ethics from Stellenbosch University.
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