[Opinion] The Transnet imperative

The plan to bring in a private player at Durban Port Terminal Pier 2 remains on hold; meanwhile the terms of investment into Transnet railway corridors, especially the proposed rates, are so onerous as to effectively mean very few if any private players will be willing to take on those costs (in addition to the fact that Transnet would remain the custodian of infrastructure and new investments into said infrastructure).

South Africa talks a big game on the potential of the Africa continental Free Trade Area (AfCFTA). Such rhetoric remains mere fluff, while the country’s own trade infrastructure and trade policy hobbles and prohibits increased flows of materials, goods, components, and investment. Should US president-elect Donald Trump’s new administration push for and succeed in implementing higher tariffs on imports, with significant ripple effects and possible retaliation by other global powers such as China and the European Union, South Africa’s underperforming trade infrastructures – held back by Transnet – will mean the country will inevitably fail to take advantage of changing global trade- and investment-flows.

Through 2023 and 2024 Transnet’s rail performance has improved – of this there can be no doubt. However, Transnet’s current target for moving volumes on rail is 170 million tonnes, and it is unlikely that this target will be achieved.

The fundamental problem for Transnet remains this: spending more on consumption (salaries) and debt, and not nearly enough on maintenance of current, and building of new, infrastructure. Stellenbosch University’s professor Jan Havenga estimates that Transnet requires around R20 billion per year, over 10 years, to fix “the network, the infrastructure.”

Radical moves

One hopes that 2025 will be the year that radical moves on the operations and policy fronts shake up South Africa’s logistics landscape. There will continually be, from political and business origins, vested interests that push against any reforms that would see them losing monopoly (or close to it) control.

Privatising for the sake of it, and not in the right manner, will simply entrench those parties with the necessary political connections. Ideally, what should be happening at the country’s ports is that different terminals should be concessioned to different players, to create competition within the port itself.

Assuming the Durban Pier 2 concession process to International Container Terminal Services is completed, the smaller Pier 1 should also be opened to private investment, with the concessionaire being required to invest in making it competitive with Pier 2, on a 30-50 year contract. The guiding thinking and attitude regarding moves to bring in private sector skills and investment across the ports and railway networks should be creating competition so that port users have a choice.

Exports

Writing in BusinessDay, Lawrence Edwards, Matthew Stern, and Jing Chien find, “Since 2000 export growth has slowed and by 2022 export volumes were only 5.7% higher than in 2008.” Additionally, “SA’s export performance has been meaningfully weaker than that of other middle-income countries. In strong contrast to SA, most of these countries’ exports increased as a percentage of GDP in 2000-22.”

South African exports cannot improve and increase in the absence of reliable basic trade infrastructure. For as long as Transnet exists in its current form, the country’s growth prospects (and the prospect of improving the average quality of life) will be terminally hobbled.

The current iteration of the Government of National Unity has a possibly very limited timeframe within which to implement and boost the kinds of reforms the country needs to break from the 0.8% GDP growth rate it has averaged since 2012. The low-hanging fruit of trade infrastructure and policy reform is ripe for picking.

Article originally appeared here.