Transnet chair Popo Molefe says the state-owned logistics company that controls the country’s ports and freight rail services has sent out an SOS for R100bn from private investors because it has neither the funds nor the expertise to fix itself and play the role it must to facilitate economic growth.
“Transnet being the livewire of the economy in the country, its reforming has become very critical,” he says.
The money will be pumped into improving the Durban port which, under its control, has gone from one of the best in the world to one of the three worst, according to a World Bank report, and Ngqura (Coega) in the Eastern Cape.
“Once we bring in the private sector they bring to bear on the operational side of the infrastructural projects, such as our port terminals, their skills, expertise and experience, and the most modern technology that we need but cannot afford.”
Molefe says no decision has been taken on whether they will be allowed to control the projects they invest in.
“We have issued the request for information [RFI]. The business model for infrastructure investment will arise out of how they respond.”
What the government is not doing is privatising Transnet assets, he says.
“The infrastructure assets will remain the assets of Transnet and the government.”
Will the private sector invest in infrastructure projects if they’re going to remain under government control?
“That’s the devil that will have to be dealt with in the negotiations subsequent to the RFI when we have assessed the appetite, the nature and size of potential investors. They will speak for themselves on that question when they respond to the RFI.”
What if they insist on majority control?
“We will have to wait to see how they respond, but nothing from our side is cast in stone.”
When government says give access to the private sector it is saying let’s reduce our control.
— Popo Molefe, Transnet chair
He says the call for private sector investment signals “a change of direction which takes into account the best international practices which have the capacity to attract investors in a manner that will facilitate growth in our economy and make Transnet competitive”.
Does this mean the government playing a less controlling role?
“Definitely. We’ve got to do that.”
He says Transnet has begun to “identify the difficult red tape that comes with too much government control”.
“There are things we think will have to change in the relationship between government and SOEs, in particular governance mechanisms and processes.”
Might Transnet in its bid to be internationally competitive model itself on Telkom, which was a disaster until the government relinquished its majority stake and took a back seat with spectacular results?
He “wouldn’t exclude that”, he says. But the model would probably be more like Eskom’s, with entities being unbundled and held accountable for generating their own revenue.
“The reality is that South Africa has to be agile, adaptable, creative and innovative in dealing with the challenges of the economy. We can’t take any dogmatic position on what would happen.”
He says if they can get the private sector “to come in with big money for initially these two key ports” then it would free up resources to rehabilitate rail and fight cable theft.
He resists using the word “privatisation” for fear of upsetting the unions, but admits that Transnet Freight Rail can’t be fixed without it.
“It can be fixed in partnership with the private sector. If that is called privatisation, so may it be.”
So why is it taking so long to give the private sector access to branch lines as long since agreed to by the government?
The investment government wants the private sector to make in ports.
— IN NUMBERS: R100bn
“Regulatory issues” have to be dealt with, such as whether private operators would have to be part of the labour bargaining council, he says.
Given the dire state of rail and its impact on the economy, isn’t there a need to deal with these regulatory issues with a greater sense of urgency?
“We want those who control regulatory issues to act speedily. Which means the government.
“I believe once we send out the correct signals we’re going to find that the private sector is willing to partner with us to fix all these problems.”
Would this mean less and less government control and escalating privatisation?
“Quite clearly, when government says give access to the private sector it is saying let’s reduce our control so that it is not monopolistic.”
What about resistance from its alliance partners?
“Ultimately, what we want is not dogma but creative ways of generating economic growth, creating sustainable jobs and reducing poverty.”
The country, and Transnet, need less ideology and more pragmatism, he says.
“Former finance minister Tito Mboweni was very clear on that. The new minister is going to have to address it as well.”
The appointment of Enoch Godongwana, whom as he points out was the leader of the ruling party’s economic transformation committee, has left him in “no doubt that government has embraced that perspective and the reality that is before their eyes”.
“Godongwana has grappled with the difficult questions of growing the economy and creating jobs. So he’s going to have to now carry out this responsibility as the minister in charge.”
What if labour refuses to accept that the government should relinquish ultimate control of Transnet to the private sector?
“I don’t want to discuss ultimate control at this stage. All I can say is the strategy we are unfolding as Transnet continues to be discussed with the labour movement. There is an understanding by the labour movement of what we intend to do and we are working with them in this regard.
“What will determine what happens are the realities of building a sustainable economy and keeping the members of the unions in their jobs.
“I’m sure they have an interest in ensuring we build a sustainable economy and that Transnet plays a facilitating role in this and in the growth of businesses, because it is those businesses that provide jobs for their members.
“Dogma that doesn’t enable us to move forward is not going to help any of us.”
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