‘We’re not the worst in the world’

Michelle Phillips, group CEO of Transnet, says the recently released World Bank 2023 container port performance index ranking South Africa's ports as the worst in the world is inaccurate, unhelpful and serves no useful purpose.

It can't be used to help improve the competitiveness of ports such as Cape Town, Ngqura and Durban, which it ranked as the worst in the world at 405,404 and 398 respectively, she says.

“If the index measured container terminal performance accurately it would be a good tool, but based on the conversations I've had that's not the case.”

Phillips says she's not denying the ports are still seriously challenged despite reforms she has driven since becoming acting group CEO in November last year.

“We're not saying there are no challenges. Of course, we still have challenges. Until we have the equipment and infrastructure we require in place, we will probably continue to limp. But with what we have, I think everybody can say we've done pretty well. Our customers are certainly beginning to feel the change, they're beginning to feel the energy and transparency with which our people are engaging with them.”

Nevertheless, Cape Town port, through which more than 55% of the country's primary agricultural products are exported, is missing targets designed by Transnet itself to be conservative and achievable.

So dire is the situation at the start of the citrus export season — potentially worth billions to the Western Cape economy — that premier Alan Winde called on Transnet months ago to send in their “top team” to improve operations at the port’s container terminal.

“We have engaged extensively, including myself personally, with relevant stakeholders in Cape Town”, says Phillips, who has won praise from the private sector, which strongly supported her appointment as group CEO in March, for the sense of urgency she has brought to the freight transport and logistics company.

“We've formed a close relationship, specifically with the fruit industry, and have included them in our operational decisions.”

But Cape Town port has “unique” challenges in terms of gale force winds, which brought operations to a halt for 13 days in April, because of the danger to crane operators and the fact that in high winds machines cut out, she says.

“We're trying to minimise the impact of machines that have passed their lifespan, and also the impact of inclement weather.”

Aren't they failing to meet targets they themselves set, presumably with these typical Cape weather conditions in mind?

“We know we're not meeting the targets. But if you go to the Cape Town port container terminal there's an improvement team there to assist the managing executive for terminals, Oscar Borchards, and his team, and try to introduce new equipment into the system as well.”

Until this month Borchards was one of a number of people filling key executive positions at Transnet in an acting capacity, which she agrees is not good enough for an organisation in crisis. According to the World Bank index this describes the Transnet National Ports Authority, which has been led by an acting CEO since Pepi Silinga was suspended in January pending investigations into allegations of corruption and mismanagement.

Cape Town port  is not on our priority list of private sector participation transactions

Though Winde says there's an “urgent need to give the private sector more control in how the port of Cape Town is managed”, there are no plans to bring in a joint venture partner to run the port's container terminal.

“Cape Town port  is not on our priority list of private sector participation transactions,” she says.

She doesn't believe the absence of a joint venture partner will affect efforts to improve the port's performance.

“We have to be very mindful of the assistance we require from the private sector.”

They need private sector capital more than private sector skills, she says.

“We have extremely skilled operators in Transnet. Many of them have not had the necessary tools and equipment to deliver on what is expected of them. We need to fix that.”

Will the private sector be happy to provide the necessary capital and equipment if they're not brought in as partners to manage and operate the container terminal?

“I've not had any push from any customer or international terminal operator to get involved in Cape Town port specifically.”

Almost a year after choosing Philippines-based port management company ICTSI  as its joint venture partner to manage and operate the country's biggest container terminal in Durban, the transaction is in limbo after being challenged in court by international shipping giant Maersk's AP Moller Terminals (APMT), one of the losing bidders.

“That is holding us back”, she says. “We have to wait and hear what the court has to say.”

The R12bn contract should have been signed in April, then July. Now nobody knows when, or even if, it will be signed.   

“If the court decides against us, it may say we must start afresh. That would really set us back quite a bit because we depended on this transaction for a large cash injection. For now we are proceeding as best we can, ordering the equipment we need because we can't afford to wait.”

Maersk is challenging Transnet's joint venture award because it says ICTSI could not have met the solvency ratio. If true, this might pose questions about Transnet's due diligence.

“ICTSI is a listed company and my understanding is that they used their market cap to show their financial capability to meet the bid requirements”, says Phillips.

She says it was not because of doubts about this that the new Transnet board did a new due diligence when it came in last year.

“It was a step in the process. We'd awarded ICTSI with preferred bidder status. To actually award the concession to them we had to do the necessary financial due diligence. We were getting these questions from APMT about their ability to meet the financial requirements, so the due diligence was very specific in ascertaining whether or not ICTSI had the financial capability to meet the bid requirements.”

Neither Transnet nor the country can afford further delays in getting Durban's container terminal 2 functioning at full capacity, she says.

“We don't have time to be fighting in court with stakeholders or customers. For the sake of our economy, we need to get on with the job.”