This month will mark the anniversary of South Africa’s first shipment of goods to various African markets under the African Continental Free Trade Area (AfCFTA).
Speaking at the Port of Durban on January 31 last year, President Cyril Ramaphosa described the shipment as a “historic moment in Africa’s economic destiny”. He was right. Africa has low levels of intra-continental trade, which the AfCFTA seeks to remedy, as well as drive the development of complementary national economies with a combined market of 1.7 billion people.
As African trade ministers gathered in Durban to push for increased trade to serve this market, Ramaphosa launched South Africa’s first AfCFTA shipment. He spoke of the benefits of trade while staring at the reality of Transnet’s poor performance — the country’s biggest economic obstacle after Eskom fixed its coal plants and stopped load-shedding.
But, like the inaugural launch, the shipment anniversary on January 31 is preceded by crippling equipment breakdowns and shipment backlogs at Durban’s pier 2 container terminal. Ramaphosa’s freight logistics roadmap — aimed at improving the efficiency and competitiveness of our rail network and ports — is yet to bear fruit, despite marginal improvements.
It is concerning that Transnet is now burdened by a huge debt pile and its credit rating has nose-dived. In its November 2024 announcement, ratings agency S&P Global downgraded Transnet to BB minus. The ratings agency said it expected Transnet’s gross debt to increase from R134.7bn by the end of fiscal year 2024, to R151bn by the end of fiscal 2025, with an annual interest payment between R15bn and R17bn.
That Transnet posted a R2.2bn loss for the six months ending September 2024 doesn’t augur well for its ability to raise money to invest in capital expenditure.
First among issues requiring immediate consideration is the need to review and tighten procurement capabilities
The company’s interim infrastructure manager, an entity established to help private operators access rail as part of the freight logistics roadmap, estimates Transnet needs to invest R51.3bn in infrastructure over the next five years for the rail network to achieve a 226 million ton a year capacity.
To his credit, Ramaphosa and his logistics crisis committee have been driving reforms to secure private sector investments in rail and ports. Long-term private sector access — with a minimum of 15 years — will be required to draw in investment. The same model should be followed at the port terminals, which also desperately need aggressive efficiencies to ensure our exports are globally competitive.
While the ongoing reforms — including the publication in December of the proposed tariff structure for rail access — are heading in the right direction, there are issues requiring immediate consideration to prevent the derailment of reforms.
The first is the need to review and tighten Transnet’s procurement capabilities. The legal tussle between bidders competing for the multibillion-rand contract to operate the Durban container terminal indicates a need for improvement. The legal fight has pitted the winner of the tender, International Container Terminal Services Incorporated, against Maersk’s APM Terminals, the second bidder.
Fixing the procurement system might require outsourcing tender processes to independent experts, especially on large contracts that have huge implications for the whole economy. The economy cannot afford to be held back by legal battles caused by Transnet’s chronic procurement weaknesses.
The second is to consider recalling skilled personnel who have left the company, demoralised by state capture and poor leadership. While some may have positioned themselves as consultants to Transnet, the company would be better having them as full-time employees.
The third is to reform the governance structure of the company to prevent power struggles and to “politics-proof” it from interference. The company’s CEO should not feel constrained to act in the best interests of the company, provided he or she is held fully accountable by the board.
Flowing from this is the fourth proposal: eliminating too many accountability avenues or decision-making structures. It is true that too many hands spoil the broth. And a bad outcome in such a situation cannot be attributed to a particular pair of hands. While the president’s logistics crisis committee was conceived with good intentions, its terms of references and lifespan should be clearly spelt out and restricted.
The Transnet board must not be left under the unintended impression, however slight, that it is somehow secondary to some external driving force. Economic players and the public should not guess who to hold accountable in moments of failure, or who to reward when there are positive developments.
Lastly, it is important the infrastructure manager operates in a way that gives priority to exports of goods through South African ports. This would, of course, require the ports are operated efficiently, and third-party operators are procured competently and efficiently.
The post-election riots in Mozambique that led to the blocking of freight destined for Maputo Port are a wake-up call to South Africa to be fully independent when it comes to export logistics.
The Maputo Port is supposed to complement existing ports and serve South African industries that are geographically closer to it. However, what has happened because of the decline of our logistics systems is that Maputo Port has become a primary exporting avenue for some South African exporters. That must change. Only then can the South African economy maximise the benefits of infra-African trade and increase its potential to employ more people.
• Bayoglu is the MD of Menar, a mining investment company
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.