South Africa approaches port privatization with ‘groundbreaking’ ICTSI deal

The South African Ports Authority has brought the sector closer to privatization after forging a “groundbreaking” 25-year partnership with International Container Terminal Services (ICTSI).

State-owned Transnet announced that it has selected ICTSI as the preferred bidder for a joint venture that will initially expand the capacity of Durban Container Terminal Pier 2 from 2 million to 2.8 million TEUs – a highly controversial move.

Jacob van Rensburg, Head of Research and Development at the South African Freight Forwarders Association SAAFF, said: “This is a significant development for South African logistics.

“While caution is warranted at this time, the industry welcomes the development. In fact, SAAFF – in partnership with key business associations and industry leaders – has long been a proponent of private sector involvement in South Africa’s maritime economy.”

Pier 2 is Transnet’s largest terminal, handling 72% of the port’s throughput and 46% of the country’s. However, the performance of South African ports has declined rapidly in recent years.

Container throughput last year was about the same as 2012, with hourly container throughput being more than 37% below Transnet’s targets, prompting many in the industry to call on the private sector to improve things.

“The long-held ideology of publicly owning and operating the national port and rail system is archaic and extremely rare internationally,” said Mr. van Rensburg.

Nonetheless, a small step towards a public-private partnership suggests that opposition to private sector involvement in South African society remains strong. Since 2018, President Cyril Ramaphosa has been pushing for external investment to strengthen port infrastructure, but even with this latest development, privatization remains a highly controversial issue.

As part of the agreement with ICTSI, a new company will be formed to manage Pier 2, with Transnet retaining a controlling interest of 50% plus one share.

And while the initial focus will be on expanding Pier 2, this is part of a broader effort to increase total container capacity across the port from 3.3m TEUs to 11.4m – although Mr van Rensburg does not see the viability of that growth plan at least in the short to medium term, while port inefficiency persists.

“Over the past two decades, South Africa’s exports have increased by 1.6% while imports have increased by 4%; Other international benchmarks are also devastating,” he said. “Therefore, changes are required in and around our ports and the entire logistics network.”

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