By Antony Sguazzin and Loni Prinsloo
Transnet SOC Ltd., which owns and runs South Africa’s ports and freight-rail network, is increasingly turning to private partners to help expand and improve its operations — a key driver of the nation’s economy.
The state-owned company is exploring the option of creating a rolling-stock leasing firm that would enable private entities to use its rail network, and plans to outsource the operation of a planned dry bulk terminal at Richards Bay on the east coast, it said in a response to queries. The process of selecting a partner to help it run Africa’s biggest container terminal in the eastern city of Durban, which it plans to expand, is also at an advanced stage.
Transnet has already begun looking for private operators for a liquefied natural gas terminal at Richards Bay, and for a new port and rail line at Boegoebaai in the Northern Cape — which is envisioned as a green hydrogen export hub. Last month, the company announced plans to issue a 20-year contract to run and maintain a rail line used to transport containers between Johannesburg and the Durban port.
What would amount to handing over the operation of many of Transnet’s activities to private companies comes as it battles to run its business. Coal shipments on the rail line to Richards Bay hit a three-decade low in 2022 due to a host of labor and sabotage problems and issues with its locomotives. In 2021, three of its container ports were in the bottom 10 out of 370 facilities that were ranked according to their efficiency in The Container Port Performance Index.
In the six months ended Sept. 30, the company breached debt covenants on some of its loans as its cash-to-interest ratio fell to 2.1, below the 2.5 stipulated in the terms of some loans. The lenders agreed to waive that requirement.
Portia Derby, Transnet’s chief executive officer, gave more detail about its plans to work with the private sector on a Jan. 26 conference call with investors ahead of a $1 billion of international bond sale, said two people with knowledge of the contents of the call and who asked not to be identified as the presentation was private.
She said a request for proposals would be issued for a partner to take up a majority stake in Transnet’s leasing company, according to the people. Transnet will retain a 50% plus one share in the Durban port, which almost all of the world’s major port operators have expressed interest in helping run, and a deal could be concluded this year, Molefe was cited by the people as saying.
Transnet plans to increase Durban’s capacity to enable it to handle 11.4 million twenty-foot-equivalent-units, a measure of container capacity, and 900,000 automobiles a year, which would entail an expansion that’s been costed at more than 100 billion rand ($5.7 billion).
Port Partner
Its other plans include bringing in a majority partner at the port of Ngqura in the Eastern Cape province, Derby said, according to the people.
The CEO also spoke about complications on the company’s rail line to Richards Bay Coal Terminal, which have been partly caused by a dispute with China’s CRRC E-Loco Supply, which has supplied Transnet with 455 locomotives.
While a 20-year service agreement signed with CRRC was supposed to come into effect on Dec. 31, the company told Transnet it hadn’t resolved disputes with the tax authorities and the central bank, meaning it can’t do business with South African companies. Transnet gave CRRC until the end of January to come back to it with a solution, she said, according to the people.
“The condition precedent was extended and CRRC is in discussion to resolve its outstanding disputes to enable implementation of the agreement,” Transnet said in a response to queries, without saying whether there had been progress by the end of January.
Meanwhile, Transnet last month said it will issue a tender for rail equipment companies to rehabilitate idle CRRC locomotives. Still, Derby said on the call that process could take two to three years, while a process of refitting some Alstom SA locomotives could take a year.
Read more:
- Transnet to shrink rail network by 6500km
- Transnet agreement with Chinese company hits the skids
- Transnet CEO should get the boot – DA’s Galeb Cachalia
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