South Africa is partnering with the private sector to breathe new life into its rail network, marking a significant shift in strategy. The Department of Transport has engaged Business Unity South Africa to establish a dedicated office, acknowledging the need for corporate expertise to revitalize freight and passenger services. This collaboration aims to overcome challenges that have plagued state-controlled rail services. Concurrently, Maersk A/S is contesting Transnet SOC Ltd.’s choice of partner for sub-Saharan Africa’s largest container port, highlighting the growing importance of fair and transparent processes in state-owned enterprises’ privatization efforts. Transnet is defending its selection process, while ICTSI, backed by Filipino billionaire Enrique Razon, stands firm in Durban’s container terminal bid.
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By Antony Sguazzin ___STEADY_PAYWALL___
South Africa has asked companies to help it set up an office to facilitate the entry of private operators onto the continent’s biggest rail network for the first time.
In a letter sent last month to Business Unity South Africa, the Department of Transport asked the country’s biggest corporate lobby group to help set up a private-sector participation office. It also asked BUSA to “support concessioning and investment in freight and passenger networks.”
The department asked whether companies would “be in a position to help them set up a unit,” said Khulekani Mathe, chief executive officer-designate at Busa. “We will produce the capacity to populate it and then have nothing to do it.”
The transport department didn’t respond to a request for comment.
The overture to the private sector over reviving the moribund rail industry is the latest attempt by the South African government to rope in corporate skills in a bid to kick-start collapsing government services ranging from electricity provision to water supply.
“The openeness with which the department is approaching this, with a willingess to take help from the private sector, is not something we have seen before,” Mathe said.
South Africa’s freight-rail services, run as a monopoly by state-owned Transnet SOC Ltd., have deteriorated to the point where iron ore is piling up in stockpiles at mines and coal railings to ports are at a 30-year low. That’s slashed earnings for companies including units of Anglo American Plc and Glencore Plc. It’s also resulted in a lower tax take for the cash-strapped government.
The government has produced a strategy — the Freight Logistics Roadmap — to reform rail and port services and Transnet last month published a document detailing how it envisages private companies operating its network.
That document, which is open for public comment, has attracted criticism from miners and other companies reliant on rail as it aims to allow private operators to book slots for a period of one year, which then need renewing, rather than having access for longer periods. Longer access would encourage infrastructure investment.
Late last month, BUSA wrote to its members asking them to submit proposals to it on how the rail network — or segments of it — could be run, in addition to seeking help to start the PSP office. The deadline for the proposals is April 19.
A number of unsolicited bids “have been submitted to Transnet,” the Department of Transport said in its earlier letter. “These PSP initiatives need screening and prioritizing but can be made market-ready within a year through the establishment of a sector-specific PSP unit.”
Bankable Opportunities
The transport department said the unit will need transaction advisers as well as legal and technical experts to set up “bankable PSP opportunities.”
Mathe said government envisages the unit running along the same lines as an office that’s run bids for private power provision, and secured well over 200 billion rand ($10.7 billion) in investment.Â
Maersk Contests Transnet’s Pick for South African Port Partner
By Paul Burkhardt
A.P. Moller – Maersk A/S is contesting a process held by South Africa’s state logistics firm Transnet SOC Ltd. to find a partner to develop sub-Saharan Africa’s biggest container port.
International Container Terminal Services Inc. won the award to buy almost half of the main container terminal in the southeastern port city of Durban and operate it for 25 years. Maersk unit APM Terminals, which was among the companies that applied for and lost the bid, is challenging that decision through an interdict application in the Durban High Court.
“We wish to ensure that a proper, fair and compliant process has been followed,” Maersk said in a reply to questions Monday.
The court bid comes as South Africa seeks to improve the lagging performance of state-owned enterprises by boosting private participation. Transnet specifically seeks the turnaround of ports that are ranked among some of the worst in the world and increasing deliveries of its rail operations that drag on the nation’s mining sector.
The deal with ICTSI is the first major attempt to bring the private sector into the operation of the country’s ports.
“It is to be expected that a bidder would find reason to contest an outcome that is not in their favor,” Transnet said, adding that it followed due process to find a partner for its Durban Container Terminal Pier 2.
Transnet’s board on March 1 said it had concluded financial due diligence involved and approved the finalization of the contract with ICTSI, which is owned by Filipino billionaire Enrique Razon.
ICTSI is opposing the challenge by Maersk, it said in an emailed response, declining to comment further on legal matters.
Read also:
- 🔒 PREMIUM from the FT: How SA’s state rail network Transnet came close to the brink
- Transnet seeks private boost for SA’s ports and Rail networks amid operational woes
- South Africa’s transport woes: CRA Macro Review reveals a struggling economy stuck in a traffic jam
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