Transnet on track to meet freight targets
● Transnet, which is facing a legal challenge from a shipping company that lost out on a contract to run the Durban Container Terminal Pier 2 (DCT Pier 2), says it is on track to achieving its recovery targets.
In an ambitious recovery plan unveiled in October, the state-owned ports and rail company committed to railing 154Mt in the 2023/24 financial year. It also promised to increase these volumes to 193Mt by yearend 2024/25.
This was on the back of the Richards Bay Coal Terminal exporting 47.2Mt of coal in 2023, the lowest in 30 years.
New group CEO Michelle Phillips said on Friday that preliminary data is positive, indicating the group moved 151.7Mt in 2023/24.
“The preliminary data indicates that Transnet has been able to increase its revenue, it has been able to reduce its operating costs, we have also been able to drive up volumes. A lot of improvement came during the second half of the year.”
She said this has been achieved by focusing attention on operational processes, improving accountability and oversight.
“We have had to improve on our equipment and rolling stock availability to be able to achieve an improvement. We have been able to achieve a return to service of an increased number of locomotives and we have seen the delivery of some equipment at the ports”.
However, she said securing the rail network remains a big headache. “We continue to face security challenges. We need to come together to find ways to better protect the infrastructure because it is in our interest to ensure there is security on our network.”
Phillips was appointed as Transnet’s acting CEO after Portia Derby quit at the end of September 2023 amid increasing calls for her resignation as the performance of the rail networks and ports worsened while the group’s debt climbed.
As part of the rehabilitation of South African ports, a 25-year contract was granted to Philippines-based International Container Terminal Services Inc (ICTSI) to upgrade DCT Pier 2 but APM Terminals, a division of AP Moller-Maersk, is challenging the legality of the bid award.
Phillips said the court will have to determine if the claim is valid or not, and whether Transnet erred in making the award. “APM Terminals indicates they are concerned that ICTSI could not have met some of the criteria that we had put in our bid. A specific criterion they referred to is a financial criterion that speaks to what we call a sovereignty ratio. They questioned whether they [ICTSI) are able to meet requirements financially, or satisfy the financial requirements of the bid,” Phillips said.
She added that independent due diligence which was conducted shows ICTSI has the financial muscle to deliver on the contact.
“In the due diligence exercise, the main objective was to establish whether the bidder had the financial capability to meet the financial requirements of the bid. We reported the due diligence exercise was concluded successfully, which means the outcome of the exercise was that the bidder we have identified does have the financial capability to meet the obligations in respect of the bid.”
The appointment of ICTSI is part of a wider government reform to turn around rail and ports by bringing in private expertise to assist in unlocking efficiencies and improving operations.
Transnet this week invited interested parties to bid for a 25-year concession for the upgrade and operation of the Cape Town terminal.
Transnet chair Andile Sangqu said on Friday that despite the court challenge, its “resolve and determination to proceed with private sector participation is unwavering”.
He said when Transnet launched its recovery plan in 2023 the focus was on stepping up private sector participation and strategic transactions, including upgrading DCT Pier 2 which has not been upgraded in 60 years. “The infrastructure and design of DCT Pier 2 has remained the same since 1963. It manages about 65% of container cargo in highly constrained conditions and is operating at critical levels, beyond the original design specifications.”
As a result, in the past 20 years congestion at the terminal due to limited operational capacity has led to serious backlogs, Sangqu added.