Private Sector Calls for Chapter and Verse Revision of Pier 2. PSP

Media Release

Friday, 6th December 2024

Private Sector Calls for Chapter and Verse Revision of Pier 2. PSP

By Juanita Maree

Logistics Industry leader Dr Juanita Maree is the Chief Executive Officer of the Southern Africa Association of Freight Forwarders (SAAFF)

Robust, dynamic discussions shaped the logistics industry symposium held this week, highlighting positive signs for the year ahead. The meeting called for government to maintain its focus on consultation and collaboration with the private sector at this crucial juncture. Dr Juanita Maree, Chief Executive of the Southern Africa Association of Freight Forwarders (SAAFF) emphasised that while progress is being made, the process of freeing logistics from monopolistic practices and control – which is hindering economic growth in South Africa, remains a key challenge. She stressed the importance of heightened awareness and course correction, urging the government to urgently engage with the industry on ongoing efforts and very specifically on work-in-progress projects of critical importance.

This year marks the first year of the implementation of the Freight Logistics Roadmap, following its approval by Cabinet in December 2023. The roadmap was developed in consultation, by the Presidency and private sector representatives and aims to transform South Africa’s monopolistic logistics network structures through the implementation of a vertical separation strategy. This approach seeks to foster a more efficient, competitive supply chain logistics system for the country. It typically involves separating the ownership and management of the infrastructure from the operation of the services, which helps improve competition and efficiency in the system.

South Africa must seize the opportunity to restore and strengthen its competitive edge in supply chain logistics. Achieving competitiveness hinges on reducing logistics costs, which, in South Africa currently account for 57% of the total cost of an end product. To drive this reduction in cost, alignment across the logistics system is essential to eliminate waste, friction and other inefficiencies -paving the way for streamlined, cost-effective international, regional and domestic supply chains.

Across de world, in this transformative, evolving landscape, public, private partnerships (PPP) are increasingly shaping a range of project finance platforms across technical, operational and developmental fields, enabling private sector participation and the involvement by special dispensation of other third parties through concessionary projects.

In 2023 Filipino ports company International Container Terminal Services (ICTSI) won the bid for the 25-year contract to operate and develop South Africa’s Pier 2 at the Durban Container Terminal – Africa’s largest container hub. However, a legal dispute between competing bidders has emerged, further disrupting the positioning of solutions to the national logistics network crisis, stalling the momentum of this vital initiative undermining the project at its base and foundation.

The legal wrangle has prompted reaction from private sector operations. According to media reports, companies are holding APM Terminals – the losing bidder and a subsidiary of a major Danish shipping company, responsible for halting the PSP structure. The company obtained an interdict, accusing Transnet of unfair practice during the evaluation process that led to the awarding of the contract to ICTSI. This week the court will decide whether the appeal will be granted.

The final ruling is set for March 12, 2025. This delay, resulting in a pause to the rescue project for Pier 2, adds yet another layer of disruption to South Africa’s already strained logistics network – amid a national logistics crisis.

This situation is deeply concerning, and it is imperative that both the nation and the industry should not overlook these developments.

Pause for reflection

This pause presents South Africa with a unique chance to reevaluate the concessions’ framework and to reassess whether it is fully aligned with the country’s specific needs and objectives. Is the PSP for Pier 2 fully supportive of critical national imperatives?

“In the midst of every crisis lays great opportunity,” said Albert Einstein. This pause in the Pier 2 process allows us to revisit and reassess the building blocks and feasibility of the concession:

Is this agreement tailored to our own specific local conditions?
Is it the most appropriate, efficient PSP model for Pier 2 – South Africa’s biggest container terminal?

The IRERC Report

The Interim Rail Economic Regulator Capacity (IRERC) Report and corresponding network statement is set to be published this December and will indeed mark a significant milestone in South Africa’s logistics rail sector. The progress reflected in this report underscores the growing maturity of the country’s vertical separation programme as it is unfolding in the rail network.

It is particularly encouraging to note the remarkable transparency in the IRERC report. Transparency is key to ensuring that all stakeholders – whether public or private, domestic or international – have access to credible, relevant data, methodologies and decisions shaping the future of South Africa’s rail and other logistics modalities. This openness signals a mature regulatory environment which is essential to fostering long-term investment and innovation, suggesting also commitment to stakeholder engagement.

The IRERC process is testament to the country’s ability to build a world-class logistics network across all transport modalities – air, road, ocean, rail and pipelines and reflects the broader vision of an integrated, efficient and competitive ecosystem. When all modalities work in synergy, it can significantly boost South Africa’s position in global trade, as well as regional and domestic economic growth.

Building the architecture of the future nation

Our fragile economy calls for strong leadership. It is no longer feasible to undertake any PSP transaction in isolation. What may look at first like a soft loan may incur an opportunity cost or cause attrition in the flight of local talent, may also cause loss of control of critical infrastructure – among other many possible consequential risks.

The time has come to examine the building blocks of this deal and to establish a robust mechanism to oversee future agreements as we shape our collective future.

Every strategic project now plays a critical role in shaping the architecture of our nation’s future. It is essential for the public and private sectors to join forces, combining expertise to engage South Africa’s brightest minds, experts in their fields in this transformative journey. Together we must cultivate a culture of excellence, rooted in integrity and transparency, always prioritising the best interests of SA Inc. as we forge a path to a stronger and more resilient future.

The building blocks

What is the ultimate master plan for SA Inc. to achieve an intact logistics network across all modalities?

Performance tracking the PSP for Pier 2 to yield the contracted results over a 25 year period
(how will Government ensure and enforce best practices?)

Productivity Index base? a. fit for purpose b. deployment of new technology c. price setting for terminal handling d. other related charges?

Clarity on the Implementation of Protocols for a 49% shareholding transaction in the country’s biggest container terminal

Clarity is required on the oversight role the PSP will play in structuring a multimodal structure with an Inland terminal, back-to-port operations and freight villages

Call to action

LET’S TAKE THIS DEAL BACK TO THE DRAWING BOARD! – LET’S TAKE ANOTHER LOOK.

Under an umbrella of good governance and policy reform, we will diligently craft the building blocks. Building trust through transparency, we have the data, configuration and world best practices available to us. Government and the nation can count on the Private Sector. We got your back SA Inc.

ENDS

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Photos (see below and hi-res photos attached)

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Contact: Catherine Larkin – CVLC Communication

Telephone: 087 133 0525

Cell phone: 083 300 0331

Contact: Catherine Larkin

Email: catherine@cvlc.co.za

Website: www.cvlc.co.za

The Southern African Association of Freight Forwarders NPC (SAAFF)

SAAFF was formed in 1921 and is a national association with members throughout the Republic of South Africa.

The Association provides for a board of directors, who are highly experienced, senior executives from member freight forwarding companies, nominated and voted for by these members.

Freight forwarding plays an essential role in international trade and our members are dedicated to facilitating this activity through their involvement in the management of transportation, customs clearing, documentation, third party payments and many other elements of international supply chains. We call the freight forwarder the “architect of transport”. Globalisation and the need to reduce cost over the entire supply chain have re-focused the freight forwarder in ways that are innovative and functional.