Stakes in Inefficient State Ports Up for Sale in South Africa

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South Africa’s state-owned ports and rail company is seeking a partner to take stakes in two container terminals to boost efficiency and strengthen ties with global trade routes.

Transnet SOC Ltd. has earmarked its biggest facility in Durban, on the eastern coast, along with the more southerly Ngqura site for partnerships with private operators, Chief Executive Officer Portia Derby said in an interview. The process is set to kick off with a request for information to guage interest from potential bidders, and the Johannesburg-based company could ultimately issue shares in return for investment, she said.

The plan is “really important for improving the performance of our port system,” the CEO said. “We have a clear sense of the kind of operations that we think are suited in order to grow value.”

Durban and Ngqura were among the worst-performing container ports in the world in 2020, according to research compiled by the World Bank and IHS Markit. The former is ranked last out of 351 sites on an administrative basis, while Nqgura is bottom of the statistical chart.

The Transnet move is the latest sign that South Africa’s unprofitable state-owned entities are becoming more open to private investment and participation — with the blessing of the government. Eskom Holdings SOC Ltd., the state power giant, has welcomed increased generation by independent producers, while a majority stake in bankrupt South African Airways was offloaded to outside entities in June.

All three firms were beset by mismanagement and corruption under the presidency of Jacob Zuma that ended in 2018, and have been scrutinized as part of an ongoing inquiry into state graft over that nine-year period.

The plan is “less about politics and more about where Transnet finds itself today,” Derby said. The ruling African National Congress has “always been a believer that the private and public sector play together.”

Eroding Competitiveness

South Africa’s government has indicated the need for change at its ports, outlining the required reforms in a draft National Infrastructure Plan 2050 published last week. A lack of efficiency and high cost of logistics “is eroding the competitiveness” of the economy, according to the document.

“Many of these problems have been attributed to the monopolistic nature of port operations.”

Derby didn’t comment on potential buyers of stakes. One international ports firm with an Africa presence is DP World, which operates facilities in Senegal, Angola and Mozambique. The Dubai-based company last month agreed to acquire South African transportation firm Imperial Logistics Ltd. for $890 million.

The Ngqura Container Terminal was designed as a state-of-the-art trans-shipment hub to handle traffic from Asia, South America and West Africa. After more than a decade the facility still hasn’t reached its full potential, said Velile Dube, CEO of Transnet Port Terminals.

“We believe there’s a huge potential for taking that facility and integrating it into the global network of terminals,” he said. “To do that you need to position it together with a partner.”

Source: Bloomberg

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