Postscript

Transnet, South Africa’s government-owned ‘‘ port manager and operator, is under new leadership but the challenges keep coming with strong stakeholder criticism of the methodology behind tariff increases and concerns over the Transnet National Port Authority’s role in deploying objective port governance

TRANSNET: TIME FOR A REALITY CHECK

Transnet, the multi-division government-owned provider of port and rail services in South Africa, has been under fi re recently with a whole range of customer led criticisms ranging from corruption to inappropriate pricing arriving at its door.

With a number of senior Transnet executives removed from duty and now actively under investigation for corruption up until recently there have been many parts of Transnet that have been managed by executives that have been put in position on a temporary or ‘acting’ basis. In February of this year, however, Mohammed Mahomedy, the then acting Transnet, Chief Executive Officer (CEO) was replaced by Portia Derby as the new Transnet CEO who at the end of the same month implemented a new top leadership structure and following this vacant middle and other management positions have also been populated.

The new top leadership structure is not identical to the one that went before with, for example, the posts of chief strategy officer, chief business development officer and chief legal officer all designated as “existing positions that are to be reprofiled.” This “reprofiling,” according to informed sources, has also involved some executives being pushed towards the door, one example being Ndiphiwe Silinga, Chief Legal Officer, with Derby reportedly not happy with work carried out by the legal department in several contracts which were found to be flawed including the controversial 1064 locomotive deal which saw their price skyrocketing from R38 billion to R54 billion.

NEW BROOM

It is in effect a ‘new broom sweeps clean’ situation but with the strategy underpinning these changes yet to be fully visible.

There are, however, some signs of a new direction under construction with Portia Derby stating recently that Transnet is to shift its focus to the South Africa Development Community (SADC). She has publicly stated that Transnet will come up with a detailed plan in this respect, “within the next year or so.”

Transnet has of course endeavoured to deploy both its rail and port know-how elsewhere in Africa – with rail notably in Ghana and Nigeria, and with ports in conjunction with two projects – the BeniSA Maritime Project, which flowed out of a government to government agreement with Benin, and the new port of Lamau in Kenya where concession arrangements were targeted.

There has also been discussion of Transnet supplying training and other packages to ports on the African continent.

RIGHT DIRECTION?

The activities conducted beyond South Africa’s borders to-date in the port sector have, however, raised questions about whether these should be a Transnet priority given the problems associated with service levels and pricing visible in its own ports.

A study into two key aspects of Transnet’s port activities -port pricing and port governance – appears

8 Transnet’s leadership structure is changing. Will this

contribute to positive changes in port pricing and governance, the subject of recent heavy criticism?

to lend support to this view. The study draws its findings from the submissions of 137 stakeholders to the Ports Regulator of South Africa which were lodged in the period 2009/2010 to 2018/2019.

The division of Transnet that sets port pricing on an annual basis is Transnet National Port Authority (TNPA) which does so based on a methodology dubbed Revenue Requirement (RR). Interestingly, the findings from the submissions were that the RR methodology is arbitrary, is unjustifiable and incentivises overstating the required revenue by inflating the weighted average cost of capital (53 submissions). Annual above-inflation tariff increases were identified in 26 submissions plus there were submissions that suggested volume forecasts cause anomalies in tariff determination trends and other submissions all of which suggest the RR methodology is not the best path to promoting the country’s competitiveness.

TNPA, which has a dual mandate of lowering the logistics costs of doing business in South Africa and contributing toward economic development, comes in for some quite considerable criticism with regard to achieving effective port governance in its landlord role. Two notable complaints lodged at its door are: 5 Use of dominant position to prevent or lessen competition (it is being investigated by the South

African Competition Commission in this respect), and 5 Cross subsidisation of loss-making divisions and cross subsidisation of some services -e.g. the container trade and automotive trades being charged premium tariffs and thereby being used to subsidise bulk trades.

There is insufficient space here to review all the new study’s findings – an extensive Abstract can, however, be accessed via the Internet, entitled South Africa’s port doctrine: dilemmas and the way forward.

Even this brief review, however, suggests that there is more than enough for Transnet to get to grips with at home without participating in port projects overseas where its knowledge base is lower and competition from the private sector is much stronger.