In February 2023, state-owned rail freight operator Transnet SOC Limited (“Transnet”) announced that it would be engaging with the private sector to increase the efficient and timeous transport of containers between the port of Durban and the commercial hub of Johannesburg.
Transnet confirmed that the announcement followed a directive from Government to engage the private sector with the hopes of providing the much-needed funding to revive the ailing transport line. In recent years, poor maintenance, vandalism and theft of goods in transit have crippled the Container Corridor, with breakdowns and security incidents occurring on an almost daily basis.
Earlier this month, Transnet announced its partnership with a Philippine-based company, International Container Terminal Services Incorporated (“ICTSI”), which will oversee the operation and expansion of Durban Harbour’s Container Terminal Pier 2. Standing as Transnet’s largest container terminal, Pier 2 handles 72% of Durban’s throughput and 46% of South Africa’s port traffic.
Transnet has hailed the 25-year joint venture as “a key catalyst for repositioning the Port of Durban as a container hub port” and will help reposition the terminal for best practice performance, ensuring growth in volume throughput, and will support the terminal in providing operational and commercial support to access global shipping line call routes.
Transnet has confirmed that the key terms of the joint venture include –
- the formation of a new company to manage the operations at Pier 2, in which Transnet will have majority ownership of 50% plus one share;
- an initial, upfront payment by ICTSI of an undisclosed amount, which will be used to jumpstart the project;
- a 25-year term period, with an option to extend to a maximum of 30 years in the event that certain expansion projects are delayed;
- confirmation that non-current assets will be transferred into the new company, together with customer and supplier contracts;
- confirmation that the new company will be required to achieve a minimum level 4 BBBEE contribution status; and
- the retention of current Pier 2 employees, who will be seconded to the new company. This means that there will be no retrenchments and employees will retain the same terms and conditions before and after the introduction of the private sector partner.
This partnership between Transnet and ICTSI represents an important step in integrating global expertise and private sector involvement into South African port operations, to enhance efficiencies and stimulate growth. The ultimate goal of the newly formed company will be to improve Durban’s total container capacity from 3.3 million TEUs (Twenty-foot Equivalent Unit used to measure container volumes) to 11.4 million.
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