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.
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 by the Presidency in consultation with 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.
High price of logistics
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 to pave the way for streamlined, cost-effective international, regional and domestic supply chains.
Across the 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 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.
Legal battle
However, a legal dispute between competing bidders emerged, further disrupting the positioning of solutions for the national logistics network crisis, stalling the momentum of this vital initiative and 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 concession’s 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 lies 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 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 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 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.
Architecture of the future
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, and 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 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.
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
Back to basics
Let’s take this deal back to the drawing board.
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’ve got your back SA Inc.
Dr Juanita Maree is the chief executive officer of the Southern Africa Association of Freight Forwarders (Saaff).
