Transnet’s board has approved the finalisation of the contract to run Durban Container Terminal 2, which will be awarded to the preferred bidder, Philippine terminal operator ICTSI.
This comes after the state-owned entity completed its financial due diligence regarding the deal last month.
“The completion of the financial close is still subject to other non-financial processes which are currently under way, and set to be concluded without undue delay,” Transnet chairperson of the Board of Directors, Andile Sangqu, announced in a statement on Friday.
Transnet selected ICTSI as the preferred bidder in July 2023 and then commenced with a due diligence process, which included the evaluation of ICTSI’s financial soundness.
“The financial soundness report has confirmed that ICTSI has the financial resources to conclude the transaction. The procurement of a private sector partner is set to improve terminal productivity and increase terminal throughput,” Sangqu said.
“The partnership will have a positive impact on Transnet, container supply chains and on the competitiveness of South Africa’s economy.”
In terms of the deal, ICTSI will partner with Transnet Port Terminals (TPT) in a 25-year joint venture to develop and upgrade the terminal, which is Transnet’s biggest container terminal, handling 72% of Port of Durban throughput and 46% of SA traffic.
“TPT will continue to meet and significantly improve its obligations under its ‘License and Lease Agreement’. Transnet’s employees will play a significant role in the success of the partnership and there will be no retrenchments as a result of the transaction,” he said. However, the awarding of the contract is subject to successful finalisation of a number of outstanding legal and regulatory matters including: approval from the minister of finance for exemption from the Public Finance Management Act; the creation of a new company to house the joint venture between Transnet and ICTSI; approval from Transnet National Ports Authority for the subcontract and sublease.
The deal is also subject to the approval of trade unions which must sign the agreement in terms of section 197 (6) of the Labour Relations Act, 1995 to opt out of the automatic transfer of employees.
Final tax advice on the structure of the transaction and final non-substantive negotiations to reach consensus on the terms and conditions of the project agreements also need to take place.
“Transnet will seek the consent of all bidders to extend the bid validity period to allow for the completion of the partner selection process,” Sangqu said.
