Ports Policy: briefing & comment

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Trade, Industry and Competition

26 June 2002
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Meeting report

26 June 2002

Document Handed out:

Ports in the 21st Century: Competing for the Future
Report of Portfolio Committee on Transport on fact-finding mission to Durban
(Appendix 1)
Report of Portfolio Committee on Transport on Draft White Paper on National Commercial Ports Policy (Appendix 2)

Co-Chairpersons: Dr R Davies (ANC) & Mr J Cronin (ANC)

The Committees received a briefing on the issue of South Africa's ports from the Department of Trade and Industry. This was followed by input from the South African Transport and Allied Workers Union (SATAWU) and general comments from the Department of Public Enterprise. Each presenter had a different perspective on the challenges facing South Africa's ports, but all parties agreed that a problem exists and restructuring must take place.

On the issue of the restructuring, the two Committees felt frustrated due to the communication breakdown between government and the committees themselves. The Joint Committee recommends that further discussions must take place in order to inform the Committees of the opinions of the executive departments, organised labour, and private stakeholders concerning port policy and, in particular, concessioning. All of these legislative, executive, private, and labour concerns must engage in a dialogue in order to set forth a single, unified port policy.

The Portfolio Committee on Trade & Industry met for ten minutes before the beginning of its joint meeting with the Portfolio Committee on Transport in order to appoint Mr H M Tingingwe to the National Gambling Board.

Adv Z Madasa (ACDP) asked if a background check had been done.

Mr D Lockey (ANC) replied that a check had been done and that Mr. Tingingwe had passed the background check. With that, the Committee unanimously made the appointment.

Briefing by Department of Trade and Industry
Mr Dockrat, from the Department of Trade and Industry (DTI), made a PowerPoint presentation to the Committees on the status of port restructuring. He noted that the logistics costs in Africa are the highest in the world. Freight costs are 11% of total exports in Africa versus 5% in developed countries and 8% in developing countries. Furthermore, Durban's port throughput lags in comparison to Hong Kong, and waiting time is over three times the expected norm.

The DTI also weighed two concessioning options. The first option is to offer concessions to shipping lines. However, the DTI feels that this option would lead to negative long-term consequences, such as alienating other shipping lines and allowing a monopoly to form. The DTI recommends that if concessions are to be made they should go to Independent Global Operators. Although this could also cause some negative results, the DTI feels the advantages outweigh the negatives and that these concessions could lead to more efficiently run ports.

Briefing by SATAWU
Mr Howard, representing the South African Transport and Allied Workers Union (SATAWU), expressed his frustration and disappointment that organised labour was only involved or consulted in this process after the Minister of Transport (the Minister) had announced that concessions would be made on a pilot level. SATAWU is not fundamentally opposed to concessions, but it feels that a debate should take place to weigh the positive and negative effects of concessioning before a policy decision is made.

Mr Howard believes that restructuring is necessary. However, he believes that privatizing and selling out to big business is not necessary. SATAWU would like to see the government take a more active role in the ports, and he believes that the ports should be publicly controlled. The big problems with the ports are lack of suitable equipment and infrastructure. With increased investment, many of South Africa's problems with its ports can be solved.

The National Port Authority's representative passed on making any comments.

Mr Cronin stated that the restructuring of the ports had become a critical issue, and he pointed to his Committee's Report (see Appendix 2) that responds to this important issue. Furthermore, he noted that the last public hearing on this issue occurred on 13 March 2002, and he strongly believes that increased engagement between the executive and legislative must occur in order for this problem to be dealt with soundly. In order for parliamentary oversight to occur properly, the executive's determination in creating a national policy must be transparent.

The Committees asked the presenters and representatives of the Department and the Department of Public Enterprise to clarify several issues. Most of the focus considered the lack of information passing between committees and departments. However, the Joint Committees' main concern focused on the government's analysis of the problem and the government's proposed solution. Most importantly, are concessions really necessary? And, will granting concessions really fix anything?

Mr Harris, from Trade & Investment South Africa, asserted that the DTI has a good line of communication with the industry, and that there really is a crisis when it comes to moving goods. He stated that concessioning a port is no different then a toll road. A private company runs the road on behalf of the government, but the government still owns the road. In a way, concessioning offers the best of both worlds: the government regulates and makes policy and the private sector focuses on efficiency.

Mr Howard expressed his concern that the government departments were not doing enough to work together. Furthermore, he felt that Durban should be judged against Singapore which he believes is the best port in the world, and which also happens to be run publicly.

Mr Ankuka, from the Department of Public Enterprise, responded to Mr Howard's criticism of the government by asserting that, although different departments may have different opinions, they all confirm with each other in the cabinet. They do thus devise a single policy. Historically, the Department drives policy and the Department of Public Enterprise drives restructuring.

Mr Cronin still doubted whether a single government policy existed, and requested that the government supply a better explanation of the problem. This should include a detailed logistic report and a sharper examination of concessions.

Dr Davies suggested that the departments look at the history of concessions. He wondered if granting concessions had truly helped other ports similarly situated to the ports of South Africa.

In conclusion, the representatives from the government departments, organised labour, and Parliament agreed that further engagement on these issues is necessary. Specifically, the Chairs believed that a debate on concessions must take place in a public forum. The Committees can look at the pilot project announced by the Minister, and they can allow the departments to make further presentations. The Chairs agreed to do a better job co-ordinating with each other and, in turn, asked the departments to share more information as well.

There were no further questions or comments and the meeting was adjourned.

Appendix 1
Report of the Portfolio Committee on Transport, on a fact-finding mission to Durban, City Deep and Pretcon Container Terminals, dated 05 June 2002.

The Portfolio Committee on Transport, having undertaken a tour of Durban, City Deep and Pretcon Container Terminals on 29 April and 03 May 2002, reports as follows:

The Portfolio Committee on Transport embarked on a fact-finding mission to establish the role played by the container terminals and private freight operators in promoting the use of rail. Also considered was what is being done to attract freight from road to rail; whether there are any factors that may impact negatively on the use of rail; and, lastly, what could be done in the short-term to make rail a naturally preferred mode of transport.

This follows a Cabinet decision to support a movement of freight from road to rail. The Committee, in exercising its oversight function, took it upon itself to meet with relevant stakeholders.

A multi-party delegation of 4 members took part in a visit to Durban on 29 April 2002 and to Gauteng on 03 May 2002.

1. Mr G Schneemann (Group leader) 1. Mr G Schneemann
2. Mrs D N Mbombo 2. Mr N Magubane
3. Mr S Farrow 3. Mr S Farrow
4. Mr J J Niemann 4. Mr J J Niemann

In order to examine these important issues, the delegation visited 2 major container terminals (City Deep & Pretcon) operated by Spoornet, and Durban Container Terminal operated by South African Port Operations (SAPO), and met with the following private freight operators:

(i) Rail Road Africa
(ii) Cross Country Containers
(iii) Roadwing
(iv) MSC Logistics
(v) Intermodal
(vi) Bidfreight Transport
(vii) Container Liners Operator Forum
(viii) Vigomaud Transport

The DCT is situated in a strategic position. There are 3 modes of transport used at DCT, road, rail and coastal shipping services. Of the cargo that is handled,
75% moves by road, with 40% in the Durban area and 30% to destinations beyond Durban. The split of cargo by transport modes is 75% road, 22% by rail, with the remaining 3% being shipped via coastal services.

DCT handles 65% of the country's container volumes.

SAPO supports the view of moving cargo from road to rail because they strongly maintain that it is easier to load 100 containers onto a single train than onto one hundred individual road vehicles.

Their main concern is the extent to which rail is ready to handle the shift. At the present moment there are challenges that need to be addressed in order to see the desired shift of containerised freight from road to rail.

The constraints facing SAPO include:
(i) High rate of copper cable theft causing train delays.
(ii) Transit time by rail on the Johannesburg / Durban leg is 5 - 7 days and 24 hours by
(iii) There is a shortage of locomotives causing trains to be delayed in the marshalling
(iv) Theft of cargo occurs while being transported on rail.
(v) Insufficient interface and compatibility of computer systems which cause delays in
transport due to insufficient information being available. It was claimed that 30% of containers arrive with incorrect information, and 15% of export containers arrive late for the vessel.
(vi) Rail tariffs are higher than road transport rates.
(vii) Shortage of straddle carriers.
(viii) Shortage of wharf-side cranes.
(ix) Capacity of piers and rail terminal.

Solutions to these challenges include:
(i) More visible security alongside rail tracks in order to curb the theft of overhead
(ii) Turnaround times of trains and transit times need to be improved.
(iii) Spoornet and SAPO need to interact more closely to address the current challenges.
(iv) Streamlining of supply chain towards a fully integrated seamless transport system.
(v) Streamlining of interface with Customers and Spoornet.
(vi) Proposed repositioning of mobile cranes from Richards Bay and the combi terminal.
(vii) Introduction of 60 new straddle carriers by the end 2002.
(viii) Proposed extension of Pier 1 which includes a new small rail terminal.

When the delegation met with the freight operators it was clear that there was insufficient interaction between Spoornet, SAPO and themselves. They alluded to the fact that they support the shift of freight from road to rail but that Spoornet and SAPO need to address the existing challenges that impact on the smooth operation of rail.

The freight operators underlined the following constraints:
(i) Delays in loading / offloading vessels causes additional costs and also causes a shift
of freight onto road.
(ii) There is a shortage of locomotives and poor utilisation of rail wagons, including a
short supply for the rail of empty containers, which results in congestion and delays.
(iii) Rail tariffs promote the use of road rather than rail.
(iv) There is no synchronisation of operating times between terminals. DCT operates on a
24-hour basis while City Deep operates from 06h00 - 17h00.
(v) The need for the Department of Transport (DOT) and the Department of Public
Enterprises (DPE) to have a common vision regarding the moving of freight from road
to rail.
(vi) Slow turn-around of vessels.
(vii) Service Level Agreements (SLA) do not seem to work.

According to Spoornet, City Deep was planned specifically as a transit terminal for containerisation. It is situated close to the industrial areas of Gauteng. City Deep and Pretcon only deal with import and export containerised freight. Spoornet operates both City Deep and Pretcon terminals, which are inland terminals that provide an essential intermodal link between road and rail. City Deep handles 8 trains per day and has the capacity to handle 2 400 containers per day, but currently operates at 50% of capacity. Pretcon handles 4 trains per day and has the capacity to handle 1000 containers per day.

To increase container security on rail, rail wagons have been modified to prevent container doors from being opened. Spoornet has 24-hour security in marshalling yards.

To make it easier for clients to track and locate their containers Spoornet has designed a website where container information can be provided.

(i) No planned movement of containers from the port to the customer is provided.
(ii) Unplanned storage in the terminals causes congestion.
(iii) There is a lack of communication and information sharing between Spoornet, cargo
owners and freight operators.
(vi) Vandalism, crime and theft are a challenge in operating rail.

All the representatives of private freight operators agreed that rail is the best method of transporting containerised freight. Their concern was that the current situation was not encouraging the use of rail.

(i) Quality of service is poor and not predictable.
(ii) Rail tariffs promote the use of road instead of rail. 65 % of City Deep / Pretcon bound
containers are transported by road from the coast.
(iii) There is lack of capacity at Spoornet.
(iv) Operating hours of inland terminals need to be extended.
(v) Constant changes in management cause a loss in experienced staff.
(vi) Spoornet needs to invest in new rolling stock and human resources.
(vii) Insufficient law enforcement of road transporters takes place.
(viii) Information on the Spoornet website is often incorrect.
(ix) There is insufficient planning on the part of Spoornet.
(x) The motor industry volumes have grown by 56% while the infrastructure has
remained the same.

Spoornet alluded to the fact that they do have capacity problems. They do have monthly meetings with the operators in order to address issues, which need to be resolved.

Around the issue of security at City Deep, excellent cooperation between Spoornet and the operators had been achieved and as a result safety and security had improved tremendously.

(i) Rail transit times and the turn-around of trains need to be reduced.
(ii) Security needs to be increased along rail lines to curb the theft of overhead cables.
(iii) Planning and utilisation of rail wagons needs to be improved.
(iv) Operating hours of inland terminals should be reviewed.
(v) Rail tariffs need to be reviewed to ensure that they are competitive with road
(vi) More effective policing of road transporters needs to take place.
(vii) Service levels need to be reviewed and improved to promote the use of rail.
(viii) Spoornet and SAPO need to work together as a team to promote the use of rail.
(ix) Introduce dedicated container trains with locomotives.
(x) Ensure effective law enforcement on overloaded and under-declared containers
entering container terminals.
(xi) Labour relations need to be improved to prevent strike related action.
(xii) Communication with customers needs to be improved.
(xiii) Rail of export containers needs to be given priority.
(xiv) Accuracy of website needs to be improved.
(xv) Investigate joint venture options with stakeholders.
(xvi) Empower middle management to improve decision- making processes.
(xvii) Make available a copy of the Halcrow recommendations to the Portfolio
Committee on Transport.

The Committee wishes extend its gratitude to Transnet for hosting the delegation and also thanks Spoornet; South African Ports Operations and all the private freight operators for their participation.

Appendix 2
Report of the Portfolio Committee on Transport on the Draft White Paper on National Commercial Ports Policy, dated 20 March 2002:
The Portfolio Committee on Transport, having conducted public hearings on the subject of the Draft White Paper on National Commercial Ports Policy comments as follows:

1. The National Department of Transport briefed the Portfolio Committee on Transport on 13
March 2002 on the Draft White Paper on National Commercial Ports Policy. This briefing
followed Committee hearings on an earlier draft and submissions made to the Committee
by a range of stakeholders in the course of 2001. In this context, the Portfolio Committee
has also conducted oversight visits to the ports of Cape Town, Durban and Richards Bay.

2. The Committee welcomed the opportunity for further engagement on the Draft White
Paper. It also welcomed many amendments that reflect concerns raised by the Committee,
and by stakeholders in earlier hearings of the Committee.

3. The Committee believes, however, that further amendments are required in the following
four significant respects:

3.1 There is vagueness about the end-state institutional location of the National Ports
Authority (NPA). Given the largely regulatory, landlord and strategic policy-making role
envisaged for the NPA, we believe that the White Paper must unambiguously state that
the NPA should, in its end-state, be answerable to the National Department of

3.2 The present draft makes a number of proposals on port operations restructuring. The
Committee believes that any such restructuring must be based on in-depth research
into the sustainability of any proposal, and that this restructuring must involve effective
negotiations within the context of the National Framework Agreement on the
restructuring of state-owned enterprises.

3.3 The present draft introduces the notion of inter-port competition. The Committee
believes that the White Paper must make clear that any inter-port competition should
be strictly within the framework of an overall, emerging South African growth and
development strategy.

3.4 In general, the White Paper should more clearly emphasise the critical and overarching
necessity of aligning port policy with an emerging national growth and development



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