Port of Durban & Ngqura Expansion Plans

NCOP Public Enterprises and Communication

15 June 2022
Chairperson: Mr Z Mkiva (ANC, Eastern Cape)
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Meeting Summary


Transnet National Ports Authority (TNPA) briefed the Select Committee on their plans to expand the capacity of the Durban port terminal and the Port of Ngqura in Gqeberha. The main thrust of the plan is to modernise and expand South Arica’s port systems. In recent years local ports have fallen behind their African counterparts. As a key driver of the economy, it has become clear that increasing the capacity and efficiency of the ports is an urgent matter. This is especially the case with the Durban port being a major hub for the continent despite not having received significant upgrades for decades. Alongside the port redevelopment plans, Transnet aims to upgrade the rail lines to ports to reduce the load on roads and provide direct lines for manufacturing and agriculture. The projected timeline for these plans is phased operationality between 2023/24 and 2027/28. 

Committee Members asked why South Africa has four of the world’s least efficient ports and its ports have lagged behind other African nations; if given the current economic outlook it was worthwhile investing in port infrastructure given that it provides no immediate return on investment; the effect the recent flooding had on Durban port; turnaround time at the Durban port compared with international benchmarks; current state of railways and goods and passenger trains to accommodate the shift from road to rail; environmental groups opposed to Transnet's expansion plans; Transnet Group’s gearing ratio for borrowing; plans for Port St Johns; transformation; if Transnet National Port Authority had appointed its board and separation of roles between Transnet and TNPA; and if private sector companies have expressed interest in working with Transnet on the infrastructure development plan.

Meeting report

Ministry attendance

Apologies from the Minister and Deputy Minister were noted.

Ms M Mokause (EFF) raised the point that the Minister has previously missed Committee meetings and that this undermines the Committee because without the minister present there is a lack of executive accountability. 

The Chairperson acknowledged that this concern had been raised before and he had already set a process in motion to meet with the Minister and resolve this matter for future meetings.

Ms Mokause found this solution inadequate as the Minister is accountable to the Committee and not the Chairperson. She proposed postponing the meeting until the Minister was present.

Mr A Arnolds (EFF) seconded this motion. 

Ms T Modise (ANC) noted the point raised but felt that the meeting should continue as the Minister and Deputy were absent due to alternative commitments and because the Deputy Minister is generally present when available. 

Mr M Nhanha (DA) agreed that the Minister’s consistent allowed absence may have been normalised and he considered agreeing to postpone the meeting. However, as the Chairperson had already set in motion to engage the Minister, he should be given the opportunity to do so, and in the meantime, the meeting should continue. 

The Chairperson understood the Committee’s frustrations and said that he would give a progress report on dealings with the Minister at the next meeting.

Ms Mokause was not satisfied with the decision to continue the meeting and reiterated that it hinders the Committee’s ability to fulfil its mandate of executive accountability when ministers are not present. This works to undermine the ANC and distanced the EFF from this decision. 

Capacity Expansion Plans for Durban Port Terminal & Port of Ngqura 
The Transnet presentation was delivered by Ms Portia Derby (Transnet Chief Executive), Mr Pepi Silinga (Chief Executive, Transnet National Port Authority), and Mr Andrew Shaw (Transnet Chief Strategy and Planning Officer). 

Ms Portia Derby (Transnet Chief Executive) said that the expansion of the Durban port is long overdue. The terminal’s infrastructure and design have remained the same since 1963. Total capacity of the port is currently 3.1 million TEUs and the planned development would grow it to 11.2 million TEUs. Transnet has spent time benchmarking against other ports to strategise growth and they believe that now is the time to move quickly as Durban is a hub for the continent and the Southern Hemisphere. 

Mr Pepi Silinga (Chief Executive, Transnet National Port Authority) outlined the KZN Ports Master Plan strategy. This plan aims to turn the Durban port into a modern deep-water facility. The Port of Durban will be positioned as a container hub as it already contributes about 40% of the Group’s revenue. The Richards Bay port will handle dry bulk, some of which will be relocated from Durban port. The South African Navy base will be relocated from Salisbury Island in the Durban port to the Richards Bay port, with a satellite station remaining at the Durban port. 

The 15-step phasing of the Durban Ports Development Master Plan is as follows: Cruise Terminal; Automotive Terminal; Entrance Channel Widening and Deepening; Point Container Terminal; Multi-Purpose Terminal; Pier 2 Berth Deepening; SACD Site for Container Storage; Bayhead and Langeberg Roads Upgrade; Maydon Wharf Channel Deepening; Dry Dock; Maydon Wharf Container Terminal; SA Navy Satellite Station; Second Access Road; Island View Dig Out; Pier 1 Container Terminal Expansion.
The Durban Cruise Terminal redevelopment is now completed. The Automotive Terminal still needs to be developed. The Point Container Terminal is one of the first developments undertaken. Some of these developments are interconnected as some of the functions need to be relocated to accommodate the expansion. There is a need to upgrade the roads nearby to maintain consistent accessibility to the port in the case of floods for example. The Maydon Wharf channel needs to be deepened and widened to accommodate larger vessels. The dry dock is the vessel maintenance centre and a critical, value-adding function. After the naval base is relocated to Richard’s Bay, the Pier 1 Container Terminal Expansion will be expanded in that space.

The development is aligned with the Container Segment strategy to improve capacity and efficiency of the port and to improve commercial performance. The KZN Ports Master Plan must be approved and gazetted – this process is targeted to be completed by mid-August for approval. They are in the process of moving the head office of the Durban port. The main activities are underpinned by the rationale for optimising construction activity to capitalise on market demand. They want to optimise the cost per activity while still moving fast. There is a projected 8 to 10-year timeline for trebling port capacity from 3 to 11.2 million TEUs.

The Back of Port relations operations plan has three major pillars: Durban Logistics Park, Cato Ridge Intermodal Terminal, and Ambrose Park. The Durban Logistics Park will operate as an intermodal facility to support the hub strategy in the short-to-medium term with the provision of containers, truck staging, and the automotive cluster. The Cato Ridge Intermodal Terminal is a private sector initiative to establish a back-of-port intermodal facility and a logistics and industrial cluster. It aims to assist with decongesting the Port of Durban and support freight transition from road to rail. Ambrose Park is a piece of land adjacent to Bayhead Road which will be used as a truck staging centre and back of port facilities to alleviate the load on the port and also to provide an alternative road to Bayhead Road so there is an optional route. 

The ports are strategic assets and the approach taken has been to integrate private sector parties to mitigate the areas that the public sector entities may not have the best strengths. By providing the basic economic infrastructure the TNPA is activating private sector interest. 

The phasing of the Richards Bay Ports Development Master Plan is as follows:
New roads and bulk services at South Dunes for sites 4 & 5; Operate ISO LNG at Berth 606; Expand rail facilities; Expand roadways; Consolidate South-32 bulk; New Mega Chrome Yard; New Mega Chrome Berths 802 & 803; Expand Bulk Stockyard; Expand Liquid Bulk Precinct and new LNG Precinct; New LNG Berth 207; New SA Navy Base at Naval Island and Pelican Island; New Neo bulk Berths; New Container Handling Berth 605; Power Ship Cruise Terminal; Green Belt Offset; New Berth 210 – Liquid Bulk.

The ports of Richards Bay, Ngqura, and Saldanha have been earmarked for floating solutions which are gas-powered generation, with Richard’s Bay being a major hub. There is already a high industry demand for gas and there is existing connective infrastructure connecting Richard’s Bay to the rest of the economy. 

The status of the plan is that international experts have been contacted to validate the Master Plans. The TNPA is expecting feedback at the end of June and forecasts completion by October 2022. They have engaged stakeholders and port users in all three precincts and they have established a KZN Ports Expansion Programme Provincial Steering Committee. This comprises multidisciplinary provincial stakeholders with the mandate of providing strategic oversight over the development of the Ports Expansion Programme. On security concerns around Maydon Wharf, a contract has been awarded to secure and fence off the Maydon Wharf Precinct, and the roads in the Maydon Wharf Precinct are under Transnet National Ports Authority.

The TNPA has subdivided the ports system. Of the eight ports it oversees, it has clustered them and developed projects. The first project is a new manganese storage terminal in Ngqura which should be in operation within the next five years. The plan is to consolidate ports into specialised cargo. The Port of Ngqura has the capacity to be a multipurpose port and at the project's completion, it will have a container terminal in its western precinct, the manganese, multi-purpose and break-bulk facilities in its central precinct, and a liquid bulk and energy store in the eastern precinct. The port has a balancing tank for peak periods and for storing goods when demand is low, this also reduces the load on the harbour as the cargo does not need to stay on the ships.

The Port of Port Elizabeth in Gqeberha has begun its phased decommission and relocation of its utilities to the Port of Ngqura. The container terminal is planned for July 2022, and the liquid bulk, multi-purpose, and bulk ore terminals are set to be decommissioned by 2027 to allow for waterfront development in the area. The installation of the appropriate infrastructure and equipment in the Ngqura port is a priority because it will help to decrease the turnaround time in the ports. The projected start date for construction in Ngqura port is March 2023, with operationality in 2027. 

Alongside port expansion, there are plans to increase the capacity of the rail lines in Ngqura. This will increase the capacity, growth, and revenue of the port and upgrade the links between the ports and the mines. Steps have already been taken to upgrade the rail lines. Further construction is planned with an end date of 2027 as well. Ford has chosen to use the Gqeberha terminal which necessitates rail development to handle this load. This terminal is also therefore going to be specialised as the motor hub, and there is also a need for commercial and hospitality development. 

On the liquified natural gas (LNG) terminal project in Richard’s Bay, the TNPA is currently working ahead of schedule and so the targeted operational date of 2023/24 is within reach. In the Ngqura precinct, the TNPA has a joint development agreement with Transnet and the Central Energy Fund to develop a particular project for the gas-fired power station. 

Mr Andrew Shaw, Transnet Chief Strategy and Planning Officer, presented on the planning and segment positioning of rail and fulfilling the requirements of economic growth through rail as a logistics solution. The current investment approach is to increase from around 100 million tons to over 150 million tons in mining specifically. They see the opportunity to grow revenue significantly but they will need to partner with the private sector to expand that capacity, mainly because of the significant cost. There are project plans in place for chrome, ferrochrome, iron ore and manganese. Containers, automotive and agriculture also provide significant opportunities.

 The focus will be to increase market share to support manufacturer growth. Rail’s impact on GDP for the containers and automotive sector is approximately 18.9% which is more than in the mining sector, 5.4%. Rail’s impact on agriculture’s GDP is 12.5% and so those two groups are significant markets to prioritise when growing rail. The plan is to introduce new train operators to capture market share, and allow private sector operators in the slots which they do not use in selected corridors. Another important option is to seek additional grants from government for rail infrastructure expansion and modernisation.

Ms L Bebee (ANC) asked if – given the current economic outlook – it was worthwhile investing in port infrastructure given that it provides no immediate return on investment. She wanted details on the Transnet Group’s gearing ratio so the Committee can have a clearer idea of how much they can borrow and the strength of its balance sheet.

Mr Nhanha commended the Transnet Group for its clear and concise presentation. The Port of East London has good future planning included in the Master Plan as it has enormous economic potential. He felt the Port of Port St Johns has great potential with a community in need of an economic injection and he implored Transnet to consider it in its plans going forward. 

Mr Nhanha wanted clarity on the effect the recent flooding had on the Durban port infrastructure, expansion plans, as well as business confidence

Mr Nhanha noted that recently environmental groups have opposed Transnet's expansion plans due to the environmental impact they would have. He asked to what extent Transnet had engaged with these groups and if they have been able to reach a compromise.

Mr A Arnolds (EFF) noted that the ports and terminals are key engines of economic growth for South Africa and that Transnet is responsible for their effective and efficient growth. South Africa has four of the world’s least efficient ports and asked how Transnet planned to remedy this.

Mr Arnolds asked if there has been a clear separation of roles between Transnet and the National Port Authority, and if so, what they were.

Ms W Ngwenya (ANC) asked about the current state of railways and goods and passenger trains. Had Transnet been able to develop rail capacity to accommodate the shift from road to rail and what are the details on that. She requested an update on the private sector partnerships to improve the export capacity of fully built automotive units and improve parking facilities at the East London and Port Elizabeth ports. 

Ms Ngwenya enquired about the identity of Transnet’s stakeholders for the year 2022, specifically for the KZN port. She asked if Transnet National Port Authority had appointed its board yet, if so, who the chairperson was, and if not, when the board would be appointed. 

Ms Ngwenya asked why South Africa’s ports have lagged behind other African nations such as Kenya and Nigeria. She suggested that it would be beneficial to travel to some of these nations to learn how they have overcome the challenges South Africa is currently facing. 

Ms T Modise (ANC) asked Transnet what the turnaround time was at the Durban port and how it compared with international benchmarks. She asked if private sector companies have expressed interest in working with Transnet on the infrastructure development plan. 

The Chairperson asked about transformation at the ports. Historically the shipping and mining sectors have been difficult to access by the previously disadvantaged groups. 

Transnet response 
Ms Derby responded to Ms Bebee’s question by acknowledging that the current economic climate is strained due to the Covid-19 pandemic as well as other geopolitical events such as the war in Ukraine. However, this creates an opportunity for South Africa as the world realises how centralised certain goods are and moves to finding alternative sources. Manufacturing is a job-intensive practice and the best time to ensure that the country has efficient logistics systems is now. The challenge South Africa faces compared to some other countries is the great distance between the ports and the inland zones. Therefore another economic opportunity presented by the development of port infrastructure is that nearby manufacturing zones will need to be developed. She did concede that this is an expensive undertaking and that Transnet would need government’s support as it could not afford to do it alone.

Ms Nonkululeko Dlamini (Transnet Group CFO) replied about the gearing approach, they have a long-term view that accounts for the expected income from their operations, but with an understanding that they need to raise money from the capital markets to continue their projects. The project will take 10 years before there is profit and so there is a five-year plan that states that the ideal gearing ratios should be between 40-45%. With this Port of Durban expansion, the focus is on utilising third-party money effectively to continue construction and support economic growth. The goal is to continue the project and structure it in a way that does not overburden the balance sheet of Transnet. Ms Derby noted that the ratio approved by the treasury is 50% so they are within the norm. 

Mr Silinga agreed that there is a great opportunity with these ports and said that the aim of the project is to take each port to its maximum capacity. They do not want to underfund certain ports and therefore lead to their demise. On the Port of Port St Johns, they had not considered it yet and they would have to consider the issues surrounding the port before they could engage on it substantively. 

The impact of the floods cut across a range of Transnet divisions, with Transnet Freight Rail having suffered the most. The impact on port infrastructure was relatively moderate but still significant with many workshops being flooded. The cost of repair is in the billions of rands.

On expansion plans, the flood damage galvanised the team and highlighted just how necessary these developments are. Specifically planning for the projected volumes and creating alternatives before they are needed. This has led to the expediting of the development of the Bayhead Precinct, the truck staging area, and a revision of the stormwater master plan at the canals to prepare for more frequent flooding. They are working with the KwaZulu Natal Government and eThekwini Metro Municipality to expedite these plans. 

In terms of business confidence, there has been positive feedback because businesses understood that the flooding was a natural hazard and so they were still willing to work with Transnet going forward. The National Port Authority is very active in stakeholder consultation, whether through the Ports Consultative Committee or the National Port Consultative Committee. Since they are in the last leg of conceptual development, they will be going back to all the stakeholders, including the environmental groups, for intense consultation. The Group does accept the imperative of environmental sustainability in the ports.

Ms Derby reiterated that the impact of the floods was significant and that it took three days for the port to resume full operation. It was a challenge restoring Bayhead Road and the TNPA did well to deliver on that project. The Group is far along in developing an alternative route to increase the capacity out of the port. Bayhead is already back to its full capacity, but the view is that it should be bigger regardless. The cost of the floods approached R6 billion.

On improving the performance of local ports, Ms Derby referred to the special purpose vehicles (SPVs) which are crucial for solving two distinct issues. Firstly, improving Durban port’s performance ranking by creating clear maintenance practices and protocols to avoid situations where equipment becomes too damaged and must be replaced. Secondly, having adequate machine equipment, and backup machines on standby so that when maintenance takes place productivity is not lost. The partnership with Pier 2 helps to solve this operational and funding issue. In the case of Ngqura, it is a commercial partnership with the aim of getting the port to a capacity of 2 million TEUs. It is currently at 1.5 million TEUs. They need to get a partner that controls cargo to create greater value and create more jobs in the area. 

On separation of roles between Transnet and TNPA, Ms Derby noted that a TNPA board has been appointed and TNPA needs to be seen in content and in form as a subsidiary of Transnet. However, there is a conflict between the 2006 Ports Act and the 2008 Companies Act, which supersedes the Ports Act, that needs to be resolved before the TNPA can be properly established as a subsidiary of Transnet. Transnet has already worked on a governance structure that would ensure consistency in how the Transnet Group governs its subsidiaries once that is resolved. 

Mr Silinga admitted that TNPA has underperformed in the terminals’ operational performance. However, TNPA provides a landlord role to the terminal operators who are issued licences to operate in the ports and so it is important to note that the underperformance of the ports is not solely a result of TNPA underperformance but an indication of the performance of the terminal operators themselves. He takes the point that the port is uncompetitive compared to other countries. He noted that they do in fact visit other ports to benchmark and take lessons from them. They have been to many of these ports to identify opportunities for better performance. 

The turnaround time for ports is benchmarked at 50 hours. In the last three quarters of 2021/22, the turnaround time for the Durban ports was 93 hours in Q3 and 97 hours in Q4, Q2 was affected by the riots in KZN and so the time rose to 114 hours. There is underperformance in anchorage hours at the port which is 74 hours against a benchmark of 50 hours. The average for last year was 90 hours. The ports are performing well in berth productivity which is benchmarked at 56 moves per hour and it performed at 42 moves per hour. 

Mr Silinga puts the underperformance of the ports down to investment. The current culture is to wait until it is too late to invest in upgrading. Economic infrastructure is a necessary condition for economic development. Investing in infrastructure before the demand is high allows the country to capitalise when there is a demand.

There is a detailed list of stakeholders because each port is legally required to have a port consultative committee. To address priority number 7, TNPA has forged strategic partnerships with some of the neighbouring countries to ensure they are able to collectively acquire and maintain certain capital-intensive machinery. 

On transformation, Mr Silinga replied that TNPA operates at the required transformation levels required by law, but he feels that they are insufficient for the strategic objectives of the country and that it needs to be much higher to reach sustainable levels of transformation for the country. TNPA is looking at the opportunity presented by expiring leases to increase the level of transformation.

On automotive units, Ms Derby replied that three ports were automotive terminals: Durban, East London and Port Elizabeth. Transnet has appointed one manager, Wandisa Vazi, who is responsible for all three auto terminals. This will lead to consistency in the business model across the system. Durban will remain the primary export port for automotive units because of its proximity to Johannesburg. They hope to increase the number of vehicles moved by rail and streamline the process at the ports to reduce the turnaround time. It is important to benchmark against relevant competitors such as Thailand, and not just the average benchmark. 

The ports need to improve their throughput and Ms Derby conceded that Transnet has allowed ports to be used as points of storage instead of keeping the time in storage to a minimum. They have made it clear to manufacturers that they are no longer keeping vehicles at the ports for longer than the minimum specified period, and if they remain at the ports they will charge more. This is crucial for maximising the capacity that is currently available to them as well. 

The Chairperson thanked the Transnet delegation and wished them well on reaching their targets as this work is necessary for the post-Covid economy.

The minutes of the previous meeting were adopted and the meeting was adjourned. 


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