Measures to improve Transnet freight division; with Minister

Meeting report

The Chairperson welcomed all attendees and apologies were submitted on behalf of Mr A De Bruyn (FF+, Free State).

Opening Remarks by the Minister

Mr Pravin Gordhan, Minister of Public Enterprises, stated that Transnet was making steady progress in improving both of its corporations on the one hand and investing in the future on the other in terms of infrastructure, personnel, and equipment. While gaps still relate to operational expectations in various sectors, there are clear plans to improve each component of the organisation. He added that a multiplicity of initiatives is required regarding the number of cranes available in ports and other essential vessels for water operations. He also mentioned the ongoing issues of copper theft, the conditions of railway lines, the destruction of infrastructure, which both the state and Transnet have not yet managed to control, and the continuous battles the Department still face in settling matters with the Chinese suppliers of locomotives.  

Presentation by Transnet: Improvement Measures

Mr Aluwani Ramabulana, Board Member, Transnet, said that the board was making great efforts to bring efficiencies such as collaborating with the mining industry so that some of the procurement areas related to operations can be expedited. The mentioned efforts would then bring improvements through the undertaking of technical assessments on various corridors to ensure that pending issues can be identified and fixed.

He said that the Auditor-General of South Africa (AGSA) planned on auditing Transnet on operational performance, and the board was now driving this area harder to bring positive improvements despite the challenges with the locals. The board has also partnered with the original equipment manufacturers (OEMs) to strengthen the engineering within the entity to help bring back the longstanding locals and fix the maintenance issues.

Mr Pepi Silinga, Chief Executive, Transnet National Ports Authority (TNPA), said that in the TPNA division, the rate of target achievement improved for the marine and landlord functional areas but for the infrastructure, regulatory, and authority functional areas, a decline in target achievement was recorded for the 2022/23 period.

The following projects have had a CAPEX investment of over R13.4 billion over the last five years and they include, but are not limited to, the following areas:

• Richards Bay: Relocation of SA Navy to Naval Island and Pelican Island 3.
• Durban: Upgrade of Bayhead and Langeberg Roads, container hub development, entrance channel widening and deepening, automotive terminal expansion, and Maydon Wharf channel deepening.
• East London: Increase automotive terminal capacity.
• Ngqura: Liquid bulk terminal berth construction, conveyor belt, Ngqura manganese terminal, and the LNG terminal and breakwater.
• Port Elizabeth: Relocation and rehabilitation of liquid bulk and manganese. 
• Mossel Bay: Development of cruise terminal.
• Cape Town: Truck staging area and automation, expansion of CTCT, refurbishment of dry docks, and development of Culemborgv logistics park.
• Saldanha: LNG floating ship regasification unit.
• National Projects: Hydraulic Mooring System.

Please see the presentation attached for details.

Mr Jabu Mdaki, Chief Executive of Transnet Port Terminals (TPT), said that the Container Freight System is a critical component of the National Freight System and directly impacts South African trade and export competitiveness. He stated that the CSS was designed to foster improved maritime connectivity by establishing an internationally competitive hub port system, leveraging partnerships to rejuvenate the port terminal businesses and reform the container rail business. He stated that the port calls play a role in TPNA, TPT, shipping lines, and other parties, and operational challenges are incurring from people, equipment, and operations.

World Bank Container Port Productivity Index Vessel

Durban

• Operations: Link free days to container discharge and implement Dual Cycle Operations.
• Planning: Improvement in equipment reliability and availability.
• People: Implement a strategic mindset and incentive scheme.
• Technical: Enter into long term agreement with OEMs.
• Commercial: Mandatory Pre-Planning for all vessel transactions.

Ngqura

• Operations: Amending ex Line Service to be completed at least 24 hours prior to vessel berthing to allow for any housekeeping.
• Planning: Implement Pre-Planning (focus vessel approach)
• People: Improve changeover discipline.
• Technical: Kalmar RTG Drive upgrade.

Cape Town 

• Infrastructure:  Increased number of plug points by 200 to a grand total of 3 200.
• Equipment: Spare Parts Contracts in place: RTGs, Haulers and Reach Stackers.
• People: Incentives in place to motivate high performance.
• Systems and Processes: Remote Working: To improve efficiencies, working in high winds (Finalising Business case and feasibility study).
• Stakeholder Collaboration: Night runs fully resourced to service trucks at night to decongest the terminal.

He further stated that the TPT equipment investment plan was established to ensure the standardisation of equipment and spares to improve plant reliability. However, there is no incentive for OEMs to invest in developing local product support because of the piecemeal award of equipment acquisitions and supporting works. The maintenance costs are high, there is low reliability and availability over the life of assets, and there are limited interactions with OEMs for the life of the equipment.

Mr Bonginkosi Mabaso, Chief Commercial Officer, Transnet, said that the Transnet Freight Rail (TFR) turnaround strategy was anchored on stabilising rail performance and growing volumes across all critical corridors. The TFR Corridor Model is designed to improve decision-making, responsiveness to customer needs, and integrated problem-solving in the rapidly changing business, market, and policy environments. Key binding constraints include locomotives, infrastructure, and security. The benefits of Transforming TFR into a digitally enabled business through a digital partner are yard planning, load siding, train execution, train offloading, transaction reconciliation and billing, train planning, and scheduling.

Ms Portia Derby, Group Chief Executive, Transnet, said that a new digitised Transnet would offer the following:

• TFR: Infrastructure manager, 3rd party access, competitive and dynamic.
• TE: Component manufacturer, leasing company and operating in competitive spaces.
• TNPA: Massive Construction Programme.
• TPT: Competition in container terminals, and partners in DCT and NCT.
• TPL: LNG pipelines and accumulator tanks in Durban.
• TP: Property portfolio revalued to enable value-based partnerships, modernisation of own buildings and property developments in partnership.

Please see the presentation attached for details.

Discussion

Ms W Ngwenya (ANC, Gauteng) welcomed the presentation and asked about the state of the readiness of the roadmap as it was planned to translate Transnet’s commitment into reality, as stated by President Cyril Ramaphosa in his 2023 address. She asked what the development of the restructuring of the Transnet Breech Rail was, as it was established to create a separate infrastructure manager for the rail network.

She inquired about the number of ports that have international and terminal operations that have a direct link to key trading partners and the timelines that have been put in place to ensure that all vacancies in the ports are filled.

She asked whether the ports in Mossel Bay, Richards Bay, and Saldhana Bay were making a profit following the report that they were not in the previous period. 

She then enquired if there were any vacancies on the board and if there were plans to fill them in due time.

Ms L Bebee (ANC, KZN) asked where the money to fund the plans to increase capacity in freight and ports came from, and whether Transnet has been able to secure any private equity partners for capacity expansion projects.

Mr M Nhanha (DA, Eastern Cape) stated that Transnet came well prepared and from the presentation, it was clear that there was effort put into it. For that reason, he stated that he had a lot of clarity-seeking questions and would forward some in written format. He applauded the collaborations between Transnet and the mining industry. He recalled that in a previous meeting, he had raised his concerns about the issue of manganese and its detrimental effects on South African roads, particularly in the Eastern Cape in Nelson Mandela Bay. He stated that this was a serious issue and that the response that Transnet had given was that the problem was to be dealt with by the Department of Transport. However, the entity had committed to engaging with the mining companies. He asked whether the collaborations mentioned included the issue of trucks on roads, particularly those going to Nelson Mandela Bay.

He inquired about the organisation’s debt collection model and highlighted that in the presentation, progress was mentioned. He asked for the mechanisms used in debt collection and whether this included debt collectors and whether there is value for money in this mechanism.

He stated that the Minister of Finance had made available R5.8 billion to improve infrastructure efficiency, and asked how the money has been spent and whether there are any notable improvements.

He recalled that in the past, there was s target set of about 35 cranes to be moved hourly. He asked how this compares to the targets that have been set.

Directing the question to the Minister, he asked what the vacancy rate was within the Transnet board and the impacts these have on the operations.

He recalled that in the previous year, there was a six-month ban on scrap metal. He asked if the Minister was satisfied with the outcome of the ban because, as was mentioned in the presentation, there has been theft of over 13 km of cable.

He was concerned about the 20-40 cents return on a R1 investment on the container corridor and asked about the risks that come with container theft in terminals and if it forms part of the loss alluded to in slide 26 of the presentation.

Mr Nhanha mentioned that he had read about the closure of Carlton Centre, but he was worried about the rampant nature of building hijackings and illegal occupation of buildings, especially in the Johannesburg CBD. He asked whether the entity had put in place measures to ensure that the property does not fall prey to building hijacking and illegal occupation.  

Ms T Modise (ANC, North West) asked what the cost estimation was to expand capacity or improve efficiency, and whether there are timeframes set for implementing and completing the mentioned projects.

She welcomed the board’s initiative to work with the mines because there has been an issue from community members about trucks that carry minerals on the roads. 

The Chairperson appreciated the presentations and applauded Transnet for their work and consistency in delivering good professionalism and ethical leadership.

He asked about what the most appropriate way would be to deal with cable theft, and if the entity takes insurance for the cables, as it is very expensive to restore and maintain them. He added and inquired whether the entity compared notes with other related organisations in the railway industry to determine whether the stolen cables were not circulated within the same industry.

He asked if the entity declares dividends to its shareholders because of an increase in its profit.

He inquired on whether the entity has any submarines and what instruments are used to ensure surveillance under and above the surface. He also asked if there were any drones as part of the fleets.

The Chairperson asked if the issue of loadshedding affects the systems in any way.

He stated that Transnet needed to explain its medium-term to long-term view on meeting some of its policy imperatives as outlined in the National Development Plan, especially with issues related to transport logistics in its different forms.

He highlighted that from the presentation, he noted that Ms Sizakele Mzimela had been replaced by Mr Mabaso and asked what this meant as there was no apology registered.

Responses

Minister Gordhan stated that Ms Mzimela had a bereavement and needed to be excused.

He said that the Transnet roadmap is made to relate to Operation Vulindlela as announced by the Presidency and hopes that by June, there will be a product to talk about from government and Parliament. He mentioned that he investigated the ports in Singapore and the Tianjin port in China, and both ports are fully automatic. Currently, Transnet has started to upgrade the skills of its workers to improve efficiency.

He said there were vacancies on the board currently under consideration within government, and hopes are that these vacancies would be filled by the end of June.

He elaborated that the money used to fund most projects comes from within Transnet and private partners that respond to various Requests for Proposal (RFPs). He added that there is currently a collaboration between Transnet and mines; however, he expressed that he was unhappy with mines having a habit of going to the media whenever it suits them without engaging in constructive discussions.

He stated that a targeted number of trucks should be removed from roads and he would appreciate it if the likes of Mr Nhnaha could give feedback by July on whether they are satisfied with the number of trucks on the roads of Eastern Cape. He explained that government policy requires all products to have a net movement of transport from road to rail and more effort will have to go into such.

The Minster indicated that part of the R5.8 billion made available by National Treasury was for post-flood repairs in KwaZulu-Natal, there is also a net shortage of cranes but Transnet is discussing with organisations like ZPMC for the supply of cranes. He mentioned that scrap metal contributed to reducing cable theft, but the bottom line is that syndicates are involved, and law enforcement needs to invest more effort in resolving the issue.

He indicated that contingency plans often involve switching from electric trains to diesel trains depending on which part of the network is impacted. He added that there is a lot of overlap between the Passenger Rail Agency of South Africa (PRASA) and Transnet with the utilisation of infrastructure and Sasol became the one entity that paid R1 million worth of dividends, which is a move in the right direction. He added that the aim of the State-Owned Enterprises (SOEs) was to remove Transnet’s reliance on the fiscus and move towards being self-sustainable.

Ms Derby said that the commitment that the entity made is to establish an infrastructure manager by 01 October to be responsible for the maintenance and selling of slots to both TFR operating companies and private sectors. Transnet also works closely with PRASA to share systems, especially in the metropolitan areas where conversations about establishing infrastructure management have been held, so that the reflective tariffs could be passed to prevent inequity in the system. She said there was a transaction where a partner for TPT was brought in, in Pier 2, in Durban, which happens to be the biggest container terminal, and all the internal work has been finished. She added that it was now left to DPE and National Treasury as shareholder representatives to make the final decision.

She clarified that from the mentioned R5.8 billion, R2.9 billion was used to refund the entity for returning to service of the container corridor after the floods. The remaining R2.9 billion is being used to refinance their return to service of the longstanding locomotives.

She said that Transnet discovered that it could ban exports of scrap, and the organisation had been given a list of entities that could buy scraps. These entities are mostly minimal and are likely having conversations amongst each other to price the scrap around the same amounts during auctions. These companies are also more concerned about copper cables than other scraps because electric cars are coming onto the market, extensive wiring is needed, and this is not a problem that only Transnet can solve on its own. Transnet has also tried insuring copper, but the risk is so high to the point where the cost is prohibitive and unsustainable. Therefore, the plan moving forward is creating a system that is fundamentally diesel. The benefit of moving to diesel is that there is a reliable rail system. Although it may impact greenhouse gases, it can be trusted.

She stated that there is also an increase in capacity on the rail to export manganese and that there is a need for a ban on manganese on the roads. She said that the impacts of loadshedding were felt, although the offices are not greatly impacted as much, however, there are times when ports in Saldanha Bay are shut down occasionally for 6 to 12 hours to help the mining sector.

Mr Silinga said that about 92 terminal operating licenses are held by 38 terminal operators and the cargo goes global. He agreed that Mossel Bay, Saldanha Bay, and Richards Bay ports were reported to be distressed from a range of perspectives. He stated that, in a way, the Port Authority is a monopoly, and it is hard for monopolies to make losses because the methodology used by the Port Regulator of South Africa (PRSA) protects them from making losses if efficiencies are in place. This needs to be balanced against the future costs of replacing such assets because replacement costs might be higher than what has been put aside.

He explained that Transnet did not use debt collectors but made use of TNPA employees and if a response is not received from debtors, court orders are served to the respective parties using private law firms. He added that this process is quicker and brings value for money to the entity.

He mentioned that each project gets scoped and the estimates for the projected costs of projects that will increase capacity improve as the projects become executed.

Referring to the question on profits gained from properties, he stated that the income before the billion odds is relatively from the property portfolio.

He added that there was no need for a submarine as the entity has a close relationship with the South African National Defence Force (SANDF) where they can help each other with projects such as reconfiguring the capacity of ports.

Mr Silinga stated that drones were a critical component of a recently developed strategy, although initially, they were not being used. The entity was, however, scaling up the security side of things, such as ensuring the appropriate certification of people who will operate them. Such a strategy aims to reduce the human element to some extent and increase technology to reduce instances of breach of security.

Addressing the issue of loadshedding, he said that the backup system has already been alluded to and extensive work has already been done in determining the levels of consumption of utility services and what is required from a critical point of view. He explained that different cities have different protocols for loadshedding, but most cities have tried to protect the ports although their protection is limited, as is likely when loadshedding reaches beyond stage 6. The plan is to have all ports supported with alternative energy by December 2024 so that they can withstand intense stages of loadshedding. He added that a collaborative contract with the port in Maputo about GCEs had just been completed and it went well and that South Africa chairs the Port Management Association of Eastern and Southern Africa (PMAESA), where discussions about leveraging common resources and circulating limited resources are held.

Mr Mdaki addressed the questions directed at TPT. He said that regarding vacancies, some of the skills that are being sought after involve automation, and what the entity does is train lifting equipment operators. There is currently a training programme in progress, which is expected to be finalised by the end of the year. He mentioned that regarding the technical skills, the entity was in the process of aligning their requirement of technical operators with the skills required and how these can be utilised with short-term requirements in terms of OEMs.

He said that the gross crane moves per hour (GCH) targets are at 25 moves per hour for foreign contents and this is a work in progress. Given the challenge with equipment, he highlighted that targets were not being met. He added that this was driven by the availability of equipment on land sites as these land-based equipment feed containers to ship to shore cranes that would then process the containers. 

He added that there are collaborations with some industries in addressing the issue of loadshedding, and an example would be in the Saldhana Bay municipality, where notable impacts were seen. In this instance, iron ore users came forward to make a suggestion which Eskom accepted. 

Mr Mabaso, in addressing the question on the number of manganese trucks on the roads, said that with the initiatives shown in the presentation, 67 540 trucks would be removed from the roads and they would appreciate feedback from members that are close to the Eastern Cape and Northern Cape regions about what the reduction visibly does.

He said that the impact of cable theft was quite significant and across the organisation, there are about 3 800 cases recorded. From this number, 1 400 sit in the container corridor which, one out of six corridors’ accounts for 40% of all cable theft. He explained that this issue could not be addressed by ensuring the infrastructure primarily because the impact of it is mostly felt by the operational and production stoppages. Over the previous financial year alone, there was a R3.7 billion loss reported to be as a result of cable theft, and out of the mentioned, only R300 million was used in fixing the line.

Addressing the question around the private sector, he stated that Transnet is working closely with the private sector on various long-term and short-term projects, which has been very fruitful to the entity.

Mr Kapei wa Phahlamohlaka, Chief Executive of Transnet Property, regarding the question around Carlton Centre, said that he took it more as a comment that the property needed to be guarded. He confirmed that the entity was currently using the property, that there was no threat of invasion, and that the property had been put into the market and would not be left vacant until the new buyer occupied it.

Closing Remarks by the Minister

Minister Gordhan said that he hoped the presentation covered the initiatives that would work against factors beyond the entity’s control, like cable theft and showed an optimistic outlook of increasing services to the country’s economy in the immediate term. He said that Transnet is a major contributor to what future generations will inherit and the Department’s job is to stabilise the organisation, which is currently being achieved, to ensure that it is self-sustaining as well as to ensure that the right partnerships are appropriate. He added that relationships across the continent still need to be built to reach a stage of solidarity for a more collective approach toward intercontinental trade. He thanked the Committee for a constructive engagement and Transnet for their good work.

Consideration and Adoption of Committee Minutes

The minutes of the meeting held on 24 May 2023 were adopted by the Committee.

Meeting adjourned.