Transnet Restructuring Progress Report: briefing

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
21 June 2006
TRANSNET RESTRUCTURING PROGRESS REPORT: BRIEFING

Chairperson: Ms M P Themba (ANC, Mpumalanga)

Document handed out:
Transnet Progress Report

SUMMARY
Transnet briefed the Committee on progress of its restructuring programme. The briefing looked at global trends in the transport and logistics industry, a macro-economic view of South Africa’s transport and logistics industry, an overview of Transnet’s plans to fulfil their mandate, and an update on the restructuring of Transnet. Emphasis was placed on the development of South African port docking facilities to improve the capacity of freight transport and new larger cargo ships. More importantly, the need for quicker ship turnaround and offload and loading time was stressed. Special emphasis was also placed on the redirection of land freight transport from road to rail. Transnet also maintained that their new mandate did not include responsibility for transporting passengers. Important concerns were raised over job creation and Union consideration in the restructuring of Transnet, the diminishing of small towns, and the development of new ports to complement existing ones.

MINUTES
Transnet presentation and progress report
The Chairperson welcomed the delegation from Transnet and asked why the Chief Executive Officer (CEO) of Transnet was not available as agreed.

Ms Sue Lund, Transnet General Manager: Policy and Research, explained that Ms Maria Ramos (Transnet CEO) had to attend an important executive meeting and that she would be replacing Ms Ramos. She apologised for the replacement.

Ms Lund’s presentation began by highlighting the global trends in the transport and logistics industry, which contextualised Transnet’s restructuring. She provided a graphical presentation on Gross Domestic Product (GDP) growth; a topographical global presentation on container traffic between 2003 and 2008; highlighted global transport trends in containers; illustrated the container ship size evolution; and provided a Durban Container Terminal (DCT) projection of South African growth. Ms Lund also provided detail on global transport trends in bulk commodities; China’s share of global commodity usage; Africa’s share of natural resource reserves, and illustrated major global oceanic trade routes. Emphasis was placed on the need to facilitate larger container ships and quicker turn-around time for these, which would entail an expansion and improvement of docking infrastructure.

Secondly her presentation looked at the macro economic view of South Africa’s transport and logistics industry. This entailed a graphical presentation of South Africa’s macro-economic indicators; a pie chart of freight transport routes and costs; a modal split of traffic; and detail on Transnet’s constraints and ageing infrastructure for rail, ports, and pipelines. Special emphasis was placed on the shift from road freight transport, which was found to be a major a cause of damage to road infrastructure, to rail operation along the primary rail system.

The third part of Ms Lund’s presentation considered Transnet’s plan to align its strategic focus with the economy. This plan emphasised Transnet’s mandate to support South Africa’s export-led growth strategy, and reducing the cost of doing business. It looked at port activity and freight transport in South Africa. Transnet’s strategic direction was discerned as a focus on rail, ports, and pipeline operation and infrastructure, and a focus on key corridors and clusters of trade. With respect to shipping, quicker turnaround time and larger docking facilities were needed. Her presentation also highlighted the structure of Transnet and its independent regulators. Additionally, it presented Transnet’s implementation programme entailing a four point turnaround plan, and capital expenditure (CAPEX) 5-year core plan for rail, ports, and, pipelines.

Finally Ms Lund’s presentation provided a restructuring update, which entailed a look at the disposal of non-core assets that included transport facilities, and agreements reached with trade unions on disposal. (See document for relevant detail).   

Discussion
The Chairperson thanked Ms Lund for her informative presentation and opened the floor for questions or comments.

Ms N Ntwanambi (ANC, Western Cape) asked why it has taken so long to dispose of assets, as the system of transformation and restructuring has been in place for more than five years. She was concerned about consultation with trade unions and asked whether they had been consulted with regard to restructuring. She asked how the communities would benefit from the expansion of the various container terminals. She, with regard to passenger transport sales, asked if unions were consulted, and what would become of the houses subsidised for rail workers. The concern was whether the transfer of passenger transport companies would include the transfer of workers. Finally with regard to deepening of ports, Ms Ntwanambi asked if this process would include Saldana Bay.

Mr N Hendrickse (UIF) explained that his understanding of port spending entailed a focus on turnaround times for cargo ships. He asked if international expertise would be brought in to assist with the turnaround of work ethic and methodology needed to make the process a success. Secondly he asked what would be done to revitalise small towns that had previously been a hub of activity around the rail transport system and junctures. He was concerned that these towns would diminish, as they had already shown signs of regression.

Mr D Gamede (ANC, Kwazulu-Natal) referring to the global movement of containers asked whether this movement, especially concerning South Africa, was characterised by imports or exports. With regard to commodity usage, he asked how current and relevant this graph was. Referring to the movement of containers on the road Mr Gamede asked if and how Transnet contributed to the rehabilitation of road infrastructure. He asked what plan had Transnet put in place to move transport of freight from road to rail. Finally Mr Gamede asked what was being done to facilitate visits by major passenger liners, and whether harbours could be deepened for this purpose.

The Chairperson asked whether workers are being trained to facilitate the advance in technology. With regard to rail housing, she asked for a brake-down per province with the progress made on housing. On the redirecting of freight transport from road to rail, Ms Themba asked when this process will start and if it has started how far it has progressed. She asked how many jobs would be created by the pipeline development between Durban and Gauteng. On completion of new ports, the Chairperson asked if this process would create jobs. Finally, she asked if workers would be losing jobs with the pipeline replacement, and were there any talks between Transnet and the Unions regarding this.

Ms Lund responded to the question of Union consideration, by arguing that extensive engagement with Unions was part of the process and that it was not possible to negotiate a transfer and disposal of non-core asses without their approval. She also stated that the Unions have agreed to a new labour contract as to how the disposal process would unfold and how unions would be consulted throughout the process. Ms Lund said that no information was available to her at the time to adequately answer the issue related to rail workers’ housing. She made note of it and said that she would investigate it and supply the Committee with the answer at a later date.

With regard to the construction of ports and community benefit, Ms Lund explained that all construction projects would entail the creation of construction jobs; however skilled workers will have to be brought into these areas to assist. She could not provide quantitative projections of job creation however. With regard to job losses on the pipelines, Ms Lund argued that there would be no job losses. With regard to road rehabilitation, she said that Transnet did not contribute to the rehabilitation of road infrastructure. She argued that the redirection of freight transfer to rail was a priority, but it would be difficult.

Ms Lund maintained that the challenge was not to produce a cheaper service but a more reliable service, which would entail the development of a scheduled rail system. She claimed that traditionally the train would await a full load before it embarked. Ms Lund maintained that the current system ensures no reliability. In answering the question on container imports and exports to and from South Africa, Ms Lund said that she did not have the correct figures. She argued however that this concern has implications for transporting on rail and “dead legs”, which is rail traffic that has few or no goods in it. Ms Lund maintained that a country with an imbalance of imports and exports would always have dead legs.

With regard to the increased use of technology and international expertise, Ms Lund explained that the work ethic has to be changed to maximise the productivity of ports and this would be a challenge. She said that Transnet was in the process of finalising an agreement with an international port operator for training of local port operators to optimise efficiency. On the projection of commodities Ms Lund claimed that an update could be provided for the Committee, but the projection supplied in the presentation is accurate. With regard to passenger ships, Ms Lund explained that the passenger ships do not deal with Transnet but rather engage with the National Ports Authority (NPA) for docking and birthing. Transnet can only provide the necessary facilities for this process.

On complementing new and old ports, Ms Lund explained that ports had a big influence on development; however as cities grew more pressure was placed on the port for development. The development of new ports played an important part in catering for the volumes of freight that has to be imported and exported. With regard to passenger rail facilities, Ms Lund explained that these facilities included Translux, Metro Rail, and Shosholosa Meyl. Finally on small town deterioration, Ms Lund argued that the reality is that the secondary rail lines that run through these areas are not commercially active and that there was not enough traffic to justify the expense of running trains on this line. She maintained that previously these lines were subsidised by the government. Ms Lund argued that if Transnet were to fulfil its mandate it had to focus on the primary rail network. Ms Lund explained that the Department of Transport has suggested that the secondary network should be housed in a different public entity, but it was not clear how that would be accomplished.

Mr Hendrickse argued that the concern over urbanisation and the deterioration of the rural areas was an important concern. He maintained that the marketing of the main line could be improved to act as an incentive to bring traffic off the road and onto the rail. He challenged Transnet to market the rail line better.
               
Ms Ntwanambi reiterated her concern that road accidents could be avoided by better marketing of the rail network.

Ms Lund argued that transporting passengers was not the mandate of Transnet. She explained that the main concern was general freight transport on the rail system. Ms Lund further explained that it was not a matter of price, but reliability which would be improved using a scheduled system.

Mr Hendrickse asked what would be done about the trucks that were ruining the roads.

Ms Lund argued that it was one of Transnet’s topmost priorities to attract traffic to the rail system so that road deterioration could be halted.

The Chairperson thanked the delegation from Transnet and the meeting was adjourned.