Question NW878 to the Minister in the Presidency

Reply:

a) what are the details of the staff complement of the hub

The Transnet National Ports Authority (TNPA, which is the main implementing agency for MTM, has a total dedicated staff complement of 20 employees dedicated to the upgrades to existing facilities (Initiative 5). The TNPA has a dedicated Operation Phakisa Programme Director to oversee its role as an implementing agency.

(b) what amount has been budgeted for this project in each year since 1 January 2014.

Transnet SOC Ltd secured funding of R1.02bn in 2014 for the Upgrade of Existing Ship Repair Facilities (Initiative 5). This has increased to R2.7bn as the true scope of the upgrade became clearer and necessary technical studies have been conducted to inform the true costs. Of the R2.7bn, an amount of R152m has been spent for the upgrade to the berth to host the Offshore Supply Base in Saldanha and R817m allocated for the dredging marine infrastructure to host the New Floating Dock in Richards Bay.

The concessions for new Facilities (An Offshore Oil and Gas Support Hub in Saldanha Bay comprising of 3 projects, a new Floating Dock in Richards Bay and a Boat Building Cluster in East London) are based upon a private sector “fund, build, own, operate and transfer” model.

                                                                                     

(c) what are the relevant details of the reasons behind the delays with regard to

(i) purpose-built oil and gas infrastructure,

The TNPA conducted a feasibility study and Expression of Interest which found that the declining world economy and falling crude oil prices have led to scaling back of offshore oil and gas exploration resulting in weaker demand. This was further exacerbated by onshore shale gas supply in the USA as an alternative to offshore product. Newer generation rigs are more resilient and stay out longer between layups, thereby reducing demand for rig repair. The utilisation rate of the originally estimated 80 rigs of the West Coast of Africa dropped to approximately 40%.

Furthermore, anticipated private sector investment has not materialised owing to poor appetite to invest in high cost fixed port infrastructure resulting from the anaemic demand and business cases, with the exception of the proposed Offshore Supply Base (OSSB) facility. The Offshore Supply Base (OSSB) concession proved particularly challenging to negotiate under the current economic climate and market risks, leading the TNPA to de-risk by taking a flexible approach to the scope of services offered by the OSSB. The TNPA granted the concession for the OSSB to SALDEHCO in April, 2018, three months after the targeted date of December, 2017. In order to reduce the investment risk and improve bankability, the TNPA invested R152m in the berth to make projects more attractive to investors.

(d) what steps are being taken to resolve the delays and complete the projects in each case?  

The TNPA in collaboration with the Saldanha Bay Industrial Development Zone (SBIDZ) has diversified the service offering from exclusively rig repair to marine manufacturing including ship and rig repair, ship building, marine fabrication and marine engineering activities. The TNPA has proposed a revised 3 feet plan to seek operators for fund, build, own, operate and transfer a Mossgas Jetty Marine Manufacturing facility and a Berth 205 Marine Manufacturing facility. The approval of Transaction Advisors is underway.

(ii)Training of 2550 TVET graduates in workplace-based learner programme and 18172 learners in artisanal and semi-skilled programmes:

Currently, 784 learners have been put through workplace based programmes since 2015 and there are 80 more work placements for 2018. Workplace placements have been for the trades such as Boatbuilding, Rigging, Fitting, Welding, Electrical, Boilermaking and Millwright. Further, 620 artisans were trained since 2015 in different trades mentioned above and 1 364 people trained in different skills programmes such as Diving, Welding Inspection, Coded Welding, Offshore Safety, Corrosion Protection, Hydraulics, Pipe Fitting, and composites. About 350 more people will be trained in 2018.  Challenges to work placement relate to a combination of funding as companies require that learners be funded (have stipends) and the constrained economic environment, which has led to closure of companies and retrenchments. The nature of work in the Marine Manufacturing sector is order book based, hence the closure of companies when there are limited or no orders.

Furthermore, some of the Marine Transport and Manufacturing projects that were planned for Operation Phakisa in which the Skills Development targets were based on have

• not materialized or
• Implementation of some projects was delayed;
• there has been low demand for those that have been implemented.

The South African International Marine Institute (SAIMI) is now in the process of engaging with the Marine Manufacturing companies to determine the number of learners that could be accommodated, trades, and costing related to that to find ways to incentivize companies to take more learners. The Sector Education and Training Authority (SETAs) have been approached to collaborate with SAIMI in this regard in terms of creating a pool of funds to fund the stipends. SAIMI will be funding 50 artisans for work placement at PetroSA in January 2019, and more will be funded through collaboration with SETAs and other stakeholders. 

In respect to training of seafarers, the challenge has been the availability of training berths as SA does not have its own ships and therefore is reliant on international shipping companies to provide berths and employment. The South African Maritime Authority (SAMSA) is continuously trying to increase the number of ships on the SA ship registry (there are currently 6 ships on SA registry which can only take a limited number of cadets). SAIMI has also been working with the Department of International Relations and Cooperation (DIRCO) in an effort to secure more berths for SA cadets in different countries.

what are the relevant details of the reasons behind the delays with regard to

(iii) the Richards Bay strategic priority project,

The feasibility study and Expression of Interest (EOI) showed that international investors did not have the appetite to invest in high cost fixed port infrastructure to support a floating dock. The shipping industry has been negatively impacted by the global economic slowdown resulting in cargo consolidation, shipping line conferences (agreement to carry interline cargo) and thus fewer vessels in circulation. Also, the cost of vessel repair continues to favour the eastern ship repair markets (India and China).

(d) what steps are being taken to resolve the delays and complete the projects in each case?  

The appetite for a floating dock in Richards has been confirmed provided that TNPA funds and executes the marine and landside bulk infrastructure to de-risk the project. The TNPA has thus decided to fund and execute the dredging works, berth upgrade and bulk landside infrastructure estimated at R817 million. The project is therefore defined by two streams, namely the infrastructure development stream and the Section 56 concession for a Private Operator to Supply, Install and Operate a Floating Dock.

		Approved	Not Approved	Approved as amended
		Comment:
Dr NC Dlamini-Zuma Minister in the Presidency: Planning Monitoring and Evaluation
Date: