ATC211129: Report of the Portfolio Committee on Public Enterprises on the oversight visit to Transnet, dated 24 November 2021

Public Enterprises

Report of the Portfolio Committee on Public Enterprises on the oversight visit to Transnet, dated 24 November 2021

 

1.         Introduction

The Portfolio Committee on Public Enterprises (the Committee) undertook an oversight visit to Transnet operations in Cape Town. The Committee visited Transnet Port Terminals and Transnet National Ports Authority at the Port of Cape Town.  This oversight was undertaken on 4 May 2021.  The Committee also visited the Transnet Engineering and Transnet Freight Rail at the Bellville Campus and Transnet Property on 5 May 2021. 

The main purpose of the visit to Transnet was to familiarise the Committee with the operations and capabilities of the company, furthermore to assess the developmental impact of the infrastructure development and the operations on the immediate communities in terms job creation, skills development, promotion of local businesses and transformation.  

1.1       Delegation

The Committee delegation included the following members:  Mr K Magaxa (Chairperson of the Committee, ANC), Ms J Tshabalala (ANC), Ms J Mkhwanazi (ANC), Mr N Dlamini (ANC), Ms C Phiri (ANC), Mr G Cachalia (DA), Ms M Clarke (DA), Ms O Maotwe (EFF), Mr E Buthelezi (IFP) and Mr N Kwankwa (UDM).   The delegation was accompanied by the following parliamentary officials: Mr D Mocumi (Committee Secretary), Ms Y Cele (Committee Assistant), Ms Y Landu (Principal Communication Officer), Ms L Bramwell (Researcher) and Mr R Mnisi (Content Advisor).

 

2.         Visit to Port of Cape Town

The Committee was received by the Transnet delegation at the Transnet National Ports Authority (TNPA) Training Centre at the Port of Cape Town.  The Transnet delegation was led by the Chief Executive Officer of Transnet Port Terminals, Mr Velile Dube.  The Committee was taken through presentations of Transnet’s operations at the Port of Cape Town, which included the following:

• Transnet Port Operations (Mr V Dube)
• Transnet Freight Rail Operations (Chief Executive Transnet Freight Rail – Ms Siza Mzimela)
• Transnet Engineering Operations (Chief Executive Transnet Engineering – Mr Ralph Mills)
• Transnet Property (Mr Kapei Pahlamohlaka).

 

The Committee was also taken through presentations regarding the following:

• Transformation, staff complement and demographics, skills development, job creation and capabilities at the Transnet Schools. (Chief of People – Mr Khaya Ngema)
• Promotion and support of Small Micro and Medium Enterprise’s (SMMEs), Enterprise Development initiatives (Chief Procurement Officer – Mr Vuledzani Nemukula)
• Corporate Social Investment (CSI) Initiatives (Head of Foundation – Mr Molatwane Likhethe).

 

2.1       Transnet Port Terminals

Transnet Port Terminals only operate two of the nine terminals in the Port of Cape Town, seven terminals are operated by the private sector. The two terminals operated are the Cape Town Container Terminal (CTCT) and the Multi-purpose Terminal (MPT). Transnet Port Terminals at the Cape Town harbour are experiencing the following challenges: traffic congestion; berthing delays; poor operational performance and Poor equipment availability, reliability and poor state of IT infrastructure. However, there are interventions underway to improve flow of containers into and out of Terminal Waterside and Landside. Transnet will also improve availability and reliability of equipment, improve planned maintenance and the response time to breakdowns.  Operational turnaround plans for the Western and Eastern Cape Container and Automotive Terminals Future include:

1. To grow volume @ NCT from 578 909 to 800 000 TEU and from 613 870 to 850 000 TEU at CTCT.

2. To increase productivity from 17 to 24 GCH at Cape Town, from 18 to 26 moves at Ngqura and from 17 moves to 22 moves at PE.

3. To increase containers moves per ship working hour from 40 to 50 at Cape Town and Ngqura and from 30 to 36 in PE.

4. To reduce export container dwell time from 7 days to 5 days or less at or less at Western and Eastern Cape Container Terminals.

5. To reduce truck turnaround time from 42 min to 35 min in Cape Town and from 45 min to 35 min at Ngqura by 31 March 2022.

6. To keep health and safety measures (disabling injury free rates) below 0.7% for the next year.

 

2.2.1 Container Terminals

In terms of the CTCT, Transnet highlighted four main changes to their operations, namely; the weather, operational times, port equipment, and staff. All these challenges contribute to port congestion:

 

• Weather: The operations of the CTCT are mostly affected by weather, November to March there are high winds, and June to August there are high waves.  These weather conditions have to be taken into account, as only five months out of the year weather conditions are ideal working operations. To address this, TPT is also purchasing new equipment (cranes) that can withstand the high winds of the Cape.  At the moment, the cranes cannot be operated in high winds for safety concerns.
• Operating times: The port is operational 24 hours, Transnet is in consultation with its logistics chain, which currently operates the standard 8-hour work day from 8am to 4pm, for them to operate 24 hours as well, which will help with the congestion in the port. Furthermore, Transnet will be introducing a truck booking system in September 2021 as they did at the Port of Durban, this will also assist in relieving the congestion of trucks at the Port.
• Port Equipment: Transnet Port Terminal (TPT) has deferred midlife refurbishments due to operational requirements and budget constraints.
• Staff: During the height of the Covid-19 pandemic in South Africa, Transnet was left short staffed, so they are currently upskilling their crane drivers so that they have multi-purpose skills.  This will ensure that Port Terminals will not be left short staffed again.

 

2.2.2     Multi-purpose terminal

 

The multi-purpose terminal is the smallest terminal in the Port of Cape Town. It handles manganese, food (sugar, maize, barley, etc) and refrigerated (reefers) containers. In the presentation, Transnet noted that the MPT is also facing equipment issues, the harbour cranes are giving problems. 

 

2.2.3 Cape Town Multi-Purpose Terminal Operational Improvement Initiatives

These listed below are initiatives that the Cape Town Multi-Purpose currently is embarking upon:

a.         Improving the flow of containers through the Terminal via a truck appointment system.

b.         Improving availability and reliability of equipment through availability of spares.

c.         Improving planned maintenance.

d.         Improving response time to breakdowns through filling of critical vacancies.

d.         H-berth Quayside wall rehabilitation.

e.         H-berth shed rehabilitation.

f.          Rail road refurbishment.

 

2.3       Transnet Freight Rail

The Bellville depot plays a critical role in the successful execution of the train service in the Cape Metropolitan area. It provides an integral link to Metrorail and PRASA. It also provides services to luxury passenger trains such as the Rovos rail and Blue train. It is a key link between the port of Cape Town and surrounding grain customers to enable the export and import of agricultural products. It is a local market to stimulate growth for containerised traffic.

 

Bellville depot comprises the following businesses:

 

• A depot for maintenance and support of the Freight business.
• Training centre to be set up as a business going forward.
• Locomotive and wagon depots.

 

2.3.1 People

Bellville operations has 2 Full Time Union representative (1 United National Transport Union (UNTU) and 1 South African Transport and Allied Workers Union (SATAWU) and a total of 17 shop stewards (13 UNTU and 4 SATAWU).

Targeted initiatives ongoing to address / improve:

• Rail Network Maintenance Support
• Condition of Real Estate and facilities
• Provision of developmental and promotional opportunities
• Affordable housing for employees (PMG)
• Lack of Uniform Clothing and PPE.

 

2.3.2 Training focus areas

• Train Driver Pipeline Project
• Lean Six Sigma –White, Green & Yellow Belt
• ROMP (Railway Operations Management Programme)
• Belong Programmes-Speed of Trust; Crucial Conversations; Team Effectiveness
• Assessor / Moderator Training, Employee Relations Training
• Safety Supervisor Behaviour Coaching
• Leadership Development Programmes -Supervisory Development, First Line Management Leadership, Middle Management Leadership, Women in Logistics.

 

Key Focus Areas/Strategic Projects

The key focus areas/strategic projects for TFR are the following:

• Grow market share (branch lines and containerized traffic) Establish BelConas the preferred back of port facility to decongest the Port of Cape Town.

• Upgrade key branch lines to enable the road to rail focus for the corridor. Optimize train lengths to maximize the slot capacity utilization on the Cape mainline.
• Grow agriculture volumes in the Cape region –Increase reefer capacity for Citrus and Grapes from Kakamas and Hexriver Valley to the Port of Cape Town.
• Improve Customer/Port/Rail/PRASA interface to reduce delays.
• Prioritize end-to-end collaborative supply chain planning & improvement initiatives.
• Optimize asset utilization -densify corridors with current assets.
• Customer-led solutions/ investment -Invest in rail loading & offloading equipment.
• Investment in and use of Technology and smart intelligence to manage crime effectively.

 

2.4       Transnet Engineering

In an overview of Transnet Engineering, the following were highlighted in terms of operations, and human resources:

 

Challenges: The theft and vandalism of infrastructure, particularly copper cables, was highlighted as one of the key challenges. Of the total amount spent on maintenance, approximately 30 per cent is spent on correcting theft of cables. However, it is a national problem, which needs a holistic, and sustainable solution, it cannot only be addressed by Transnet.   

 

Opportunities: The aim is to move road traffic to rail, this will only work when the cost of rail is cheaper than the cost of road.  To do this, the traffic on rail needs to be increased, so that the maintenance of the railway tracks can be borne by all the users of the line.  This will make the use of rail more economic and efficient when compared road transportation.

2.4.1 Skills Development

 

The School in Belville specialising in Artisan training for Diesel Electrical Fitter, Electrical fitter, Wagon Fitter and Examiner & Repairer for the rail industry. Other initiatives currently at school are the following:

•           Youth Development: Currently the Bellville school has 11 artisan learners, with a capacity for 24 learners.

•           9 Examiners and Repairers just completed their training and were placed at various maintenance depots, and 4 Wagon Fitters are preparing for their trade test.

•           The school offers Adult training: High voltage training, Upskilling of employees on the New generation locomotives and Wagons, Technical Worker Basic training as well as soft skills.

 

 

2.4.2 Locomotive Maintenance Profile

 

The locomotive maintenance profile consists of the following:

• Schedule maintenance A, B, C and D programs.
• Unscheduled maintenance.
• In-Service preparation of trains.
• Break down work.
• Loco’s maintain D35, D36, 18E, 20E.
• Budget R175 million 2020-2021.

 

2.4.3 Wagons Maintenance Profile

 

The wagons maintenance profile consists of the following:

• Schedule Wagon Maintenance in the workshops.
• Unscheduled maintenance.
• In-Service trains inspections.
• Testing and Certification of Cargo Trains.
• Respond to breakdowns and derailments in service.

 

2.5       Transnet Property

Transnet Property has a large portfolio of buildings, which the majority are dilapidated, and needs to be redeveloped. Some residential residences will be sold to employees at reasonable prices, as some employees cannot afford houses and cannot get bonds. Furthermore, Transnet Property is planning on entering a partnership with the private sector to transform 1 Adderley Street into a mixed use property with residential, business and retail operations.  This will provide low-cost housing in the City Centre.

 

2.5.1 Property Strategy: Key Strategic Initiatives

The property strategy’s key strategic initiatives consist of the following:

• Consolidation of Operating Divisions and Transnet Business in Transnet owned buildings.
• Development of Strategic Partnerships Framework with like-minded development partners.
• Development/Redevelopment of mixed-use developments in 1 Adderley Street, Culemborg and Salt River to support logistics and back of port operations.
• Consolidation of Real Estate Functions throughout Transnet Group under one centre of excellence.
• Consolidation of Transnet Real Estate Asset Register.
• Disposal of all residential properties including Mass Housing.
• Development of Asset Management Framework for Transnet Property Portfolio.

 

3.         Socio-economic impact

These are the socio-economic impact of the operations in Cape Town.

3.1       Job creation and skills development

At the core of Transnet training is a special focus on youth development and the development of pipeline through bursaries for employees. A total of 2747 employees and 181 young people have been developed year to date from the various skills development initiatives. Transnet Academy is committed to employee and youth development through various skills development initiatives. Skills development of the employees is focused on Operational, Technical, Functional and Leadership Development training. The amount spent on training is R20 112 412,82. The total number of employees who benefited is 2 747 and the total number of youth who benefited is 181.

 

3.2       Promotion of local small and medium businesses

Transnet approached National Treasury to approve set asides for certain contracts for local suppliers where Transnet does business. National Treasury approved this initiative but with only TFR mentioned in the letter. Transnet has gone back to request that the approval cover other Operating Divisions. Feedback has not been received yet. This will see local suppliers benefiting immensely from local procurement and this will lead to creation of jobs and poverty eradication.

           

4.        Interaction with stakeholders

The Committee also interacted organised labour and representative of local business. The issues that workers raised related to the conditions of service and benefits of unskilled and low paid employees, particularly the lack of housing allowance. Local business complained that, SMMEs in the Cape Town region do not have a relationship with Transnet and were not given opportunities.

 

Other issues raised include:

• Contract employees do not have job security
• Management of contract not properly managed
• Cleaning and waste contracts were not properly managed
• Skills transfer not happening as there are no opportunities to train, however workers are satisfied with training and bursaries of Transnet
• SCM processes are too slow resulting in the plants spending weeks without service providers to keep the plants hygienic.

 

5.         Observations

The Committee made the following observations:

5.1     A concern was raised that not enough was done to create space for SMMEs in        the port terminal. Small coal miners and other SMMEs cannot afford the containers, which do not get prioritised for shipment at the Port of Richards Bay. 

1. Clarity was sought as to whether Transnet has any plans to invest in Ports outside South Africa, as part of the Transnet Africa strategy.
2. Clarity was sought in terms of the initiatives to improve the efficiency of the                                                     Cape Town harbour, and the reliability and timeliness.   
3. A concern was raised regarding the poor and dilapidated state of Transnet properties, and the lack of maintenance.
4. A concern was raised that the initiatives to curb cable theft do not seem to be effective and the problem persist.
5. Transnet was commended on women representation in executive and senior management, and the work of the Transnet Foundation through the Phelophepa train.
6. Clarity was sought on the importing of spare parts and work done to manufacture parts locally.
7. Clarity was sought on the revamping of the rail and technology systems, timeframes and detailed information sought.
8. A concern was raised that the School of Excellence continues to train boys whereas there is women soccer in South Africa.
9. A concern was raised regarding the fact that Transnet has not yet established itself as a port of entry in Africa, and losing some business to the Mozambique ports.
10. A concern was raised regarding the efficiency of the equipment, especially a report that cranes that are procured are alleged to only carry five containers per hour.
11. A concern was raised regarding the fact that the Port of Cape Town TPT has left the liquid bulk to the private sector. What plans are there to use the terminals carrying the greater bulk of cargo?
12. Clarity on outsourcing, how much of revenue goes to Transnet and private sectors of port terminal operators.
13. A concern was raised regarding a plan to lease certain parts of TFR operations.
14. Clarity was sought on the targets and volumes being moved nationally and locally.
15. A concern was raised regarding the support of SMMEs only focusing on cleaning instead of manufacturing of rolling stock equipment.
16. A concern was raised on asset register for the management of Transnet’s assets.
17. Clarity was sought on the timelines for the corporatisation of the TNPA, however, the Committee raised an objection to any attempt to the privatisation of the port.
18. Clarity was sought on the funding model for Transnet’s capital investment programme.
19. A concern was raised on the procurement transgressions in relation to any steps taken by management to ensure a fair and transparent Supply Chain Management process.

 

6.         Recommendations

The Committee made the following recommendations:

The Minister of Public Enterprises should ensure that:

1. The Port Manager should establish a stakeholder forum which should include representatives of organised labour, business and City of Cape Town in order to address all the concerns that have been raised in this report. The Port should send a quarterly report to the Committee on progress made with resolving the issues raised.
2. The Port of Cape Town should improve its developmental role through robust outreach programmes to communities and schools, and a deliberate effort should be made to visit, recruit and develop young people from rural and farm communities. Furthermore, investments should be channelled towards developing disadvantaged and marginalised communities.
3. The contractors working at the Port of Cape Town use local suppliers as sub-contractors and pay them in time.
4. The management of the Port should consult and communicate with civil society, local business and organised labour on a regular basis.
5. The management of the Port develop a corporate social investment programme that will focus on advancing the developmental objectives of government, such as providing skills development and bursary opportunities for young people in the community and improve the socio-economic conditions of the adjacent communities.
6. The economy, efficiency, and effectiveness of the port operation is enhanced through setting of timelines of the corporatisation of Transnet National Port Authority (TNPA).
7. The funding model for the corporate turnaround plans in making capital investments prioritising key focus areas or strategic projects for Transnet is presented to the Committee in the next quarter.

 

Report to be considered.