BMI Country Risk and Industry Analysis, a Fitch Solutions company, has warned that the stated desire by the uMkhonto weSizwe Party (MKP) to reverse the privatisation of the Durban Container Terminal and the Richards Bay Terminal will drive away private sector involvement in the country’s ports sector.
Headed by former president Jacob Zuma, the MKP won the majority of votes in KwaZulu-Natal in the May 29 elections, putting it in a position of influence especially from the perspective of local communities and labour, although it failed to garner enough votes to govern the province on its own.
As South Africa’s political parties thrash out a path forward after last month’s election in which the ANC fell below the required majority, the focus has been placed on the likely influence of the MKP on the country’s ports industry, particularly after South African ports were ranked among the worst in the world.
The Transnet National Ports Authority has appointed Philippines-based International Container Terminal Services Inc as the preferred operator of the Durban Container Terminal (DCT) Pier 2 at the Port of Durban while also appointing the Vopak Terminal Durban and Transnet Pipelines (TPL) Consortium Venture as the preferred bidder to develop and operate a new Liquefied Natural Gas (LNG) terminal at the Port of Richards Bay.
In an interview with Business Report on Friday, Chiedza Madzima, head of operational risk and South Africa research at BMI, said private sector participation in the KZN ports could be dealt a blow if the MKP had its way in the running of the provincial administration.
“In a scenario where the MK commands influence in KZN, our view of their aims is guided by their manifesto, which pledges to reverse the privatisation of the Durban Container Terminal and return the Richards Bay Coal Terminal to full Transnet state ownership,” Madzima said.
If pursued, “these intentions by the MK Party could potentially decelerate the involvement of private sector entities and foreign investors” in South Africa's port sector.
This comes at a time when the ports sector in South Africa is saddled with operational constraints despite some signs of improvement.
Moreover, the World Bank has just adjudged South Africa among countries with the worst ports in the world.
Under its 2023 Container Port Performance Index (CPPI) released last week, the World Bank revealed that four of South Africa’s ports ranked lowly. Cape Town was ranked in last place of the 405 ports listed in the CPPI, while Ngqura (Coega) at 404, Durban at 398 and Gqeberha at 391.
Transnet Port Terminals operates the container terminals at these four container terminals.
However, Madzima noted that although the MKP could “leverage” on its provincial positioning in the KZN legislature to “negotiate concessions, particularly regarding labour policies and the engagement of local communities”, it would fall short of the required clout to effect national legislation on ports.
She said that even if the MKP was to enlist the assistance of the EFF, their voting threshold in Parliament – where legislative changes have to be debated and passed – would still fall short.
“Even if the MK partners with the left-leaning EFF to pursue their goals, together they wouldn’t have a majority,” Madzima said.
“Indeed, their combined votes amount to less than half of the total vote share (and) they would lack the power to directly obstruct legislative initiatives aimed at reforming the ports sector.”
Madzima said the DA’s electoral gains in the Western Cape signified a favourable environment for port modernisation and privatisation initiatives at the provincial level, reflecting the party’s reform-oriented agenda.
Even though the ANC had won just 40% of the national vote, President Cyril Ramaphosa’s party had demonstrated some willingness to sort out the mess at the country’s ports sector.
The ANC has announced its preference for a Government of National Unity (GNU) and invited a number of smaller parties after failing to win an outright majority in the elections.
With the DA appearing to be keen to join the ANC under a GNU administration, the combination of the two parties could help to facilitate policy momentum for South Africa’s ports sector.
“The ANC along with the DA, holding a combined parliamentary majority exceeding 61%, are likely to facilitate policies that further the current momentum towards revamping the logistics sector,” Madzima said.
“This bipartisan support underscores a strong disposition towards strategic development in South Africa’s port operations.”
The World Bank in its latest report identified the efficiency of port infrastructure as a key contributor to the overall port competitiveness and international trade costs.
It underscored that poorly run, ports and terminals – particularly for containers – can often be the main sources of shipment delays, supply chain disruptions, additional costs, and reduced competitiveness.
“The result is that instead of facilitating trade, the port increases the cost of imports and exports, reduces competitiveness, and inhibits economic growth and poverty reduction,” noted the World Bank.
BUSINESS REPORT