THERE is pressure on both Transnet Port Terminals and its preferred private sector participation (PSP) partner, International Container Services Inc (ICTSI), to demonstrate that the working relationship can turn the terminal’s performance around and prove a sound investment for the PSP’s shareholders.
Expectations are high. Transnet Port Terminals (TPT) is expecting the partner to increase the asset value of Durban’s Pier 2 Container Terminal operation from R4-billion to R10-billion over the 25-year contract period and has set ambitious key performance indicators which must be reached within four years.
In an open discussion with the media at Durban Container Terminals (DCT) last week, managing executive of Durban Terminals, Earle Peters, answered questions on the structure of the agreement, Transnet’s expectations and how the partnership will operate.
The legal framework for the private-public entity which will operate DCT Pier 2 is a post-state capture experiment that might fly.
Legally, the license to operate the terminal and lease of the land from Transnet National Ports Authority (TNPA) will still be held by TPT, which will sub-contract the terminal’s operations to a new joint venture (JV) company. This is subject to approval by TNPA. TPT will own 50% plus one share of the JV company which will be governed by a board of five members, two of whom will be from Transnet.
Alternatives to the PFMA
The JV company will not be a State-Owned Entity (SOE), and decisions, including procurement, will be made by the board. Peters says they are in negotiations with National Treasury to finalise details of which Acts will govern these procedures. It is hoped that the JV company will be able to operate outside of the Public Finance Management Act (PFMA). This has the potential to dilute political influence in decision-making, but could also reduce transparency. The JV company is required to achieve a minimum of level 4 BBEE status.
With regards to staffing, Peters says that ICTSI will bring in two new executives to fulfil the roles of CEO and head of operations. These two new executives will be working with TPT’s current 1,988 employees at DCT Pier 2 who will be seconded to the new JV company with no changes to their existing terms of employment.
Peters said that negotiations with organised labour had been ongoing since the process started and that management was working with the two recognised unions affected by the partnership. “A delegation from Transnet Port Terminals is due to travel to the Philippines where ICTSI is based within a few weeks to learn first-hand how the company operates,” Peters said.
Part of TPT’s motivation for the PSP is to lift DCT Pier 2’s global competitiveness, which requires new equipment and access to international shipping networks.
Investment
The amount that ICTSI offered to pay for its shares in the JV was a consideration in the selection process, Peters said, as this investment will be used to fund other TPT projects. “The new JV will need to generate its own cash to invest in DCT Pier 2,” he said.
KPIs
There are provisions in place for non-performance by ICTSI, according to Peters. Within four years, the JV company is expected to increase efficiency across three measures by 140%, 55% and 75% within four years of operation. The table below details these KPIs.
Table 1: JV efficiency targets
| SWH
(moves/tons/units per ship working hours) |
GCH
(moves per gross crane hour) |
TEUs
(twenty-foot equivalent units handled per year) |
|
| 2012/3 (best year benchmark) | 62 | 27 | 1.9 million |
| Current | 50 | 18 | 1.6 million |
| Four-year target | 120 | 28 | 2.8 million |
Timing
The joint venture is expected to be in place in time for the new operating period which starts in April 2024. “Optimistically, we would like to see things happening in three to five months,” said Peters.
The JV contract is for 25 years, with the option of extending it for another five years.
About ICTSI
ICTSI is a leading independent global developer and operator of origin and destination container terminals. ICTSI is headquartered in Manila, Philippines and is a publicly-listed company, traded on the Philippine Stock Exchange and the Over-the-Counter Markets Group in the United States. The company operates 34 terminal operations in 20 countries across six continents.
The company operates four terminals in Africa:
- Kribi Multipurpose Terminal in Cameroon;
- Onne Multipurpose Terminal (OMT), which manages and operates berths number 9, 10, and 11 of the Federal Ocean Terminal at the Port of Onne – the main port in Nigeria’s oil-rich delta region;
- CTSI D.R. Congo S.A., a natural gateway to Kinshasa and the country’s only terminal with modern infrastructure and equipment located on the Congo River; and
- Madagascar International Container Terminal Services Limited is a private Malagasy company created in 2005 to manage the Toamasina container terminal.
It is ranked the eighth-largest container terminal operator in the world, according to twenty-foot equivalent units (TEU) equity volume. In the 2021/22 financial year, ICTSI handled over 12.2 million TEUs and generated more than 2.2 billion USD in gross revenues from port operations. ICTSI has 11 000 employees.
