OPENING UP SOUTH AFRICA’S GATEWAYS TO THE WORLD

Dear Fellow South Africans,

Last week, I launched the first export shipment of goods produced by South African companies destined for other African countries under the preferential trade provisions of the African Continental Free Trade Area (AfCFTA) from the Durban port.

We can expect many more products and many more shipments to follow as South African companies sell South African made goods into the massive African free trade area. Exports to AfCFTA countries already account for nearly a quarter of South Africa’s global exports. This figure will now increase quite dramatically.

South African companies have a great opportunity to take advantage of the AfCFTA by exporting their goods into the rest of the African continent. In order to take this great opportunity up, as a country we need to ensure that our products make it from the factory gate onto the ship and head towards their destinations with the least possible delay and at the lowest possible cost.

For some years now the efficiency and competitiveness of our ports and rail network have been in decline. In order to give our companies the ability to take up these export opportunities we need to fix our logistics architecture.

Transnet, which operates our ports and freight rail lines, has had to contend with severe challenges, including the effects of state capture, the impact of the COVID pandemic, natural disasters and rising levels of theft and vandalism of its infrastructure. As a result, the volume of goods transported on our rail network has decreased significantly, forcing more companies to use trucks and causing congestion on our roads.

Working together with the private sector, we are turning the situation around, guided by the Freight Logistics Roadmap that was crafted by Transnet, government and social partners. The roadmap outlines a clear set of actions to stabilise and improve Transnet’s performance in the short term and to fundamentally reform the logistics system in the long term.

To ensure this work receives dedicated attention, we established the National Logistics Crisis Committee (NLCC), which is chaired by the Presidency and brings together all of the relevant government departments to drive a coordinated response to the logistics challenges.

We have also established Corridor Recovery Teams which bring Transnet, the private sector and independent experts together to improve the performance of strategic rail and port corridors.

This single-minded approach to improving performance is already showing results. For example, the number of ships waiting to berth at the Port of Durban – which has experienced severe congestion in recent months – reduced from more than 60 ships in mid-November to just 12 ships at the end of January.

At the Port of Cape Town, which is preparing for the important fruit season, Transnet has deployed new leadership and is putting in place several measures to improve its capacity in the short term. Seven new cranes, which are used for moving and stacking containers, were delivered to the port last month, and the number of work shifts is being increased to improve vessel turnaround times.

In addition to these short-term measures, the Freight Logistics Roadmap includes far-reaching reforms to modernise our logistics system and enable much greater investment in infrastructure. These reforms will introduce private sector investment and competition in port and rail operations, improving efficiency and bringing down prices, while ensuring that infrastructure remains owned by the state.

A key milestone in this reform journey will be the implementation of ‘open access’ to the freight rail network, which will allow private rail operators to invest alongside Transnet Freight Rail for the first time.

Another key step is the introduction of strategic partnerships in container terminals, which will enable new investment to expand port capacity and upgrade equipment. Progress has already been made with the appointment by Transnet of an international container terminal operator for the Durban Pier 2 terminal. Transnet will retain 51% ownership of the terminal and no workers will lose their jobs once the partnership is established. The private partner will have full management responsibility for the terminal and will contribute both capital and expertise to improve its performance.

The process of reform takes time and there are no quick solutions to the challenges facing Transnet. However, the steps we are taking now will not only improve performance in the immediate term, but will also create a truly competitive and efficient system into the future.

This week’s Mining Indaba in Cape Town will showcase the enormous potential of the mining industry to drive economic growth and job creation. The actions underway to improve the logistics system will help us to unlock this potential, given that mining companies depend on the rail network and ports to compete in global markets.

From the work already underway, we have shown that it is possible to overcome the barriers to growth by working together in partnership. We are building momentum and have begun to see the results.

As more and more of our products leave our shores, whether to the African continent or other parts of the world, more companies will thrive, more investment will be made and more and more jobs will be created.

With best regards,