Transnet was warned about the crisis – but did nothing

Road Freight Association CEO Gavin Kelly said state-owned entities are absolutely useless and should not run important infrastructure like ports and rail networks.

Kelly made these comments during an interview with Biznews during which he lamented the dismal state of South Africa’s logistics infrastructure.

His comments come amidst a growing crisis at South African ports that are crumbling under incompetence, corruption, and mismanagement.

Transnet Port Terminals managing executive Earle Peters revealed that it will take four and a half months to clear the backlog at the Durban harbour.

Durban’s two piers lost 265 operational hours in September and October, causing more than 20 vessels to wait at outer anchorage, with berthing delays averaging up to 18 days.

The situation at Cape Town’s harbour is equally concerning and has forced shipping and logistics giant Maersk to compensate for the congestion.

Maersk delinked Cape Town’s harbour from its Far East-West Africa service, which shows the extent of deterioration at local posts.

A study by the GAIN Group put a monetary value to the economic impact of Transnet’s collapse – R1 billion a day.

What is particularly concerning is that many stakeholders warned Transnet for years about the problems, but nothing was done.

Kelly told Biznews that many industries, including mining and road freight, have raised concerns over the last ten years. “It raises the question of why nothing was done,” he said.

He said the reality is that people in charge of the ports, railways, and other important infrastructure are not doing what they are supposed to.

“Transnet should have known they were heading for a disaster and devised a plan. This did not happen,” he said.

“The Road Freight Association could no longer let state-owned entities that have proven to be absolutely useless run crucial logistical nodal points and infrastructure points.”

He urged the government to give crucial infrastructure like ports and railway networks to the private sector so it can be run efficiently.

It is not enough for the government to ask the private sector for money as funding alone will not solve the problem.

“Our members will not invest a dime if they do not have control of how the money will be spent and the decisions which will turn the entities around.”

Transnet a bigger catastrophe than Eskom

FNB Wealth and Investments’ Wayne McCurrie said Transnet is a bigger catastrophe than Eskom and is causing severe economic damage.

Speaking to Business Day TV, McCurrie said most South Africans do not realise the extent of the disaster because it does not touch them personally, like Eskom’s load-shedding.

“The average South African don’t realise what a complete and utter catastrophe Transnet is. It is way worse than Eskom,” he said.

McCurrie’s comments align with Krutham managing director Peter Attard Montalto, who also said the crisis at Transnet is more complex than that at Eskom.

Attard Montalto explained that Transnet has quasi-regulatory functions on top of its deteriorating rail and port infrastructure.

Transnet’s finances are in such a mess that it asked the National Treasury to take on R61 billion of its debt.

Attard Montalto said it is not a surprise, as Transnet had already been breaching loan covenants with banks at the beginning of the year.

He said that the Treasury has little choice but to come through in some form and provide support for Transnet.

“If you did not do these bailouts, they would come back to bite you ten times worse later regarding defaults and investors pulling out of the country.”

The problems at Transnet have severe economic consequences for the South African economy as it impacts many of the largest sectors.

Stanlib chief economist Kevin Lings said it placed 68% of the country’s GDP at risk as companies increasingly cannot import and export goods.

South Africa’s imports and exports combined comprise 68% of the country’s GDP, effectively meaning that R3.1 trillion of R4.6 trillion of GDP depends on Transnet.

Imports are particularly important as the output of South Africa’s productive sectors, such as mining and manufacturing, have been flat over the past 20 years while retail spending has grown massively.