Francois Nortje, director of NT55 Investments and developer of the Port of Gauteng, unpacks the watershed public-private partnership deal announced yesterday by Transnet. Nortje, the parastatal’s most vocal critic, is full of enthusiasm lauding Transnet’s selection of ICTSI, a reputable Filipino company which is one of the world’s leaders in this field – and valued at R135bn on the Manila Stock Exchange. He is not as excited about the second leg in the process, a similar partnership opportunity on rail connectivity, but reckons improving South Africa’s port infrastructure is a positive step towards levelling out the downward economic spiral of recent years. – Alec Hogg
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Relevant timestamps from the interview
- 00:07 – Introductions
- 00:53 – Francois Nortjie on the reason he is interested in Transnet
- 03:08 – On Transnet’s private sector partner ICTSI
- 04:56 – On ICTSI getting the nod over Chinese competitors and how that bodes for BRICS
- 06:46 – On Pier Two in Durban being the lifeblood of imports and exports
- 07:56 – On the likeliness that Transnet would want to run things on their own at some point in the future
- 09:06 – On the possibility that the ships on the Durban harbour will reduce due to a more efficient port operator
- 11:00 – On the rail traffic coming from the Durban harbour to Gauteng
- 14:31 – On the number of conditions the Filipino company have to adhere to to get the licence
- 17:01 – On what this all means for SA
- 19:00 – Concludes
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Edited transcript of the full interview with Francois Nortje
Alec Hogg: We have a logistics expert in our midst, Francois Nortje, the director of NT55 Investments and the developer of the Port of Gauteng. With Transnet’s watershed public-private partnership deal announced yesterday, we turn to Francois for insights. Francois, could you provide some context behind your interest in Transnet and the Port of Gauteng? What are the business reasons driving your involvement?
Francois Nortje: As the developer of the Port of Gauteng, our primary goal is to establish an inland port in Gauteng aiming to enhance logistics efficiency and reduce costs associated with warehousing. Currently, the Port of Durban serves as the main source for approximately 90% of goods transported to Gauteng. However, Durban’s high land costs and geographical challenges make it less favourable for large-scale warehousing. Given the increasing size of warehouses globally and the trend towards third-party logistics, establishing warehouses in Durban proves to be economically burdensome. By situating them in the flat east ramp area between the railway line and the entry point, we can significantly decrease warehouse expenses and streamline logistics operations, eliminating double movements. This presents an opportunity to lower overall logistics costs while simultaneously creating valuable long-term property investments. Trade routes have remained consistent for centuries, and key infrastructure elements such as the N3 highway, the Durban-Johannesburg railway line, and the Port of Durban are permanent fixtures. The properties surrounding the Port of Durban have historically been lucrative investments, and we aim to replicate this success by developing another set of commercial properties that attract pension funds and long-term investors with a horizon spanning 30 to 50 years.
Alec Hogg: Considering your interests, I imagine you’re thrilled about the recent news that Transnet has secured a private sector partner after a two-year process. The selected partner is ICTSI, a reputable Filipino company listed on the Manila Stock Exchange, with a market value comparable to major South African corporations such as Shoprite and Sanlam, and larger than Impala Platinum, Nedbank, and Discovery. It is the new equity partner with Transnet in the Durban harbour.
Francois Nortje: ICTSI is a dynamic entrepreneurial company from the Philippines with a rich history in managing ports. Having started 36 years ago by taking over the Port of Manila, they have since expanded their operations to 20 countries worldwide. Given that the Philippines has a strong maritime tradition, with 7,000 islands. A substantial number of Filipinos are merchant sailors – they account for 25% of the sector’s global workforce. ICTSI’s expertise in running ports is deeply ingrained in the national DNA. Their selection as Transnet’s partner in the Durban harbour aligns perfectly with their background and experience, making them an ideal choice. I commend Transnet on their decision, as I believe they couldn’t have made a better selection.
Alec Hogg: It’s noteworthy that, despite the two-year process, the chosen partner for Transnet isn’t one of the Chinese competitors, which might have been expected due to the political ties between South Africa and China within the BRICS framework. Instead, a Filipino company secured the partnership…..
Francois Nortje: I’m genuinely pleased with the outcome. There were various rumours circulating, and I’m glad that a Filipino company was chosen. Regarding the Port of Ngqura, it hasn’t been awarded yet, and I’m not sure why. Perhaps political factors were involved, potentially related to the Chinese. However, I don’t have any concrete evidence to support these speculations. For my specific interests, the Durban Port is of utmost importance. While the mines utilise other ports like Richards Bay and Saldanha, Durban serves as the primary hub for general goods import and export in the country. I’m excited and eager for the partnership to commence.
Alec Hogg: Do we have any indication of when the collaboration will begin?
Francois Nortje: The announcement by Transnet only mentioned the awards, with no specific timeline provided. Unfortunately, there wasn’t a press conference where journalists could ask questions. Instead, a press release was circulated via email and WhatsApp. We’ll have to wait for further clarification on the timeline, as these processes often take longer than anticipated. However, I remain hopeful that progress will be made soon, and there will be light at the end of the tunnel.
Alec Hogg: Francois, the press release refers to the partnership being on Pier 2, which handles a around three quarters significant of the Port of Durban’s volume and almost half of South Africa’s total port traffic. It’s a substantial operation and a crucial gateway for our imports and exports.
Francois Nortje: Indeed, Alec. Currently, Durban operates with Pier 2, which manages about 75% of the port’s volumes and nearly 50% of South Africa’s total port traffic. However, as part of the master plan, Durban aims to have a total of five piers in the future. While Pier 2 is already operational, additional peers will be developed gradually to accommodate the projected growth in container traffic, which is expected to reach 11.3 million containers annually (from 3.3m today). The Philippines’ involvement in the initial phase is highly encouraging, and it positions them well for potential future collaborations on the remaining peers. The future development of Pier 1, 3, 4, and 5 will provide ample opportunities for similar public-private partnerships. It’s an exciting prospect, and I’m glad to witness the Philippines taking the lead.
Read more: Transnet seeks private boost for SA’s ports and Rail networks amid operational woes
Alec Hogg: So this first step opens the door for further opportunities. However, do you think Transnet will continue seeking private sector involvement for the upcoming peers, or might they prefer to manage them internally?
Francois Nortje: I believe that ICTSI, as the chosen company, will set the international benchmark for port operations, and other companies will follow suit. However, I don’t think all the future peers should be awarded to a single company, as it would create a monopolistic situation. We don’t want to replace Transnet’s monopoly with a private sector monopoly. Each peer should go to a different company to ensure healthy competition. In my opinion, this company will establish the standards from day one, and shipping companies will choose to dock at Pier 2 because of the progress and efficiency they witness there. Competition is crucial, and the most competitive and innovative company will be the first choice. Other companies running subsequent peers will have to match or exceed those standards; otherwise, they may struggle to remain competitive.
Alec Hogg: Looking out at the Indian Ocean, it’s not uncommon to see ships waiting outside the Durban Harbour. Do you think a more efficient port operator will reduce this congestion?
Francois Nortje: Yes, we believe so. I reside in Ballito, and I’ve noticed several ships waiting outside the harbour. However, if you look at harbours like the Port of Los Angeles, the congestion is even greater due to logistics backlogs. It’s not feasible for every ship to have immediate access to the harbour. While there will always be ships waiting at sea, the number may decrease. From the land, it’s not easy to gauge the exact number of ships, as they may be arranged in multiple rows. Nevertheless, congestion is a common issue in many harbours. It’s a unique sight for people living in waterfront properties to see the lights of the ships at night, creating a pleasant atmosphere. I don’t think the sight of ships waiting will disappear entirely, although it may diminish. The crucial aspect is the volume of cargo and how efficiently it is processed. In recent years, our harbours have received poor ratings among the 350 harbours worldwide. Our aim is to improve and move up the rankings, hopefully to reach the top 150 or even better.
Alec Hogg: Indeed, progress from the wooden spoon position to a much higher ranking would be desirable. However, we should also consider the rail transportation from Durban Harbour to Gauteng, which is the country’s largest market by far. Without an efficient rail network, achieving the desired benefits becomes uncertain. What are your thoughts on this aspect?
Francois Nortje: The rail infrastructure is being addressed. Transnet has issued requests for proposals, although I have voiced my criticisms regarding some errors or mistakes in the process. I hope we won’t find ourselves discussing the same issues two years from now. It’s a slow process that sometimes drives me mad, but at least it’s progressing. What’s interesting about the awarding of this tender is that it went to an independent company, someone without a vested interest. I hope the same will happen with the railway line. It’s crucial to select an independent and efficient operator who can ensure the best outcomes. Once both the port and the rail are functioning optimally, things will start to happen. While the pace is frustrating, I’m pleased with the progress and the right company chosen for this task.
Alec Hogg: 18 responses to the original request for interest of those nine were from global terminal operators. This is according to the Transnet press release. Ten were shortlisted, six submitted proposals and you say they could not have chosen a better one. Are we seeing similar interest or is there likely to be similar interest on the rail link?
Francois Nortje: I’ve got no idea. I was thinking of participating, but because of the lack of information, I didn’t participate. I know of people that are participating. We will watch with a bated breath what will be announced, how many people are interested. I hope there’s as many and there is a quality peak and that they can live with the conditions that Transnet has put there. Some serious conditions. They want five million rand. invested into the railway line and that you must take over all the staff at City Deep and Kaserne and the staff on that line. They’ve had similar conditions on the Durban Harbour and that got accepted but that’s a different ballgame. The harbour is the harbour, there’s no competition for the harbour. But the railway line has got the N3 that is its competition and the trucks. It will be interesting if they accept that five billion and… taking over the employees. Time will tell.
Read more: Transnet on the hunt for ‘ghost trains’ depriving it of revenue
Alec Hogg: It’s an interesting point you make there because there were a number of conditions also, as you say, with the Filipino company getting this license. First of all, it’s only 25 years. They’ve obviously done their sums, but 25 years doesn’t sound like a lot of time. Also that they have to take over all the employees. Plus the Transnet remains the controlling shareholder with 50% plus one share. Now all of those conditions sound very onerous and yet this very well regarded international company still went ahead and did the deal.
Francois Nortje: Yeah, no, that’s why I said, because the harbour has to happen. You can’t fly out the stuff at Margate or take it on a boat by Margate, where there’s no alternative way to get it from land side to sea side, where the road, or the rail, there’s an alternative. I think the… and the shows, obviously, that they think they can make it work, but when there is alternatives, and there’s such… conditions. My opinion is it will fail the first time, the rail. It’s on record saying that. So let’s see. Or it might be stopped by the competition authority, because there are people that needs to protect their interest along the railway line that would like to tender for it to protect their interest. And that’s replacing a state monopoly with a private monopoly. And I don’t think they’ll get competition approval for that. I don’t think Transnet have thought about that. And because the timeline they published, they said tended to be adjudicated end of January or announced and take over first of March. They’ve allowed no in their timeframe for competition, authority, investigation, and approval. So I’ve placed that on record to Andrew Shaw, but I think that they are naive and that it will be stopped if the wrong party is… win that tender. I’ve got no idea who’s tented and who’s interested. Like with this one, there were 10 shortlisted, but only 6 submitted a bit. Once we know how many people have submitted a bit for the railway line, and if they are independent people that won’t run into competition problems, then we will have an idea if there could be an operator.
Alec Hogg: So what does all of this mean though for South Africa? We know that it’s not good to have bad ports or ports as we know, rated amongst the worst in the world. Now that we’ve got a private sector operator, one hopes that Durban at least will go much higher but what does it mean in a broad sense?
Francois Nortje: It’s very important because currency fluctuates and currency fluctuation, some people get oppressed if the currency goes down. Some countries like Japan for years wanted a weaker currency because it creates exports. But it doesn’t help you’ve got a lower currency and you can’t export. The mines can’t put out the coal. We miss this coal boom that’s just happened. It doesn’t help. We’ve got 100,000 orange… reef containers, reefers with orange containers with 13 tons of oranges all inside it and they can’t go out and the oranges go vrot and whatever. Then a lower currency or weaker currency brings no benefit. Then you go into a depression spiral, you know, your currency weakens and weakens and you can’t take advantage of it because your currency goes weaker, your imports gets more expensive, it brings some inflation into the economy but you create jobs, you export. and you create wealth even though it’s at a lower currency base. But if you can’t export, you’ve got a major, major problem, especially with us though, the currency is weakened. So this might not bring benefit, but it can stop a spiral, a death spiral in the economy that the currency weakens and weakens and the mines can’t export and can’t create jobs and the agricultural guys can’t export. jobs get lost and lost and we’re getting poorer and poorer and it creates inflation. I think it’s called stagflation. Economy don’t grow and there’s inflation. You go into a very bad spiral. So at first this is not creating necessary opportunities but it’s stabilising the economy, taking us out of the ICU to the general ward. That’s what it is.
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Source: https://www.biznews.com/interviews/2023/07/18/transnets-filipino-partner-best-world
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