South Africa Signs its' First Ever Port Privatization Deal

South African port and logistics firm Transnet SOC Ltd. signed a concession agreement with a company headed by Filipino billionaire Enrique Razon to expand the main terminal at the continent’s top container hub in Durban.

The signing of what Transnet described as South Africa’s first port privatization deal comes two years after the company awarded International Container Terminal Services Inc. the right to buy almost half of Container Terminal Pier 2 and manage the facility for 25 years. Razon’s firm will spend about 11 billion rand ($647 million) on its plans.

“This ground-breaking partnership is a step forward in Transnet’s ambition to be among the world’s best ports,” - Transnet Chief Executive Officer Michelle Phillips

The agreement marks the biggest attempt yet to bring in private expertise to revive state-owned ports, which rank among the least efficient globally, according to the World Bank. Pier 2 handles about 70% of Durban port’s total throughput and more than 40% of South Africa’s container volumes, Phillips said.

The introduction of new technology and equipment is expected to increase Pier 2’s capacity by 40% to 2.8 million twenty-foot equivalent units, while improving gross crane moves per hour to 28 from 18, and doubling ship working hours to 120, the company said in an emailed statement.

“These improvements are envisaged to reduce logistics costs and improve service quality, thus broadening market access and attracting new volumes,” - Transnet Company Statement

Finance Minister Enoch Godongwana also exempted the partnership from the Public Finance Management Act for the duration of the concession, reducing administrative obligations that can slow implementation.

Source: Bloomberg