Michelle Phillips says structured private sector deals will transform South Africa’s logistics landscape
The current recovery process at Transnet must be seen as a transition period, with the rail and port entity’s long-term goal being to reach a state of reliability and sustainability, says Transnet group CEO Michelle Phillips.
Phillips cast a spotlight on the main challenges the transport rail and ports entity faced as it moved to reinvent itself, stressing that while progress had been made, significant hurdles remain.
“Transnet has a long way to go. We still have issues of asset reliability and funding. We are working as hard as we can with what we have. We must do more with less.
“We have applied to government for funding through the Budget Facility for Infrastructure BFI, for very specific projects, and we hope we’ll be successful.”
The Budget Facility for Infrastructure is a National Treasury mechanism for funding large scale public projects valued at more than R1 billion to drive economic growth.
Security continues to weigh heavily on operations. Phillips revealed that Transnet last year lost around 4.5 million tons on its system owing to theft and vandalism.
“We continue to collaborate with customers to protect the system.”
She noted that as Transnet moves beyond stabilisation toward scalable, bankable partnerships, it must ensure transactions are properly structured and defensible.
“The other challenge as we move into next phase beyond stabilisation to scalable, bankable partnerships is that we want to make sure we deliver quality transactions to the market.
“We do not want to be caught up in court battles because people have lost bids. We want to work with business to ensure we manage this well.”
Transforming the Logistics Landscape
Phillips acknowledged that Transnet has struggled with costs, particularly because of its status as a State-owned enterprise.
“Because we are a State-owned enterprise, it means that we pay a premium for everything we purchase.
“We find that our customers are able to go to market for the same product, the same parts, at a fraction of the price, and much shorter delivery periods.
“We are going to focus on further reducing our cost of doing business.
“We think we are only seeing the tip of the iceberg in terms of the type of pricing that we get from the market compared with what our private sector partners get.”
While collaboration with the private sector has already begun to rehabilitate rail and port systems, Phillips emphasised that the real transformation will come as Transnet shifts from crisis driven recovery to structured, long term agreements.
“That is what we believe will transform the logistics landscape, that shift from ad hoc, crisis driven support to structured participation and scale.
“What do we need We need bankable partnership models. You will see us advancing public private partnerships across our business, rail operations, rolling stock, port terminals, corridor infrastructure. We intend, certainly, to move faster from design to execution in these transactions.”
Mining companies are expected to play a decisive role in underpinning these partnerships.
“Mines play a critical role because they make these transactions bankable,” added Phillips.
“They are able to provide certainty in the long term, 25 years and longer, about where the product is going to come from. We think mining will play that critical role for us in providing the certainty that investors want to get these projects going.”
Phillips concluded that while the current recovery phase represents a positive joint effort with private partners, sustainable economic growth will depend on disciplined and well governed collaboration.
“At the end of the day, it was important to note that while the current recovery process was a positive joint venture with the private sector, the real growth the country required would only come through structured, disciplined, properly governed partnerships,” emphasised Phillips.
“You will see us over the next weeks and months going to the market, putting out transactions and inviting the private sector to bid and to come in with us and manage these projects and businesses going forward.”