Transnet monopoly holding back South Africa

The time has come for South Africa to reconsider the organisation of its ports. South Africa’s ports are operated by stated owned Transnet Ltd, who offers most port related services to users. This is contrary to the trend in Europe to promote competition and thereby improve service delivery.

These ideas are evident in the proposed EU Regulation aimed at liberalising services in key ports, which provides that various port services such as pilotage and reception facilities should not be run by a monopoly.

While there are problems with the proposed regulation (for example pilotage, a public service and mandatory in most ports, may not be well suited to free market conditions), the initiative of applying ordinary commercial principles to drive port growth is to be applauded.

The question which South Africa needs to address going forward is whether the state grip on port operations is the best way to drive port development. The central problem with the current state of affairs is that any new South African port developments are unlikely to entice investors, where the current legislative framework would disallow investors from having a say in the management of their investments.

Substantial developments to South African ports are required for South Africa to remain competitive in the future, especially with Africa’s expanding export markets in areas such as coal and copper. Transnet’s monopoly of port operations hinders South Africa from tapping the investment opportunities required for new large scale developments, unless Transnet is prepared and able muster the funds itself and bear all risk in the investment. The alternative would be for Transnet to enter into Public Private Partnerships (PPP’s) with strategic partners.

Even if Transnet could raise public or private sector funding, would port efficiency be improved with the introduction of a freer market?

Andrew Pike is a director of Durban-based maritime and port law specialists, Velden Pike Nichols Inc.