Neels Blom Writer at large

Transnet, the state-owned rail-freight agency, and agribusiness Afgri have announced a R100m tie-up to upgrade grain-handling facilities at the ports of Durban and East London.

SA’s food security and the growth and development of the agricultural sector depend on the handling capacity at the country’s agri-ports. But under-investment at SA’s ports have led to severe cargo-handling congestion and a decline in Transnet Port Terminals’ market share.

Port congestion is considered a threat to food security when the import and shipping into the hinterland of staple foods, such as wheat, are delayed. Congestion also affects domestic producers’ access to export markets, notably that of maize shipped from East London. It is generally held that port effectiveness enhances trade competitiveness and reduces instances of demurrage —  penalties imposed when goods from a ship are delayed.

To tackle the problem, Transnet issued a tender in 2016 for a 15-year concession agreement for the operation and maintenance of landside (public access) operations at SA’s two most important grain-handling ports. Afgri was the winning bidder.

The East London Grain Elevator is the largest port-based grain elevator in SA with a potential capacity of 720,000 tonnes of grain a year. Currently, the facility handles between 80,000 and 100,000 tonnes a year. The Durban agri-port is one of the three bulk agricultural terminals in the Port of Durban. The other two are operated by SA Bulk Terminals and Bidvest Bulk Terminals.

Optimising direct benefits

Transnet’s chief business development officer Gert De Beer said on Wednesday that the proposed arrangement would create a “platform for synergy between Transnet and the private sector” by providing an “integrated logistics solution” for the agricultural market. “The project offering will be designed to optimise direct developmental benefits as well as have a significant impact on the broader agri-sector, which will further unlock developmental benefits for the economy.”

The partnership is also expected to strengthen Transnet’s road-to-rail strategy.

Afgri and Transnet Port Terminals will share the planning and scheduling of landside and quayside operations, health and safety, as well as legal matters, while facilities management, human resources and public interaction, among other services, will be handled by Afgri. Transnet retains ownership of the upgraded facilities.

The partners expect operations to be integrated from April 2019.

The upgrade must ensure that the silos at the ports have the throughput and volume capacity to allow timely loading and discharge of vessels to alleviate increasing logistical pressure, according to Afgri CFO Jacob de Villers.

Transnet Port Terminal will  provide the funding needed to restore or reconfigure the quayside plant and equipment and provide efficient rail capacity for private sector partners, said Molatwane Likhethe, GM for corporate and public affairs at Transnet. The 15-year contract with Afgri allows enough time for the state agency to recoup its investment.

According to De Villiers, the planned R100m expenditure is not expected to change materially.