Speech by Mr Malusi Gigaba, the Minister of Public Enterprises, at the Quay Wall handover of the Cape Town Container Terminal (CPCT) in Cape Town
6 May 2011
Mr Mafika Mkhwanazi, Chairperson of Transnet,
Mr Brian Molefe, the Group Chief Executive (GCE),
Mr Karl Socikwa, Transnet Port Terminals (TPT) Chief Executive,
Members of the Media Fraternity,
Ladies and gentlemen
I would like to take this opportunity to thank you for inviting me to witness this key milestone, the Quay Wall handover of the Cape Town Container Terminal (CPCT).
This development needs to be seen in the context of the on-going Transnet infrastructure investment program, made up of around R110 billion over the next five years, of which just under R30 billion will be invested in port infrastructure and operational equipment.
R5.4 billion is budgeted over the next five-year for the expansion of the Cape Town Container Terminal.
According to the World Bank, although infrastructure is central to Africa’s development, deficiencies in infrastructure are holding back the continent by at least one percentage point in per capita growth.
In many countries, these deficiencies are depressing productivity at least as much as red tape, corruption and lack of finance. Furthermore, in most African countries, infrastructure is a major constraint on doing business and depresses firm productivity by about 40 percent.
In comparison to other parts of the developing world, Africa lags behind on about every measure of infrastructure coverage.
The World Bank thus argues that in meeting Africa’s infrastructure needs and developing cost-effective modes of infrastructure service delivery a substantial programme of infrastructure investment is required, both in building new infrastructure and rehabilitating and maintaining existing facilities.
In South Africa, it is also realised that an efficient, competitive and responsive economic infrastructure network is important to lessen the effects of the binding constraints that are holding back economic development.
In this regard, the massive recapitalisation programmes of Transnet have the potential to become a major driver for economic growth in South Africa.
In addition to the impact on the economy, these programmes can also make a significant contribution to the achievement of the goals of the New Growth Path, and in particular on socio-economic factors such as job creation and skills development.
With this milestone we are witnessing today, we are taking this facility a step closer towards doubling its capacity by 2012 in line with growing global demand for containerised cargo.
The berth upgrades we are undertaking are necessary to accommodate the massive, new hip-to-shore cranes deployed by the terminal to serve bigger ships carrying more containers.
As an evolving developmental state, we have the objective of investing in infrastructure to leverage growth amongst State Owned Enterprise (SOE) customers and suppliers.
It is important today to underscore the importance of world class container terminals to the national and the city economies in which they are located; as well as of ensuring a high level of city and provincial participation in our ambitious skills development programmes to ensure we have the human capacity to develop a world class logistics cluster in Cape Town.
The capacity and efficiency of container terminals are highly strategic to both the national and city economy.
At a national level, we stand at an intrinsic competitive disadvantage because of both our distant location from major world markets and the associated lack of density of ships plying our sea-routes.
Certainly, operational inefficiencies and low productivity in some of our ports only serve further to compound our challenges, especially in regard to competitiveness with the economies of similar size.
The national network of container terminals makes up the conduit for the flow of a vast range of manufactured goods between the South African and global economy.
Container terminals consequently make up the gateway for international trade in key products.
The efficiency of our container terminals will determine the capacity for international trade and will either enhance our competitiveness in engaging in trade or exacerbate our locational disadvantages.
The cost of sea transport, largely made up of the rental costs for large container ships, is the most expensive component of the global logistics chain.
It is the efficiency of the container terminal that will determine the speed with which these ships are turned around at the port and consequently both logistics costs and the attractiveness of our ports for global shipping lines.
Container ships waiting in queues outside our ports are extremely expensive to shippers and create a negative perception of the efficiency of our economy.
Conversely, an efficient port enhances our national reputation and becomes part of the port network for a range of shipping lines, creating competition and choice for shippers, which further enhances our competitiveness.
Hence, we must focus on making the Cape Town Container Terminal a destination of choice for the major shipping companies through providing an efficient and reliable service and an extremely speedy turn-around.
As a shareholder responsible for supporting our national growth objectives, we will be monitoring the quality of operations in all our container terminals with a high level of interest.
This will involve the department setting standards for port performance against global benchmarks in key productivity areas such as total ship turn-around time and terminal crane moves per hour, monitoring our performance and constantly scrutinising the implementation of plans to continuously improve.
As we have earlier stated it, we must underscore the importance of the container terminal to the city economy should also not be under-stated. The terminal can have a negative impact on key sectors in the city economy.
Cape Town is first and foremost South Africa’s largest destination for international tourism.
Yet as container volumes grow, there is an increasing risk of road congestion if the port is not able efficiently to process trucks – a situation that will undermine both the City’s tourism attractiveness and the quality of life for its residents.
In this context, it is critical to find creative solutions to bring containers to the port using rail and thus shield the water-front from the spectre of long queues of trucks lined up outside the port and congesting our roads.
This means that our freight rail must become efficient and well served and serviced in order to support port operations and efficiencies.
This means that as well as investing R23 billion on locomotives and R18.9 billion on wagons over the next five years, it is important to improve on the current situation where only 680 of the potential 1 700 trains are taking off each day due to the unavailability either of the wagons or the locomotives to support the balance.
We must put an end to train derailments, which has a major impact on port operations and achieving efficiencies.
The entire value-chain must be aligned to operate in tandem and feed into and off each other in a manner that makes our infrastructure both competitive and world-class.
On a positive note, the container terminal can act as a magnet for new investment in the back of port manufacturing and logistics activities creating jobs and economic activity in the city.
Back of port activities needs to be enabled through ensuring that spaces are created for these activities which have efficient and cheap logistics connections to and from the terminal.
Again, it will be the quality of these spaces and their logistics links that will determine how global companies design their supply chains to either optimise economic activity in South Africa or do as little as possible in the country.
We need to see how the investment in an expanded container terminal can be leveraged to promote local economic activity and job creation through the design of a comprehensive and thought through back of port economic development strategy.
Furthermore, a well designed back of port strategy will also provide intermodal facilities for containers to go to port on rail which will decrease road congestion.
Again, the department will be monitoring the design and implementation of this strategy with a high level of interest.
The department will also be engaging with both the provincial and city governments to ensure that we coordinate the design and implementation of our investment plans to optimise their impact on the local economy.
We will also listen with interest to these stakeholder perceptions as to whether we are delivering on our mandate to provide a world-class infrastructure service to support the national, provincial and city economy.
This we will do across the country in order to align our infrastructure plans with the provincial economic growth strategies, as well as to support particularly the mining sector.
Of particular interest, we are determined that we should seize the opportunities offered by the commodity boom to enhance our country’s infrastructural capacity, and thus reverse the many years of neglect of infrastructure development which has bequeathed us the legacy of massive infrastructure backlogs.
If we did so, we would contribute towards further creating and enhancing our country’s industrial capabilities, supporting localisation and beneficiation, and thus job creation, skills development and enterprise development.
It is for that reason that our rail and port strategies and investment plans need to be aligned to these future needs of the economy, and it informs our plans further to invest in enhancing our rail and port infrastructure plans and operational efficiencies.
As a major logistics player, Transnet is a key developer of scarce and critical skills within the rail, ports and maritime sectors and has uniquely specialised training facilities in these areas.
We are presently training an average of 1 500 employees annually. Transnet provides bursaries of approximately R144 million per annum.
The Department of Public Enterprise will be working with the Department of Higher Education and Training to see how we can raise resources significantly to increase this number so that we provide skills proactively to support growth.
In addition the Youth Development Initiative has enrolled 105 participants.
Transnet also has an intention of collaborating with other industries in the transportation, mining and services sectors in developing formal pre-employment training programme.
The point I want to emphasise is that Cape Town is a port city. It is critical that a sizable proportion of future port management and employees come from the city if the port and the surrounding logistics cluster are to thrive.
It is therefore vital that Transnet works with local educational institutions to make sure that this vision is realised. The department will be working closely with Transnet in this regard.
The leadership of Transnet as well as their stakeholders should all be commended for the achievement of this milestone.
However, building the infrastructure is only the beginning of the process - we cannot become complacent. We now need to ensure that the operations on this infrastructure achieve world class efficiencies.
We need to ensure that port operations does not create road congestion and undermine Cape Town’s attractiveness as a global tourist destination or the quality of life of its residents.
We need to ensure that it is leveraged to promote economic activity and employment creation in the city and the province.
I look forward to working with all key stakeholders to make sure that this is achieved.
I thank you.
Issued by: Department of Public Enterprises
6 May 2011
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