Remarks by Malusi Gigaba MP, Minister of Public Enterprises, at the Business Breakfast in Richards Bay on December 7th, 2011
7 Dec 2011
I wish to take this opportunity to thank you for inviting me and the senior management of Transnet to this breakfast and thus for affording us the opportunity to exchange views with you.
Three key recent developments make our focus at this breakfast session particularly relevant, that is:
- The growing importance of emerging economies, particularly the BRICS, in driving both the quality and scale of growth in the global economy. It is clear that for the next period at least established economies in Europe and the USA are going to be struggling to keep their heads above water. This will unquestionably negatively impact emerging economies which will make it critical that the BRICS countries work together to sustain global demand and growth.
- The recognition that the state needs to play an active role in emerging economies. As developed economies get engulfed by a financial crisis of nothing less than terrifying proportions, the confidence and authority that drove the so-called “Washington Consensus” is breaking down. The debate has shifted to not if the state needs to intervene to ensure that investment in plant, technologies and skills into areas that will provide long term economic returns but to how the state should intervene.
- The importance of State-Owned Enterprises in emerging economies as champions of the economic development process. In order to build robust clusters and compete on a global scale, it is critical to build adequate economies of scale and scope in an anchor commercial enterprise. Many industrialised countries have gone through the same process. While we recognise the importance of building the private sector, of partnering with private enterprise and aligning public and private investment, we will continue to leverage the state’s ownership of commercial enterprises to achieve strategic economic goals.
The provision of infrastructure is a key enabler of economic activity. In our own country, in terms of the New Growth Path, infrastructure is viewed as one of the critical jobs drivers.
It is universally agreed that infrastructure rollout is pivotal to stimulating the global economy and placing it on a growth trajectory particularly during the present global economic turmoil, in order to create employment. It is also acknowledged that the eurozone and the United States would both need massive infrastructure projects for them to revive their economies.
As well as the Chinese investments, what has been driving global recovery has been infrastructure development in the emerging economies. For us in South Africa, what makes infrastructure development urgent is not only the imperative to address the challenges of high unemployment occasioned by the global economic turmoil which has affected our economy, but it is also the imperative to diversify our economy and shift it away from its current reliance on commodity exports towards producing value-added products.
Infrastructure development should not only support the current patterns of production, predicated as they still largely are on the minerals-energy complex, but should also support the development of downstream industries, promote internal trade and our African trade initiatives and integration.
For this reason, we must be of the same view that infrastructure development is not merely about establishing the capacity networks to support current patterns of production, but that it is vital for industrialisation; and that it is not merely about economic activity, but it is vital for the establishment of social cohesion through facilitating shared growth and the sharing of wealth and the democratic dividend.
Guided by this perspective, we should be of the same mind that both the Richards Bay Terminal (RBT) and the Richards Bay Coal Terminal (RBCT) play a critical role in attracting investments and economic activity to the City and the Provincial economy. Indeed, the establishment of the Industrial Development Zone (IDZ) was to capture the opportunities created for industry by virtue of having proximate access to port facilities.
We cannot imagine the establishment of export related industries without the provision of efficient logistics infrastructure. Consequently, the capacity and efficiency of our rail and ports system is highly strategic to the national 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. Our ports network makes up the conduit for the flow of a vast range of extractive and manufactured goods between the South African and the global economy.
Ports consequently make up the gateway for international trade in key products. The efficiency and capacity of our ports will determine both 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 ships, is the most expensive component of the global logistics chain – it is the efficiency of the terminals 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.
An efficient port system 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 increases our competitiveness. A key requirement for a competitive container related port system is the building of a hub port that has significant economies of scale that will enable investment in cutting edge technologies and which will lower the unit cost of goods through the port.
The only way that this is possible is through an appropriate division of labour between ports. In other words, choices have to be made as we cannot spread our limited national volumes over too many facilities. This does not mean that any port gets neglected or does not receive adequate investment so that it can play its role in the system – but what it means is that we do need to find an appropriate balance.
Furthermore, having recognised the importance of the Richards Bay Port Terminals for the IDZ, it is also recognised that an efficient container terminal can act as a magnet for new investments in back of port manufacturing and logistics activities creating additional jobs and economic activity. Therefore, as the shareholder, we are committed to ensure that there is adequate investment in container handling facilities at this port to provide this competitive advantage to the Industrial Development Zone and the Northern KwaZulu-Natal region so as to attract much indeed investment to the area.
In this regard, we plan to invest R3bn over the next 5 years at the RBT in loading equipments, off-loading equipments, conveyor belts and other handling equipment, bearing in mind that it is estimated that more might need to be invested over the next 7-8 years.
My understanding is that presently less than 25,000 containers are handled at the RBT through the multi-purpose terminal and that the service that this provides is adequate. We are committed to ensuring that as these numbers increase we provide additional handling capacity to ensure that the port will not be a constraint on growth. For example, at around 100, 000 containers a dedicated container quay can be established with specialised stacking equipment. At around 200,000 containers we can build a dedicated on berth container facility.
Transnet’s footprint in KZN includes ports, rail and pipelines. KZN alone has 5 rail infrastructure and about 6 branch line networks. This province alone handles more commodities than all other ports combined and employs more people than all other provinces combined. There are therefore plans to expand all our current major infrastructure, and in particular, we intend expanding the coal export line to over 81 million tons per annum by 2016, the Richards Bay Coal Terminal and to double the single line section between Stanger and Richards Bay.
This expansion of the coal export line will involve the migration of Eskom’s domestic coal from road to rail, the establishment of the Waterberg rail, port expansion and capacity allocation to junior miners.
One of the reasons that we are here today is to test this understanding and the appropriateness of this approach from a City and Provincial point of view. We are committed to ensuring an optimum integration of national, provincial and local concerns in the design of our investment plans. This integration and alignment can only take place if we maintain an open minded dialogue with each other.
I wish, as I conclude, to emphasise the importance of forging strong partnerships between various tiers of government in so far as infrastructure development is concerned; and of strong and robust partnerships between government and business as we forge both the social compact and social cohesion.
I believe that Richards Bay has immense potential for development providing we all harness our strengths and resources towards the common goal of its development and ensure that big business in particular marshals its enormous resources to invest in stimulating the local economy.
I thank you very much for your attention.
Issued by: Department of Public Enterprises
7 Dec 2011
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