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Interview

with Tau Morwe, Chief Executive, Transnet National Ports Authority (TNPA)

07.05.2012 / Energyboardroom

You became the new Chief Executive of the TNPA little over a year ago although you do have a long track record within Transnet as whole, having been the former Chief Executive of both Transnet Port Terminals and Transnet Freight Rail. How did you experience this switch? Was it a different ballgame?

It was not exactly a different ballgame, in view of the fact that I had already spent roughly 15 years with the Group. Having been in the port at the time the restructuring began, i.e. when the Authority split from the Operations, one could gain an understanding and view of the Port Authority. When I moved across, I only had to validate my understanding on the operational side.

What were some of the key priorities you set for the TNPA when you took over?

Although the National Ports Act was passed in 2005, its implementation is taking shape only now. Regulation is now coming into full force and tariffs are being regulated. We are therefore also busy with a tariff methodology to reach an agreement with the Regulator. We are also working on a pricing strategy, in terms of “who pays for what” within the port services that are being rendered. These are the key areas we focus on right now.

When we speak of port tariffs in particular, we saw the TNPA applied for an 18% increase for 2012/2013, while the Regulator only approved a 2.76% increase. From an economic point of view, how do you explain this significant difference?

It is indeed a big range, but the difference solely comes about as a result of our methodology wherein we differ from the regulator. For example, we have differences when it comes to the Weighted Average Cost of Capital (WACC), on the regulated asset base, and so forth. We are now refining this methodology to ensure that we are on the same page.

Regardless of this limited tariff increase, do you still expect 2012 to become a good year for the TNPA?

2012 is going to be a good year in terms of doing the things that we need to do!

For the past couple of months, the talk of the town has been around infrastructure investment, both in President Zuma’s 2012 State of the Nation address as well as the Budget Speech of Finance Minister Gordhan. Transnet as a whole plans to invest R 300 bn in the coming 7 years. How much of this will trickle down to the TNPA and what are some of the key infrastructure plants you foresee in the South African ports?

A good chunk of the R 300 bn will be invested by Transnet Freight Rail in new rolling stock, rail infrastructure, and so forth. The balance –roughly R 100 billion- goes to both Transnet Port Terminals and ourselves, where the TNPA takes up R 46.9 billion.

The big projects include the expansion of the iron ore terminal in Saldanha Bay, which effectively increased capacity from around 50 to 83 million tonnes. Additionally, we will be moving both the manganese terminal and the liquid tank farms from Port Elizabeth to the Port of Coega. Also, we will deepen the berths of the Durban container terminal while additionally expanding the Cape Town terminal.

We see quite some movements towards Coega. What role do you foresee for this new port within South Africa’s future?

In the past, all container terminals outside of Coega -Cape Town, Port Elizabeth and Durban- were not focusing on transshipments. They would only take transshipments if they were available and Durban’s port was running into problems of congestion. You need to balance import/export levels versus transshipments.

The idea was to take advantage of the opportunity that we did not have a port dedicated to transshipments. We therefore decided to exploit the Eastern Cape and build the Port of Coega. By June 2012, its container terminal will have 4 berths, which effectively means a doubling in size and a new capacity to handle around 2 million TEUs. This capacity will most likely be split into 70% for transshipments and 30% for import/export movements.

When we interviewed South Africa’s Minister of Trade & Industry Rob Davies earlier this year, we spoke of how the oil and gas sector has now been indicated as a priority sector to grow the economy. Particularly because of their deepwater characteristics, he was very positive about the role that the Ports of Coega and Saldanha Bay could play within the South African oil and gas sector. He did also mention that a lot of interaction was still needed between the National Government and the Port Authorities. Have these interactions started?

While we have not necessarily been interacting with the Department of Trade & Industry, there is interaction with the Department of Transport, the Provincial Governments of the Western Cape, Eastern Cape and Kwazulu-Natal. Our plans now need to align with the various provincial plans. In Durban, for example, the refining facilities are over 30 years old which means that -on the port side- we need to provide adequate capacity to import finished product in case the refineries shut down. The focus there is on creating additional import terminals.

In the Western Cape we see a different scenario, where the objective is to create a service hub for the oil and gas industry on the West and East Coast of Africa. Most of the projects there are geared towards supporting this. In the Eastern Cape, as I mentioned, we are busy with liquid tank farms and will be working closely with PetroSA to ensure sufficient storage capacity if they go ahead with the refinery.

Traditionally, the container business has been a profitable business case for Transnet to invest in, as compared to oil and gas supporting facilities. Is it a challenge for oil and gas to become a priority for the TNPA?

This is not really a problem today. Compared to the past, we now have the National Ports Act which basically tells us to launch a publicly transparent terminal process for any new terminal coming on stream. You will therefore see the private sector becoming more and more involved in terminal operations in the port. As Transnet we therefore do not necessarily need to fund the building of terminals. The private sector can now build, operate, own and transfer such facilities.

Do you also see the opportunity to enter into discussions with the private sector to align your strategies?

We are working very closely with the industry through the South African Oil and Gas Alliance (SAOGA). In general, we have started working with various industries, such as oil and gas, but also the fruit industry and so forth. This helps us to precisely understand their requirements and needs, and helps us to align what we are doing at the same time.

Western Cape Premier Helen Zille talked about South Africa as the next Singapore. What is your take on this?

The idea is for all of South Africa –and its provinces- to move in that direction, whether it is the provision of infrastructure, the creation of capacity ahead of demand, etc. We all need to be doing this.

Do you see the potential for South Africa to be a role model for other ports in the African continent, where a lot of growth is expected to take place in the coming years?

The potential is there and we are working closely with other ports through the Ports Management Association of Eastern and Southern Africa (PMAESA), through UNCTAD, and so on. It is a reciprocal learning process. For us, the key priority going forward is skills development in the maritime industry. This will make us advance quite significantly.

In this sense, what did the TNPA School of Ports bring to the industry?

We have been able to transform certain jobs (pilots, tug masters, etc.) within the maritime industry to some extent, by opening them up to the historically disadvantaged South Africans. The next stage now is to create skills for the global market, rather than the South African market alone. People that qualify in South Africa will therefore not specifically be bound to work here, but can go work in Dubai or elsewhere as well. We are moving towards establishing a maritime academy that would have a large intake of students every year.

Is the interest from the younger South Africans also there to join the sector?

Today the interest is there. In the past, however, people were not aware of the different opportunities in the industry. Over the Christmas period for example, we went out into the major malls across the country to promote the different career prospects within the maritime industry.

TNPA as an organization also needs the best people, efficient information systems, and so forth. What do you see as the key aspects that still need to improve within the organization itself?

We need to start looking at the port and capital planning aspects of the business. We need to focus on our operations, i.e. by concentrating on performance at a port level. This is different from the past, where we looked at performance from a TNPA level as a whole. We should be involved in increasing performance at the ports.

What is your target for the TNPA to achieve over the next 5 years?

We will be sitting with a Port Authority that truly understands its role in contributing towards the development of the country, that has skilled people in the right place, and that is passionate and dedicated to excelling in the performance of our ports.

Do you have a final message on behalf of the TNPA to our readers?

There are many opportunities for international investors such as those that want to invest in terminals and infrastructure. Those in the shipping fraternity need to spend some time into looking what the port system in South Africa can offer, as well as the benefits they can obtain compared to other ports.

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