Nicola Mawson
Former finance minister and the chairman of The European House Ambrosetti (TEHA) Africa, Nhlanhla Nene has come out in support of the government saying that the government must remove bureaucratic obstacles to facilitate private sector involvement in tackling the country’s pressing infrastructure challenges.
This comes as the National Treasury and The Presidency preparing to launch the next phase of Operation Vulindlela, which is aimed at accelerating the implementation of structural reforms, with a particular focus on the critical sector of freight rail logistics.
Currently, the 25-year joint venture to build and modernise Durban Container Terminal (DCT) is in limbo as for at least another year due to legal wrangling by private sector players.
The Philippines-based International Container Terminal Services Inc is taking on legal review a court decision, which was initiated APM Terminals (APMT), a subsidiary of Maersk, to temporarily halt the agreement with Transnet. DCT Pier 2 is Transnet’s biggest container terminal, handling 72% of the Port of Durban’s throughput and 46% of South Africa’s port traffic.
Speaking with Business Report on the sidelines of the 11th TEHA CEO Dialogue on Southern Africa yesterday in Johannesburg, Nene said that the State could not resolve issues with Transnet, Eskom, water supply, and road infrastructure on its own.
Nene said that it was vital that there was investment into these areas as well as other aspects of infrastructure, adding that public-private partnerships had worked in the energy sector.
Companies could not afford hold-ups, said Nene, as they have an obligation to repay loans, else they will default, and they need projects to reach financial close.
“We just need to be creative, if there is political will, we can just find a way,” Nene said. “No-one wants to invest in environment where there is a security risk.”
Early last month, phase two of a partnership between business and the government was launched and is set to continue to focus on core issues of resolving logistics, electricity, and crime. The Compact set the “stretch goal” of adding a million new jobs to the economy through adding 3% to gross domestic product growth by 2025.
However, Nene conceded that there had been delays in implementing projects under the Independent Power Producers’ Programme, which he said was why South Africa needed a conducive environmental to remove red tape.
Of Eskom and Transnet, he concurred that the two State-Owned Entities were a drain on the fiscus. Eskom’s most recent financial plan targets profitability from 2026/27 onwards, although it continues to battle with outstanding municipal debt. Transnet’s loss for the year to March widened from R5.1 billion last year to R7.3bn. It has set itself a profit target of R1bn for next year.
What the State needed to do, Nene said, was prioritise enabling investment into infrastructure, de-risk investments by ensuring financial and physical security to create an appetite from within the private sector, as well as engage communities to ensure that there were not protests midway through a project.
In addition, he said, international companies may be able to secure lower interest rates when borrowing to invest in South African projects, partially because of a stronger currency, but also because of their reputation.
Nene added that investors should be forward looking and appreciate that South Africa will once again become investment grade and will be removed from the Financial Action Task Force greylist.
During the Dialogue, TEHA Africa CEO, Pietro Mininni, stated that the international community stood ready to invest in the railway link between Johannesburg and Durban.
BUSINESS REPORT