South Africa Upgrades Port, Rail Infrastructure To Boost Exports

South Africa Upgrades Port, Rail Infrastructure To Boost Exports

The seaports and rail system of South Africa play an important role in the economies of  not only that country, but those of neighboring landlocked members of the Southern African Development Community’s 15 member states.

But world trade and shipping patterns are shifting.

Growing trade with the Far East, as well as South Africa’s inclusion in the Brazil, Russia, India, China, South Africa (BRICS) trade bloc, has increased traffic through the ports. Add to that ever-larger container vessels that require larger, more efficient port facilities and South Africa was faced with finding appropriate response or face bottlenecks.

The solution: upgrade and expand their seven ports and connecting rail infrastructure to state-of-the-art facilities.

The timing for the expansion is essential to keep up with increased traffic through the countries important sea ports and inland to landlocked countries – something especially important to the economic impact of South Africa’s exports.

“Greater export competitiveness and deeper regional integration could help propel South Africa towards faster-growing exports, allowing it to achieve higher, more inclusive, job-intensive growth as laid out in the country’s National Development Plan (NDP) 2030,” according to World Bank’s South Africa Economic Update released Feb 4.

That World Bank report assesses South Africa’s global economic prospects with a special focus on export competitiveness, with some suggestions of their own. According to the World Bank, the port/rail expansion will help improve export performance to meet South Africa’s targets.

 “Yes, it will help, but power and Information and communications technology (ICT) are also issues that, if addressed along side, would magnify the impact,” World Bank Lead Economist and co-author of the report, Catriona Purfield told AFKInsider.

The United States is particularly interested in the infrastructure expansion to support exports. Since 2000,  the “Africa Growth and Opportunity Act,” or AGOA, has allowed African countries to export duty free to the United States and President Obama has publicly supported renewal of AGOA after it expires in 2015.

“In 2012, South Africa exported $2.1 billion to the United States under AGOA. Many industries, including several automobile manufacturers, have told us AGOA was critical to their decision to invest in South Africa,” US Ambassador Patrick H. Gaspard told an audience at the University of South Africa in Pretoria on February 20.

“South Africa exports more manufactured products to the United States under AGOA than any other country. In 2012, South Africa’s largest exports to the United States were the 60,000 cars made by companies like BMW and Mercedes, along with $70 million dollars’ worth of South African wine. Overall, Americans bought $250 million in South African agricultural products last year, an historic high.”

South Africa’s National Development Plan 2030 has identified the export sector as an engine for higher, more inclusive and job intensive growth, with an  export volume target of 6 percent growth a year. To achieve this goal, the World Bank report identifies three opportunities to help ignite export growth, the least of which is resolving infrastructure bottlenecks.

“Resolving infrastructure bottlenecks and cutting logistic costs present a second opportunity to support export growth. Cutting the charges exporters incur for the use of ports, rail and telecommunications would promote competitiveness and benefit small and medium-size exporters and nontraditional export sectors,” notes the World Bank report.

“Border logistics is also important for trade in the region. The recent [South Africa] Budget Review  [sets] out the initiatives under way to address the concerns we raise,” World Bank’s Purfield told AFKInsider.

Despite “volatile and uncertain economic conditions worldwide,” Transnet SOC Ltd., the South African state-owned company responsible for the ports, as well as freight rail and fuel pipelines, says it “increased revenue by 14.3 percent in the six months ending September 2013 to $2.6 billion, driving profit higher by an impressive 71.2 percent while investing a massive $1 billion on rejuvenating and expanding infrastructure.”

The growth in income was driven by a 26 percent jump in containers and automotive-on- rail, and by a 12 percent increase in mineral and chrome volumes.

“In terms of broad categories, the largest exports are Precious Metals, followed by Motor Vehicles, followed by Iron and Steel,” World Bank’s Purfield told AFKInsider.

“More specifically, the top 5 products exported in 2012 were gold, platinum, iron ore, gold, motor vehicles.”

According to Transnet, “the performance in containers and automotive-on-rail far exceeds economic growth, confirming that we are winning both market share and the battle to shift rail-friendly cargo off the roads.”

In December, Los Angeles-based engineering firm AECOM Technology Corp. was awarded a three-year, $30 million contract by Transnet for up to 15 separate infrastructure projects in and around Cape Town, Saldanha and Postmasburg.

“We have been working with Transnet since 2006,” Paul Dickard, AECOM’s Vice President of Corporate Communications told AFKInsider.

Transnet Port Terminals (TPT), a division of Transnet SOC, operates 13 cargo terminal operations across seven South African Ports – Durban, Richards Bay, Cape Town, Saldanha, Port Elizabeth, Ngqura and East London – which have seen containers increase by a 9.4 percent in the last review period.

In fact, because 95 percent of all trade to the region passes through these ports – and other major ports of East Africa, if one port experiences any interruption due to a bottleneck, the entire region can feel the effect. This, in turn, would affect goods getting to the other members of the 15-country Southern African Development Community, including  Angola, Botswana, Democratic Republic of the Congo, Lesotho, Madagascar, Malawi, Mauritius,  Mozambique, Namibia, Seychelles, Swaziland, Tanzania,  Zambia and Zimbabwe.

Expanding Port Infrastructure

In April 2012, Transnet formulated a Market Demand Strategy that will spend $28 billion through 2019 to create freight capacity before demand exceeds capacity across rail and ports infrastructure, including $3 billion to boost port operations.

TPT wants to help also grow business outside of South Africa by forming partnerships with other African ports “to strengthen the economic and social development of the African continent” by providing operational, technical and systems advice, as well as improve intermodal connectivity in the region.