EPaper

Money-hungry monster wreaking havoc on SA’s export infrastructure

Government funds have failed to improve SOEs, so it is essential that broken ports are privatised without delay

Donald MacKay ● MacKay is CEO of XA Global Trade Advisors.

TSA he ’places s roads where and railway exports lines leave SA are called ports, and ours are broken and expensive, absolutely and relatively, compared with just about everywhere else in the world. also need to work, because they get the stuff to the ports, and because sometimes things are exported by road or rail. These are also in bad shape. Investors prefer to invest in countries that have working infrastructure because they are more competitive in those countries and their shareholders tend to be picky about competitiveness. So, poor infrastructure equals poor levels of investment.

It’s not as if the government has not spent a lot of money on Transnet, Eskom, passenger rail agency Prasa, Portnet and various municipalities, it’s just that it’s got very little bang for its buck. For example, Prasa bought 70 locomotives for R3.5bn and has received only 13 of them, all of which were too tall to run on our railway lines. If the trains don’t run, we have in effect simply set fire to R3.5bn, all of which is borrowed.

This becomes an important issue because when all that money goes up in smoke, not only does the debt not disappear, but the economic activity that would have resulted in jobs being created and taxes being collected also doesn’t occur, so other parts of the economy have to fund this.

So, now we have R3.5bn in debt, which attracts interest. And as interest rates rise, so the size of the debt increases. We manage our money like a drunk man in a strip club, so lenders want to charge us ever-higher amounts of interest.

Because of our profligate spending, we have to keep replacing old loans with new ones, and since we are now viewed as degenerate wastrels, the new debt is more expensive than the old. This is akin to paying off your home loan with credit cards.

We need to fix the infrastructure we have, and we have to build more. But because we run a fiscal deficit, we have to borrow the money, and this is getting increasingly expensive.

Poorly maintained and rapidly disappearing infrastructure serves as a money-hungry monster roaming the economy, eating cash and poor people. This money goes directly to a small number of wealthy people, such as those selling tyres, when ubiquitous potholes give all those trucks punctures.

According to Road Freight Association CEO Gavin Kelly, “Where operators (transporters) may have got 50,000km out of a tyre in the past, this has dropped to 30,000km (all dependent on routes used and how fast these routes deteriorate or are repaired). Poor roads also affect delivery times, which impacts on vehicles being able to perform viable transport to and from destinations.”

The search for paying return loads from the primary destination is a huge part of any operator’s life.

“In some cases, due to the nature of the loads, extra vehicles now ply the same route to ensure perishable goods (especially from the agricultural sector) are not left to rot due to misaligned/delayed logistical arrangements.

“Where more vehicles are required to do the work of one, costs increase. The link is thus quite simple. Badly maintained roads are directly responsible for increases in our cost of logistics as a country. This cost is borne by the consumer: it drives inflation and it pushes our products into a tougher position when competing on the international market.”

Because so much money was stolen from Transnet, our rail network (“notwork”?) now doesn’t work. The mines use a lot of trains when they export ore, or they should. But because the railway lines, stations, power cables, trains and everything else not nailed down has been stolen, this is not viable at the scale it should be. So, the mines now put their ore onto trucks, but you need a lot of trucks to make up for one train (think of at least one truck for every train carriage).

Durban port (for example) is not designed for so many trucks. It is expecting trains, but for every train, it now needs to receive 30 trucks, and these don’t drive in on the railway line. Predictably, replacing trains with trucks means the trucks take longer to get in and out of the port. This has become such a big problem that some companies are flying their blueberries to their clients, at staggering cost, just to ensure they don’t lose them as clients.

The African Rail Industry Association (ARIA) believes Transnet poses a sovereign risk to SA, and for good reason. Transnet’s response to the issues raised has been frightening: “ARIA did not represent” railway operators, barring Traxtion, and it was strange for a small organisation with minor representation of suppliers of rail material to say it speaks on behalf of the rail industry.”

Whether ARIA speaks for the industry, our rail “notwork is not working. That is the issue. It doesn’t matter how many times Transnet (Transnot?) says it is fixing the problem, the reality is that the problem remains unfixed and this has consequences.

Already certain shipping lines don’t want to dock in Durban because it takes too long. The cost of shipping cargo increases as more time is spent loading and unloading. If these delays become consistently too long, shipping lines will begin changing their sailing schedules to avoid SA ports, a problem that is not easy to fix once it occurs. If you want the ships to spend time in SA harbours, the country will have to pay more to compensate for the inefficiency of its seaports.

According to the World Bank container port performance index, in 2021 Durban, Cape Town and Ngqura were among the bottom 10 ports out of 370 worldwide regarding efficiency. “SA ports are beset with operational inefficiencies. For example, at the start of this year, cargo ships entering Cape Town had to wait for up to two weeks to berth before customs and offloading could commence.”

This is an untenable problem and it is not receiving the urgent attention it requires. The economy is collapsing, barely propped up by a mining sector that cannot achieve its potential, and in attempting to do so is doing incalculable damage to roads.

SA has arrived at the terrible position of there no longer being good decisions. The lesser of two evils is, after all, still evil.

It is essential that SA ports are privatised without delay, and it seems as if the first tentative steps have been taken, with operators apparently to be appointed by February. SA ports compete with every other port in the area, and in the case of blueberries even with Cape Town airport.

But internal competition between ports is also needed, so that Gqeberha can become a viable alternative to Durban, for example. The operators must be appointed on merit, and left to get on with the job of getting SA ports working.

OPINION

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2022-12-08T08:00:00.0000000Z

2022-12-08T08:00:00.0000000Z

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