R16.1 billion capital investment spending plan for Western Cape ports is good news, but needs to be “front loaded” over next 3 years

Media reports that Transnet National Ports Authority plans to spend R16.1 billion rand on improving the Western Cape’s ports over the next seven years is positive news that will help improve investor confidence, especially as we approach peak season for key sectors that make use of port services.

The sharing of this information also demonstrates a commitment to transparency, which the Western Cape Government has personally experienced, and which we warmly welcome.

In this spirit, we have invited TNPA to provide a briefing on this planned expenditure to the provincial cabinet, so that we can unpack their plans and find ways to assist in ensuring it is success. We have also invited Transnet Port Terminals (TPT) to provide a briefing on planned capital expenditure over and above the R16.1 billion that is planned by TNPA.

As we constructively engage with the information shared publicly by TNPA, we do, however, note that many of these capital expenditure announcements have been in the pipeline for some time already, and so what we now need to see is increased capital expenditure rates, with the bulk of the capital expenditure “front loaded” over the next three years, and not the outer years (year 6 and 7), as currently planned.

For both entities it is critical that capital expenditure performance improves. For example, TNPA spent less than 40% of its capital budget during the past two years. Capital expenditure by TPT was R500 million below budget in 2020/21. These spending rates on capital budgets will need to be addressed over the short-term for efficiency to improve.

The type of capital investment also matters. For example, expenditure is needed over the short-term on the container side of the business to match our growing export demand, with new cranes, and RTGs, so that the challenges created by strong winds are managed.

Smart “front-loading” of the capital investment spend in this way will make a notable difference in the experience of exporters and importers, who are desperate to get their product to market. We know, for example, that the difference between a high-growth and a low-growth scenario for the Cape Town container terminals could be as much as R5 billion in gross value added, and over 19 000 jobs.

We are certainly encouraged by what is a clear intent to address the capital under-investment at the Port, and we know, that if private sector participation at the Port is also embraced, as a clear Operation Vulindlela Presidential commitment, we will make major strides in improving the Port of Cape Town’s performance, and ranking, globally.

Source: Government of South Africa