South Africa’s state-owned Transnet Port Terminals (TPT) will be at the forefront of the expansion of Africa’s ports, a huge project with implications far beyond the improvement of the continent’s logistics. We spoke to chief executive, Karl Socikwa, about Operation Phakisa and the company’s interesting strategies for tackling unemployment.
The potential of Africa’s ports for expansion and development has received significant attention recently. This is no surprise – Africa’s ports handle more than 90% of its external trade but only 6% of total global traffic. With 26,000 kilometres of coastline it’s clear that huge gains in this area are there for the taking.
Importantly, these would not just improve Africa’s logistics systems and make international trade smoother. There are potentially enormous social implications that come with the expansion of any large industry, and this one is no exception.
South Africa’s Operation Phakisa is a government-led attempt to utilise the seas surrounding South Africa, harnessing their economic power in a way designed to alleviate the country’s economic problems, and, as a corollary, their social problems too. Karl Socikwa describes some of these problems in colourful terms: “In South Africa we like to say here at the moment we are under attack from the 3 headed monster: unemployment, poverty and inequality.”
TPT have been given a central role in Operation Phakisa. As the “custodian of the country’s ports and harbours” TPT have already started substantial work on the project, which was implemented by President Jacob Zuma in 2014. Socikwa describes what’s been happening: “We have already started to identify berth capacity in places like the Port of Saldanha, Port Elizabeth and other ports too. Some are going to be built up as dedicated berths for activities such as rig repair, and we are also identifying areas along the shoreline which are in custody of transit national port authorities for development of agricultural industries.”
Operation Phakisa is a collaborative project involving international, national, public and private partners. Such collaboration is necessary for such a large project that will inevitably see its fair share of challenges. One such challenge is that the basic size of vessels coming into port seems to be increasing, creating potential problems in terms of infrastructure.
While often this is a problem faced by shipping companies themselves, as they organise and attempt to cooperate when it comes to vessel sharing agreements, the ports into which the vessels must dock must also adapt to the changing environment. This is something being addressed by Operation Phakisa, as Socikwa explains: “It is a challenge that we are managing under the quad terminals division in terms of making sure we have the right type of infrastructure of cranes and that our terminals are deepened to a depth able to receive these vessels and work with them, and that our systems, tools and personnel are fully capable of handling the complexity.”
Commodity Prices and TPT
Understandably commodity prices could be seen as something presenting a problem to TPT and Phakisa. Even though the current low fuel prices are a welcome offset to more problematic commodities such as coal and iron, there are still challenges that will need to be faced. With mines exporting lower volumes than usual and ports and terminals handling less cargo, low commodity prices may be an inhibiter to expansion, but there are ways to alleviate this problem.
Socikwa identifies a way of cushioning the effects of these cycles as maintaining an intelligent capital investment programme, and the creation of strategies that allow for a certain margin of error to allow for headroom when things do take a turn for the worse. Operation Phakisa is a long-term project that will have to crest the waves of commodity price cycles for many years to come.
South Africa’s Ports and Unemployment
Bucking the trends we see in more developed countries might not seem to be a good idea when it comes to a desire for expansion, but interestingly TPT are looking at things differently. Globally, there is a trend for ports to become increasingly automated. While South Africa must ensure its ports remain competitive it’s interesting to discover that TPT are not taking this approach.
According to Socikwa, in South Africa “there is a big focus on trying to create job opportunities as much as we can for the people of the country, and there is a huge backlog in terms of education and skills level in the country that we still have to deal with”. For Socikwa and TPT, automation is not the right way to address this problem. As Socikwa admits, “there is attention on education and up-skilling the people but we are not quite at the point where we can begin to embrace trends such as automation in the same way as first world countries have”.
In order to mitigate some of the negative aspects of not going down the automation route, TPT are instead going to “embrace the fourth industrial revolution which is digital revolution, and really look at things such as the internet in terms of thinking about things in a smarter way and how we can better leverage the internet and skills of our people to form partnerships under a new and improved approach”.
As a state-owned organisation TPT are expected to some degree to align their aims with the government’s, and avoiding automation in order to create more jobs is one of the ways they will achieve this under Operation Phakisa.
An example of how TPT will balance a lack of automation with investment in digital systems comes in the form of a mechanism by which TPT will be able to predict future problems or necessary updates to equipment, meaning that technology will be working in support of a newly utilised manual workforce – so while automation may not be the focus, TPT and Operation Phakisa will still be embracing our digital future.
Private Sector Collaboration
Interestingly TPT are collaborating with private investors in order to help advance projects within Phakisa. While relations are still tentative, Socikwa tells us that “we certainly have started to look at some private sector participation projects in our various terminals, and have in fact started to speak – at a light touch level – with private entities in terms of testing their appetite levels in involving them in some of our operations.”
Working with the private sector might be the way forward for TPT and Phakisa. As Socikwa points out: “The game in South Africa at the moment is really about growth. Everyone benefits from growth and we all have to pull together and work much closer than we have done before to make sure that we are able to achieve those inspirational goals.”