I’m sure you’ve seen or heard about the World Bank Container Port Performance Index (CPPI). And that South Africa’s ports were ranked among the worst in the world with Cape Town coming in last! In 2023 the delays at ports cost SA’s economy around R98 million ($5.2 million) a day. In addition, the movement of around R7 billion worth of goods were delayed. But there could be light at the end of the tunnel for Transnet…
Transnet taps into SA’s private sector expertise
We’ve seen the benefits when the private and public sector join forces to improve SA’s problems. Just consider the growth of SA’s solar and wind power and how it has helped alleviate some demand pressure on Eskom. It’s also allowed Eskom’s management to focus on maintenance and improving the performance of Kusile. 100 days of no loadshedding has been quite a feat.
So what potential turnaround plan is in the offing for Transnet?
On the 20th June 2024, Transnet National Ports Authority (TNPA) announced that Grindrod (JSE: GND) has been appointed to develop and operate a container handling facility at the Richards Bay Port.
The development aims to TRIPLE capacity from its current 50,000 containers a year to 200,000 containers a year. The total capital investment in the project is around R285 million.
The container facility, which will begin operation in 2027, will also improve transportation times and logistics costs within the region.
If there’s one company that can revitalise Transnet’s ports, it’s Grindrod. The company boasts over 100 years of experience in logistics.
Just consider Grindrod’s investments in revitalising the Port of Maputo has been incredibly successful. From 2020 to 2023, port volumes have nearly DOUBLED, while terminal volumes have jumped 70%. So, I’m confident this partnership with Transnet will boost container capacity.
Port privatisation will get an even BIGGER boost
In the meantime, Transnet is in the process of finalising a 25-year contract with the world’s largest, independent terminal operator, International Container Terminal Services Inc (ICTSI).
The contract involves developing and operating the Durban Container Terminal (DCT) Pier 2 at the Port of Durban.
DCT 2 Pier is the biggest container terminal of Transnet. It handles 72% of the Port of Durban’s throughput and 46% of South Africa’s port traffic.
In short, bringing in private expertise is the ONLY way to successfully revive Transnet’s ports. And in doing so, it will create employment and drive much-needed economic growth.
Grindrod is a Hold in our Real Wealth portfolio. But we expect improved port efficiencies such as increasing volumes and improving costs will benefit other JSE-listed companies that import and export. To keep up to date with new investment opportunities in this space, make sure you are signed up to Real Wealth.
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