Infrastructure & Operational Efficiency and Port Productivity Management in African Ports

1. Infrastructure & Operational Efficiency and Port Productivity Management in African Ports (South African Perspective) THE 7TH PAPC CONFERENCE 2008 15TH December 2008 DJIBOUTI

2. CONTENTS • 1. Emerging story 2. Developments that support efficiency and productivity management • 3. Stakeholders objectives on efficiency and productivity of ports • 4. Complementary port strategic objectives on efficiency and productivity • Next steps

3. EMERGING STORY • Past and future economic growth of South Africa is enabled by strong growth in containerised import/export gateway traffic through the South African Ports and railroads, presenting most promising growth opportunities for Transnet, that could amount to around 20 million TEU in 2038. • In addition South African ports system faces an opportunity to attract additional coastal and transhipment business, building on steady growth of the Sub-Saharan economies as well as the South-South Trade lanes. These could potentially add between approximately 8 and 34 million TEU in 2038 with further transhipment potential from south-south interline volumes. The nature of the port productivity on commodities e.g. coal and iron ore has and it will remain a collaboration between the port system and the private sector regardless of the current economic condition • Market potential • Self and Competitor landscape • Capturing these opportunities (market potential) is time-critical as current productivity levels are low couple with capacities are reaching their limits within the short-term future. In addition, competing ports in the region envision to establish themselves in the transhipment market, in partnership with global terminal operators • Objectives and criteria for Operational Efficiencies • In order to inform a decision on the future productivity improvement, the analyses done focused on two triggering criteria, (a) optimisation of the total logistic cost for the country, and (b) value creation for port users. These triggering criteria aggregate a multitude of input factors such as skilled personnel, measurable performance indicators, productivity management etc.

4. 5 • Introduction of new players and prudent infrastructure investment could contribute to productivity level • A lot of these ports being operated by global operators who without doubt could bring strong operational efficiencies to the region ports • Transnet would need to improve overall operating efficiency in order to effectively compete with these ports • Global operators are willing to invest in African port expansions and could gain first mover advantage • If other ports develop a hub part in the region, SA ports could be relegated to a feeder part status if there is no improvement in efficiencies REGIONAL SCENARIO THAT SUPPORTS ELEMENTS OF OPERATIONAL EFFICIENCIES • 1m TEU by 2015 Uganda Equatorial Guinea Mombasa Zaire Kenya • $62m investment to increase capacity Gabon Rwanda • $130m investment on current port Congo Burundi Dar-es-Saalam (HPH) Tanzania Luanda (APM) Malawi Mozambique Building a new port at Dande Bay at double capacity Zambia Angola • R1.2bn investment to increase capacity to 500 000 TEU Madagascar Tomasina Zimbabwe Namibia • $30 million investment in terminal modernisation Botswana Maputo (DPW &Grindrod) Mauritius Walvis Bay (APM & Namport) Swaziland • Current plans to increase to 4.3m TEU Lesotho • Plans to increase capacity to 1m TEU Durban (TPT) South Africa • R4.2m upgrade to expand capacity to 1.4m TEU Ngqura (TPT) Cape Town (TPT) Port Elizabeth (TPT) • Expected capacity of 4.5m TEU Source: Dynamar; press search; Mauritius Presentation; UNCTAD; www.ports.co.za

5. ELEMENTS OF CO-EXISTENCE WITH PORT PRODUCTIVITY MANAGEMENT • Changing demand for freight • New markets conditions (reliance on global supply chains). • Tertiarization of the South African economy (gradual shift from manufacturing to services). • Changing supply of freight • Development of intermodal transportation systems. • Integration of freight transport services (third party logistics). • Higher level of supply chain management. • Public policy • Converging and diverging policies. • Investment, zoning, security and safety regulation. • Shift from a modal to multi-modal surface transportation policy. • Increased environmental accountability.

6. Cargo owners • Investors • Shipping lines • 3PL/freight forwarders • Rail/trucking companies • Private port terminal operators • Transnet • Collaborate with r port service providers with predictable service • Partner with T/Os on lowering cost structures • Make calls at port with predictable services • Reduce logistic cost for the country • Be sustainably profitable • Provide service that is satisfactory to customers • Minimise logistic cost • Dispose of approximate capacity • Improve productivity levels to serve the customer and meet regulations • Invest port infrastructure Maximise ROI • Reduce cost of doing business • DPE • Positive social impact • Community • Reduce environmental damage • Cities/local government • Maximise workers, benefit • Promotes jobs • Trade union MULTIPLICITY OF STAKEHOLDERS WITH DIFFERENT OBJECTIVES TO SUPPORT EFFICIENCY AND PORT PRODUCTIVITY MANAGEMENT • Stakeholders • Objectives • Objectives • Stakeholders • Efficient transport action system serving identified corridors • DOT • Govern-ment • Overall economy Efficiency and Port Producvity Management • Trans-porters/ logistics players • Civil society • Transnet National • Ports Authority Transnet Vulindlela Team 2007 Source:

7. Location/Centrality index (markets and routes) • Draft • Berth availability • Port costs • Service availability/reliability (incl.. Nautical services) • Working hours • Port reputation • Speed of vessel turnaround • Dock worker relationships • Potential for a dedicated terminal • Cargo volume • Cargo profitability • Import/export cargo balance • Feeder connections • Inland truck and train services • Complementary Port System NPV • Total logistic cost • Additional discriminating factors • Attractiveness to operator • Attractiveness to community • Attractiveness to lines • NPV (Port) • Possibilities to expand • Capacity of connecting land infrastructure • Network efficiency • Road congestion • Economic benefit (value added) • Economic benefit (employment) • Land use • Visual intrusion • Energy use • Pollution (C02, NOx, SO2) ANALYSIS OF THE MULTICRITERIA IMPORTANT ELEMENTS • Criteria

8. STRATEGIC GOALS SUPPORTING EFFICIENCY AND PRODUCTIVITY INITAITVES 2007/2008 2009 - 2012 Strategic Goals Initiatives currently underway to enable the safe, efficient and effective functioning of the productive port system 1. Improve vessel and cargo turnaround 2. Provision of Port Infrastructure ahead of demand • Sustained infrastructure capacity provision, • ahead of growth demands • •Integrated planning for port infrastructure • •Safe and secure world-class port system, • preserving the environment • •Competitive and efficient port system that • drives volume growth • •Growing, productive and committed workforce 3. Improve productive use of assets 4. Increase the Market 5. Enterprise-wide Risk Management 6. Develop human capital and skills to achieve objectives

9. I THANK YOU