Date: 26/09/2003
Source: Ministry of Public Enterprises
Title: Radebe: Maritime Transport Industry BEE Indaba


ADDRESS BY JEFF RADEBE, MP, MINISTER OF PUBLIC ENTERPRISES, AT THE MARITIME TRANSPORT INDUSTRY BEE INDABA, Durban, 26 September 2003

Minister Dullah Omar
Members of the Industry Associations
Representatives of Organised Labour
TETA Chambers, Maritime, Freight Handling, Liquid Fuels
Cargo Owners
Ladies and Gentlemen,

I am delighted to be part of this important milestone in the development of South Africa's maritime transport sector. The presentation of the draft Strategy on Maritime Transport Industry Black Economic Empowerment (bee) Strategy allows us to look forward to building on the tremendous gains that the African National Congress-led Government has made in all spheres of industrial and economic activity.

My colleague, Minister Omar, has already outlined the basic principles, purpose and framework for the advance of BEE in the maritime transport sector. All of us here are well aware of the strategic impact the sector has on South Africa. But we should not forget that globalisation and interdependent development have made traditional inland states have a keen interest in how coastal states regulate and manage access to the trade routes of the oceans. So the implementation of policies and programmes in the maritime sector must of necessity be judged by their impact not only on our own society, provinces and country at large but on the sub-continent as a whole as well.

I have been asked to make a few comments about the relationship between the restructuring of South Africa's ports and the BEE initiatives outlined in the Draft Strategy. I do so gladly, in the knowledge that a serious and committed engagement through the National Framework Agreement has produced agreement between government and labour on how to implement our policy. The final report outlining the terms of the agreement is in production as I stand here, and further announcements along these lines will be made at an appropriate time and through appropriate channels.

Let me just say at this juncture that government remains steadfast in its commitment to ensure job retention, to finding solutions to the worrisome problem of casualisation, and to secure skills growth and development for changing environments. Similarly, we have always argued that we shall progress from a case-by-case basis, supported by sustained examination of the financial well being or otherwise, the structure of operations, and the relationship of all parts of the various components that make up our ports system. We recognise quite clearly that the ports system in South Africa is complex, where a solution for one port may not necessarily be the same as for others as each of them fulfils specific as well as general functions. Furthermore, each port is structured differently, where some, like Durban, operate terminals and that cover a wide-range of activities, whilst others are more limited in scope. This fact of life suggests that we need to take very seriously the idea of a mixed set of solutions designed to meet the specific needs of individual ports or combinations of terminals within ports.

What is very clear to us all is that within the complexity of our ports system is a universal need for efficient investment in infrastructure, superlative productivity in operations, and commitment, imagination and initiative by both labour and management alike.

I must express some puzzlement though at reports that government has elected to postpone the concession process by 18 months. Nothing could be further from the truth. We are on track as far as our broad timeframes are concerned, and we look forward to a situation in the not-too-distant future when a solid concession programme, underpinned by agreed and transparent securities to all stakeholders involved, is up and running. This is not the occasion to speak about specifics, such as RFQs, although I can understand the enthusiasm of some of you, and I would therefore urge you to keep your excitement under control for a little while longer.

Part of the challenge of restructuring ports is to incorporate BEE in the Maritime Transport Sector. Access has been difficult in this sector that is hidebound in many ways by long traditions, and by the need for heavy doses of capital in a delicate and often volatile environment. These are issues that require close attention, and I can assure potential and current participants that Government is looking at ways to address this question.

This morning, I wish only, in summary form as time permits, to outline the probable route that BEE will take in this sector in the future, moving from the progress that has been made so far to identifying the opportunities that are there and which will open up more and more as we progress.

Allow me to highlight briefly just a few examples of progress and challenges facing the state sector in the maritime, or specifically ports environment.

Although 45%, or R260m, of SAPO's total procurement spend of R582m in the last financial year was directed towards BEE establishments, there is a significant divergence between a small 8% BEE capital procurement estimate this year compared to a larger 64% BEE spend in the operations environment, making for a total of 41% BEE expenditure for the current financial year. It is clear that we need to address the question of how to increase expenditure in the capex area.

In the NPA, we witness a similar yet possibly smaller divergence in the spending. Last financial year, the division of the NPA procurement budget between total spend and BEE share was R260m and R103m respectively, or BEE representing 40% of expenditure. The latest figures we have, those for the current year to date, show BEE spend at just over 20%, or R18.46m out of R91.7m for capital expenditure across the NPA compared to some 37.2%, or just over R51m BEE spend out of a total R137m operations expenditure. The apparent trend is for an increase in overall capex BEE expenditure for 2003 through to 2005 from 32%, through 35% to 40%, and for operations BEE expenditure from 41% through 53 to 58% for the same years, all on a steadily increasing budgetary expenditure forecast.

What is fascinating however, is that the trend of greater BEE spend in the operations field as against capital expenditure appears to not to be uniform through the NPA. For example, in East London, the BEE spend in the current year to date on capex has been nearly 87%, whilst about 60% in operations, or in the NPA dredging work, 70% of capex is BEE so far, and 9% opex.

The most recent figures at my disposal also indicate that as far as Freight Dynamics, a central element of the ports environment if not the ports directly, is concerned, BEE spend is in the region of R55m per annum, or 28% of R199m. Petronet, during FY 2002, spent some R36 million on BEE suppliers or some 17% of their total of R218m.

I use these examples to show that the world out there is a little more complicated than at first meets the eye. Different ports present different opportunities, and there is ultimately every reason for further BEE expansion with productive results for all concerned.

The base from which we launch this Draft Strategy document is varied and tells a complicated picture. We need to get behind the veil of industry specific conditions to approach the question whether current BEE expenditure is a realistic expression of capacity or whether it is constrained behind other barriers. Nonetheless, it is clear to me that our analysis and monitoring of BEE spend, let alone procurement spend generally, requires careful analysis that takes into account market issues, cyclical or seasonal questions, and other factors that will inform us as we go along whether the impact of BEE spend is continuous or erratic, depending on what is sourced and when, from BEE suppliers. Any framework that we adopt will have to accommodate serious and detailed analysis as a result.

Both SAPO and NPA currently have clearly defined policies to define BEE companies and suppliers. To date, for example, the procurement conducted by SAPO has, in fact, been successful by raising its proportion of BEE procurement above the minimum of 26% of contracts awarded. The NPA has done likewise.

I have already indicated that the NPA's procurement budget estimates propose significant increases in the forthcoming years. The same situation exists for SAPO and the other SOEs engaged in this sector. For example, the total BEE spend by SAPO for both capital and operating budgets during this financial year is 41% or R117,8m. On projects that are underway, some of which run to 2005, a total commitment to capital spending of R900m will ensure opportunities for BEE business of not less that R240million over the lives of these contracts.

In short, projected budgets of all the SOEs are powerful vehicles for Black Economic Empowerment in the maritime sector. These opportunities extend right across the board, from the mechanical engineering world of the supply of equipment for straddle carriers, postmax cranes, forklifts, tractors and haulers, through the supply of new spares for current equipment across the board, as well as for the repair and manufacture of everything from propshafts and radiators and coolers to sprockets, chains and bearings. Nothing is exempt in our view from the reach of BEE suppliers.

Similarly, we expect interest from BEE suppliers in all fields of electrical and civil engineering requirements associated with port environments, including the lease of equipment and the whole range of general applications and requirements that these ports offer.

In this region for example, the NPA intends construction and capital works at the ports of Richards Bay and Durban that will amount to total spend of about R540million in the current financial year. Next year this will be in the region of R685million. That is over R140m in this year alone allocated to BEE firms.

The concession of the Durban Container Terminal provides another opportunity for BEE. Fifteen percent of this agreement has already been set aside for Black Economic Empowerment. But as I have indicated earlier, more of that when we make the appropriate announcements at a suitable time shortly. We should note that SAPO has been doing very well in the area of break-bulk, car terminals, and bulk. It is in the specific area of containers where Government is unable, even through the South African Port Operations, to harness the necessary levels of investment to deal with a rapidly expanding and developing sector within the maritime transport arena. This is a challenge not only for South Africa, but for many areas of the globe today, and in this regard we are not unique.

Empowerment will not be limited to the transformation of ownership in the maritime sector. It has to conform to the proposed maritime transport BEE scorecard that includes management, skills development, employment equity and promotion of small-medium and micro enterprises.

My message is a simple one to all current and aspiring BEE participants and their partners: "Get in there!". Transnet, the NPA and SAPO and other operators have clear and well-defined policies that are already in line with Government policy. Take advantage of what is opening up. But at the same time as we launch this Draft Strategy Document, we are more than keen to hear the views of all and sundry on how we can make the system work better for the benefit if the whole country an the region as a whole. For this reason, I would also urge you not to be shy to seek partners beyond South Africa's borders, in our neighbouring states, because we are all dependent each on the other.

It is also my wish that, the deliberations of this Indaba should envision a world-class industry, based on seamless integration of all modes and multiple networks.

I thank you.

Issued by: Ministry of Public Enterprises
26 September 2003