Durban, 9 October 2000
In April this year, Major-General Aboud Rafrouf, the Commander of the Kenyan Navy, reminded the delegates to the SA Navy Conference held here in Durban that:
Globalisation and international interdependence have changed our view of the oceans. Because of the international character of the seas, littoral states [such as South Africa] share borders with the whole world. This necessarily carries serious security, diplomatic and social implications, since these states have to contend with drug trafficking, marine pollution, illegal immigration, contraband trade and the illegal exploitation of marine resources. They face almost insurmountable economic challenges, as these illegal activities must be monitored and checked. For Africa's fledgling economies this is indeed a gigantic task.
Whilst the General focussed his attention on the security dimensions of the maritime context, our task is to focus on the no less important economic challenges of that context. For whilst at least 80% of world trade is sea- borne, South and Southern Africa's dependence on the oceans is far higher. Thus, at last count, South Africa's maritime exports constituted some 95% of our total exports by volume and between 68% and 70% by value. Maritime imports, on the other hand, constitute approximately 95% of total imports by volume and some 85% by value. The increase in cargo handled at South African ports has increased by about 67,3% over the last 12 years. Since 1994, the total volume of cargo going through South Africa's ports has increased by 27%, from 122,4m tons to 155,7m tons. Containerised cargo has seen the most dramatic increase over the same period, growing by 62% from 15,1m to 24,5m tons. These figures represent a massive increase in growth when compared to other parts of the developing world where there has been a significant expansion in container port traffic as well. All indications are that these trends will continue. It is interesting to note that in the 1999/2000 financial year, imports from Asia accounted for just over 36% of the total, and exports to that area 47.5%. Europe followed in second place with just under 17% imports, and 37% exports. So far the current financial year indicates some substantial shifts, with Asia commandeering 30% and Europe 24% of imports and dividing export volumes by 45% and 35% respectively.
Whilst these figures provide some indication of the scope of the import/export trade, let us not forget the huge volumes that pass from ship to shore in our ports and harbours, destined for Zimbabwe, Botswana, Zambia and even as far afield as Rwanda, Burundi, parts of DRC, and Malawi. Underdevelopment and civil war has meant that continental Africa's ability to optimise agricultural as well as mineral and ore production has been restricted. Just as the countries under-produce, so many of the ports of southern Africa such as Maputo, Mombasa, Luanda, Walvis Bay and others operate below capacity. Inadequate infrastructure and its dysjuncture with the requirements of the international maritime fleet also hamper this undercapacity. One example is the need to keep up with international trends that have seen a shift away from goods exported in bulk and breakbulk to containerised cargo.
At least three very important developments that South Africa has deliberately participated in also contain the seeds of increased pressure on our ports. Multilateral trade liberalisation under the auspices of the WTO to which South Africa subscribes, commits us to reducing tariffs over a range of products. Reductions in non-tariff barriers that include inefficiencies at ports that lead to delayed turnaround times must also be targeted for implementation. The conclusion of the EU-SA Free Trade Agreement in 1999 provides for reciprocal preferential access for goods traded between Europe and South Africa and will more than likely lead to an increase in trade through our ports as well. Just last month, SADC countries agreed to a Free Trade Agreement that provides for reciprocal preferential market access between SADC countries. Moves in the United States to liberalise their closed markets and allow greater access by African countries into the US will also encourage higher exports, many of which will use South African ports. Durban accounts for about 50% of all imports, whilst Richards Bay dominates export volumes with about 65% of the total; figures that indicate to some extent the nature of our import/export trade.
These trade agreements have important implications for the definition of costs and tariffs, and the operations of our ports. They have focussed attention once again on the need to urgently revise the tariffs that currently prevail in the ports sector. In particular, the ad valorem wharfage charge that levies tariffs on cargo on the basis of value rather than volume serves to undermine the competitiveness of high value-low volume manufactured goods.
Thus, intrinsically, the pressure on South African ports, our rail and road infrastructure, as well as our portside and seaside operations and management will come under increasing pressure to deliver quality service on time, all the time. There are a number of necessary ingredients to ensure that our ports, maritime related industries and transport networks are able to operate effectively, efficiently and with the necessary flexibility to cope with the fluctuations that occur within your environment. Essentially these ingredients include appropriate infrastructure and logistics, transformed administration and operations, and sound labour relations. Allow me to touch briefly on each.
Parliament recently approved fundamental amendments to the Transnet Pension Fund that will allow us to rework the question of the Transnet debt substantially. Alongside other instruments, the R27bn debt burden faced by Transnet will become of creature of the past, paving the way for overdue infrastructure investment. Already, solid progress in Transnet over the previous and current financial years has led to agreement on proposals for a massive injection of investment in our port facilities. Portnet's container terminals at Durban, Port Elizabeth, East London and Cape Town are in line for upgrading, and we look forward to the rapid development of new cargo bays for Richards Bay and Saldanha Bay. The development of a new deep-water port at Coega in Algoa Bay is also on track. These are all major projects and will lead substantial improvements that will not only provide for the current shortcomings of some of these facilities, but also lay the way for steady expansion to deal with the growth we expect in the sector over the next 15 to 20 years.
You will all recall the introduction of the Cosmos system…including the teething problems we had to deal with at the outset! It is now handling record quantities and has proven the soundness of the decision to acquire it. However, the fact of the matter is that besides the need for increased sophistication in the data systems we use, e-commerce is going to increasingly reshape and revolutionise the nature of the industry in which you work. Thus, the communications networks we utilise have to be integrated with a much wider array of customers and clients than in the past. These factors have also been accounted for in the development of policy and planning for Portnet and for the industry as a whole.
Government will shortly be publishing for public comment a policy document for ports that includes both policy and regulatory issues. In order to strengthen the efficiencies already gained over the last few years, government is committed to restructuring the critical aspect of the freight logistics chain. Our ports and harbours are of strategic importance, both from the maritime security perspective and in their development role. Government has embarked on a process to distinguish clearly between port operations and port authority. The national port authority will play the role of landlord, responsible for the maintenance and development of ports infrastructure. In the case of port operations, the imperative is to enhance their efficiency during a process of divisionalisation, thereafter moving towards concessions to private sector operators on an incremental basis. The privatisation of port operations should improve the levels of service and competitiveness of the ports, whilst at the same time allowing for greater participation for new BEE entrants to the industry. We believe that private sector capital, technology and expertise can contribute, to the development of higher volumes of manufactured exports. Such exports would underpin the creation of higher wage, higher productivity jobs in our economy. The details of the proposals will come before you in due course, and will of course be subject to the procedures of the NFA, with which, I trust, the new bargaining council will interact.
This brings me to the question of sound labour relations. Port activities in many ways are a microcosm of the larger society. At any hour of day and night the sounds and sight of activity and the constant movement of myriad types of transportation and people gives one the impression of a huge, and noisy, antheap! The large number of employee organisations is only matched by their diversity. The needs and requirements of different types of labour are also only matched by the number of associations and interest groups that impact on the work of the port. Labour and employer operate in a cosmopolitan environment, open to the languages and cultures of the world, and dependent on the vessels and goods that sail in them for your common livelihood. At the same time, your activities impact in a most immediate way with the wellbeing of others, many, many thousands of kilometres away. So, just as a collapse in the Cosmos system can empty shelves in an Ndola store, so strike activity or lockouts can prevent the export of goods critical for the foreign exchange earnings of our country or one of its neighbours. Spin-off costs, such as insurance, penalties, or delays in turnaround, also bite into the economic health of the national and the local environment.
The launch of Matibco is significant in that it represents one of the first industries to transform themselves into a bargaining council under the 1995 Labour Relations Act. Up until now, bargaining has tended to concentrate on company-employee levels, or indeed, at the Transnet or Portnet level. This is clearly inappropriate as it redirects the focus of the industry away from its core roles and functions towards wage regulation and conditions of labour. It is no easy matter setting up a functional bargaining council, but I am sure that with the commitment that I have seen expressed in today's newspaper supplement, and with the assistance of the CCMA, it will be successful. There are many challenges ahead, but then, we in South Africa tend to thrive on challenges! So I am confident that we will be able to supply the quality of service with the appropriate cheerfulness that will make importers, exporters, maritime traders and investors enthusiastic to do sound business with South Africa's ports.
I thank you.