Infrastructure & Operational Efficiency and Port Productivity Management in African Ports

(South African Perspective)

THE 7TH PAPC CONFERENCE 200815TH December 2008

DJIBOUTI

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3. Stakeholders objectives on efficiency and productivity of ports

Next steps

1. Emerging story

4. Complementary port strategic objectives on efficiency and productivity

2. Developments that support efficiency and productivity management

CONTENTS

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EMERGING STORY

Market potential

•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

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.

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$62m investment to increase capacity

Plans to increase capacity to 1m TEU

Walvis Bay (APM &Namport)

R4.2m upgrade to expand capacity to 1.4m TEU

Expected capacity of 4.5m TEU

$130m investment on current port

Zaire

Uganda

GabonKenya

Equatorial Guinea

CongoRwanda

Tanzania

Mozambique

Angola Zambia

Burundi

Malawi

Madagascar

Botswana

ZimbabweNamibia

South Africa

Lesotho

Swaziland

Tomasina

Maputo (DPW&Grindrod)

Durban (TPT)

Ngqura (TPT)Cape Town

(TPT)

Luanda (APM)

Dar-es-Saalam (HPH)

Port Elizabeth (TPT)

R1.2bn investment to increase capacity to 500 000 TEU

Current plans to increase to 4.3m TEU

$30 million investment in terminal modernisation

1m TEU by 2015

Building a new port at Dande Bay at double capacity

Mombasa

REGIONAL SCENARIO THAT SUPPORTS ELEMENTS OF OPERATIONAL EFFICIENCIES

Source:Dynamar; press search; Mauritius Presentation; UNCTAD; www.ports.co.za

• 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

Introduction of new players and prudent infrastructure investment could contribute to productivity level

Mauritius

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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.

ELEMENTS OF CO-EXISTENCE WITH PORT PRODUCTIVITY MANAGEMENT

6Source:

Efficiency and Port Producvity

Management

• Cargo owners

• Minimise logistic cost• Dispose of

approximate capacity

• Investors • Invest port infrastructure Maximise ROI

• Shipping lines

• Make calls at port with predictable services

• 3PL/freight forwarders

• Partner with T/Os on lowering cost structures

• Rail/trucking companies

• Collaborate with r port service providers with predictable service

• Private port terminal operators

• Improve productivity levels to serve the customer and meet regulations

• Transnet • Reduce logistic cost for the country

• Be sustainably profitable

• Provide service that is satisfactory to

customers

• Efficient transport action system serving

identified corridors

• DOT

• Reduce cost of doing business

• DPE

• Positive social impact

• Community

• Reduce environmental damage

• Cities/local government

• Maximise workers, benefit

• Promotes jobs

• Trade union

Stakeholders Objectives Objectives Stakeholders

Overall economy

Govern-ment

Civil society

Trans-porters/ logistics players

MULTIPLICITY OF STAKEHOLDERS WITH DIFFERENT OBJECTIVES TO SUPPORT EFFICIENCY AND PORT PRODUCTIVITY MANAGEMENT

Transnet Vulindlela Team 2007

Transnet NationalPorts Authority

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ANALYSIS OF THE MULTICRITERIA IMPORTANT ELEMENTS

Criteria

Attractiveness to operator

•NPV (Port)•Possibilities to expand•Capacity of connecting land infrastructure

Attractiveness to community

•Network efficiency•Road congestion•Economic benefit (value added)•Economic benefit (employment)•Land use•Visual intrusion•Energy use•Pollution (C02, NOx, SO2)

Complementary Port System NPV

Total logistic cost

Additional discriminating factors

Attractiveness to lines

•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

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• 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

Initiatives currently underway to enable the safe, efficient and effective functioning of the productive port system

2009 - 2012

1. Improve vessel and cargo turnaround

2. Provision of Port Infrastructure ahead of demand

3. Improve productive use of assets

4. Increase the Market

5. Enterprise-wide Risk Management

6. Develop human capital and skills to achieve objectives

Strategic Goals

2007/2008

STRATEGIC GOALS SUPPORTING EFFICIENCY AND PRODUCTIVITY INITAITVES

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I THANK YOU