For black-owned businesses to benefit from future mega infrastructure projects in the ports sector, there is need to set up clear transformation objectives for the sector and making ownership and managerial control key requirements for private sector participation.
The state of transformation in the ports economy mirrors an all too familiar tale of ‘one step forward and two steps backwards’ which has been witnessed in other sectors. On paper, the objectives are well-meant, but the application has been left wanting. Section 30 (b) of the National Ports Act unequivocally mandates the Ports Regulator of SA to ‘provide equity of access to ports and facilities and services provided by the ports”. Yet, more than a decade and a half since this act was promulgated, the state of black participation in terminal licensing and the ports value chain is nothing to write home about.
Granted, black business have participated in initiatives led by the president with other social partners, however this has has not made a significant impact (at least as expected). “It would be naive of us to assume black equity participation is inferred when private sector participation schemes are announced. Unless clear and measurable targets are set for black ownership, and managerial control is set out from the onset, it is our experience that little is achieved in this regard,” bemoans Kganki Matabane, CEO of the Black Business Council.
Statistics are deceptive
Sadly, documented statistics do not reflect reality on the ground in the Ports Sector. Transnet, through its entities the National Ports Authority and Transnet Port Terminals, occupies 63% of the terminal area of SA. State-owned enterprises account for 24% of the terminal operator licenses. While foreign ownership accounts for 35% of the terminal operator licenses, 20% are owned by private unlisted entities, and 23% by JSE-listed companies.
Matabane highlights the problem with the documented statistics. “At first glance and without further interrogation, the private sector ownership of terminal operator licenses suggests that there is transformation in the sector as 74% of the companies collectively achieved a BEE rating of level 4 and higher. However, this is a very deceptive picture that fudges the true picture of transformation in several sectors in our country.”
Systemic weaknesses of verification regime
Many white-owned and controlled companies in SA use, and in some cases abuse, the weaknesses of the BEE legislative regime to avoid equity participation of blacks and women. A lot of the companies benefit from the systemic weaknesses of the verification regime to increase their scores using a bare minimum approach.
This approach overstates companies’ contributions in terms of skills and enterprise development and preferential procurement to undermine the imperatives of black ownership and managerial control. Excluding the two SOEs that control 21 terminal operator licences, it soon becomes clear who are the main beneficiaries of South Africa’s port’s economy. Only 24 terminal operators have a level of black ownership that is above 0%, while only 10 have ownership above 50%. Terminals operators with the highest black ownership occupy only 0.06% of the nation’s total terminal operator area. Companies with limited black ownership, that is less than 20%, collectively account for two-thirds of the terminal operator area.
“When we speak about meaningful economic participation, we do not just mean the passive participation of black businesses to tick boxes on BEE scorecards. We mean debt-free ownership that is held by black-owned entities, dividend participation and capital appreciation, including voting rights,” says Matabane.
Make ownership and managerial control key requirements
President Ramphosa and the department of public enterprises recently announced that R100 billon of investment is needed to transform the country’s freight logistics so that black-owned businesses benefit through the participation of the private sector. One of the projects that come to mind is deepening of the Maydon Wharf channel in Durban to allow for larger and modern vessel.
However, as long as government sticks with the current approach governing the implementation of B-BBEE for private sector participation in infrastructure projects, Matabane, fears that there might not be much change in the black economic empowerment front. In order to address the problem, he suggests the setting up of clear transformation objectives for the sector and making ownership and managerial control key requirements for private sector participation.