South Africa’s National Infrastructure Plan (NIP), which was launched in 2012 and is expected to run through 2027, is organised into 18 Strategic Integrated Projects (SIPs), including initiatives aimed at catalysing development and growth in the areas of energy supply, social infrastructure, health and education provision, and water and sanitation networks. Under the first five geographically focused SIPs laid out in the NIP document, the federal government aims to establish (or, in some cases, refurbish) new transport corridors throughout the nation, with the goal of boosting South Africa’s economic competitiveness across a variety of industrial segments. Collectively, these projects have the potential to transform the way freight and, in some cases, passengers are transported through the country.
SIPs have major implications for the logistics industry, in particular. Broadly, under the NIP the government aims to facilitate a shift away from moving freight on the increasingly congested road network to a system that relies primarily on rail infrastructure. This change is widely expected to lead to a major boost in efficiency and cost savings, particularly in exportorientated and bulk industries. Implementing and managing the R4.3trn ($407bn) NIP is the responsibility of the Presidential Infrastructure Coordinating Commission (PICC), which was launched by President Jacob Zuma in October 2011. In late March 2014, South Africa’s Parliament passed the Infrastructure Development Bill, which formally established the PICC as the primary coordinating body for infrastructure development in the country. The PICC falls under the oversight of the presidency and the federal government’s Economic Development Department (EDD). While the PICC has a mandate to ensure that all NIP-related projects are moving forward, the actual implementation of each SIP has been assigned to various other government entities, depending on the focus of the individual project. For example, Eskom, the state-owned public electricity utility, is overseeing the power components of the NIP, while Transnet, the government’s rail, ports and pipeline company, is responsible for implementing projects in its mandated areas. According to estimates from the EDD, NIP-related projects are expected to cost about R827bn ($78.3bn) through 2016-17.
Under SIP 1 the government is investing heavily in rail and utilities infrastructure in the northern and eastern regions of the country. The project is focused on unlocking South Africa’s northern mineral belt, which is a major source of coking coal, chromite, platinum, palladium, copper and precious exports. Development is taking place along a corridor that stretches from the coalfields in the northern Limpopo region through Mpumalanga and on to Richards Bay in KwaZulu-Natal, the latter of which is home to a major coal-export terminal that was undergoing upgrades in late 2014.
Mining is a key component of South Africa’s economy, contributing 8.6% of GDP overall. The country is one of the world’s largest producers of coal, iron ore, manganese, chrome, platinum, palladium and zirconium, to name just a handful of domestically produced minerals. A large percentage of this production takes place across the northern mineral belt, and in particular the Waterberg region in Limpopo, where mining accounts for more than 50% of regional GDP (see Mining chapter). Under SIP 1, the government aims to support the expansion of minerals exploration and production in the north through the development of new rail capacity and water and electricity transmission networks.
As part of the project the government aims to link the northern mineral belt with Richards Bay via Gauteng and Mpumalanaga, with the goal of boosting mineral exports from the Port of Richards Bay, which is South Africa’s leading bulk port. The Richards Bay Coal Terminal (RBCT), which opened in 1976 and has been expanded a number of times since then, is the largest coal export terminal in the world, with overall capacity of 91m tonnes per year, though the port has been operating significantly under capacity in recent years as a result of a lack of supply. The expansion of rail capacity is expected to boost supply. Additionally, the rail component of the project involves linking the coalfields in Waterberg with power stations in Mpumalanga, thereby assisting Eskom in overcoming a recent bout of power supply issues. In February 2014, for example, RBCT was shut down for two weeks as a result of a nine-day power outage in the region.
One of the most prominent initiatives put forward under the NIP is SIP 2, which involves the creation of a logistics and industrial corridor linking Gauteng with the port at Durban via Free State. Key components of this initiative include major upgrades to the rail lines that run between Johannesburg – widely regarded as South Africa’s commercial and industrial capital – and Durban, home to the country’s largest port by a significant degree. “The NIP represents a huge investment in infrastructure by the government, which is sure to have a positive long-term impact,” Jackie Walters, a professor of transport and supply chain management at the University of Johannesburg, told OBG.
Transnet’s seven-year Market Demand Strategy (MDS), which was launched in April 2012, is a R312.2bn ($29.6bn) programme revised in July 2014 from R37.5bn ($3.5bn). The programme is aimed at building capacity in rail, ports and pipelines (the company’s primary areas of operation), with the dual objectives of substantially boosting freight volumes – particularly bulk freight and commodities like coal, iron ore and manganese – and supporting a sector-wide shift from road to rail. Broadly, the MDS falls under the NIP, and investments made by Transnet under the strategy will contribute to a number of SIPs, including SIP 2.
Rosario Sarno, managing director of Mediterranean Shipping Company, told OBG, “Transnet’s spending to increase rail and port capacity is welcomed, given rising freight volumes, and overall integration of road and rail will improve competitiveness.”
Indeed, a majority of the investments made under the MDS initiative – some R205bn ($19.4bn) in total – will go directly to Transnet Freight Rail, which is projected to be the fifth-largest rail freight company in the world by the time the MDS wraps up in 2019. While a majority of the initiatives under SIP 2 are still in the planning stages, by late 2013 a handful were under way, including the construction of a R2.3bn ($217.8m) container terminal at City Deep inland dry port, a major logistics hub in Johannesburg; a R3.9bn ($369.3m) project to upgrade and expand the Port of Durban, the nation’s largest seaport; and the purchase of R14.9bn ($1.4bn) of new rolling stock to service the corridor.
“While Transnet has put the wheels in motion with regards to its seven-year capex infrastructure plan, which will address bottlenecks, the private sector needs to play a role in providing new capacity and financing,” Alan Olivier, CEO of Grindrod, told OBG. For its part, Transnet has acknowledged the need for private sector involvement in rail development, as stated by Molatwane Likhethe, executive manager at Transnet Freight Rail, at a Transport Forum meeting in May 2014.
Like SIP 1, SIP 3 is aimed primarily at boosting mining capacity, in this case by improving rail links between the manganese-rich Northern Cape and Port Elizabeth, in the Eastern Cape. A key component of this plan is the construction of the Port of Ngqura, which is currently under way 20 km north of Port Elizabeth. Launched in 2012, the new deep-water port is being constructed by the National Ports Authority (NPA) with initial investments of R3.2bn ($303m), though this figure is expected to rise as the project is expanded through 2019. In conjunction with the construction of the new port, the first phase of which is expected to be up and running in the near future, Transnet has announced plans to shift its manganese export terminal to Ngqura from its current location at Port Elizabeth, which will require the construction of a new rail line from Hotazel, in the Northern Cape. Manganese is also exported via ports at Durban and Richards Bay.
SIPs 4 and 5 – the final two geographically focused projects in the NIP – are both focused on boosting transport capacity, the former in North West Province, which is located just to the west of Gauteng; and the latter across the Northern and Western Cape provinces. Under SIP 4, the PICC aims to encourage the “acceleration of investments in road, rail, bulk, water, water treatment and transmission infrastructure,” with the goal of expanding opportunities in the mining, agricultural and tourism sectors. Mining is a key industry in North West, accounting for more than 50% of the province’s GDP. Minerals produced in the area include gold, platinum, uranium and diamonds, among others.
Under SIP 5 the PICC and Transnet are working to expand both rail and port capacity with the objective of supporting iron ore mining activities at Sishen, in the Northern Cape, and boosting oil and gas-related investments on the nation’s west coast. In July 2013 the Western Cape provincial government announced an R8.67bn ($821m) plan to turn the Port of Saldanha Bay into one of Africa’s largest oil and gas hubs. The strategy, which was developed and will be carried out in conjunction with the NPA and Transnet, and under the umbrella of the NIP, involves expanding the port’s capacity in oil-rig and vessel repair and maintenance.