Transnet National Ports Authority (“TNPA”) today outlined its Island View Precinct Strategy, which sets out to address lease consideration within this major petrochemical hub in the Port of Durban, while encouraging new entrants into the market.
Addressing affected lease holders and representatives of the petrochemical industry, Chief Executive of TNPA, Shulami Qalinge, said: “The TNPA Island View Precinct Strategy aims to facilitate greater participation of historically disadvantaged persons in terminal operations, in line with TNPA’s statutory mandate, while enhancing the country’s supply of strategic liquid bulk commodities.”
Historically lessees in the Island View Precinct have enjoyed tenancy in excess of 50 years, leading to slow transformation within the precinct. The majority of the precinct’s footprint is occupied by cargo owners who act as Terminal Operators. They are responsible for landing, shipping and/or storage of South Africa’s petroleum, diesel, chemicals, oils, lubricants and aviation fuel.
Qalinge said: “The underlying principles of the Island View Precinct Strategy are to promote radical socio-economic transformation, job creation and to facilitate investment in ageing infrastructure. The strategy will also allow us to allocate capacity to new entrants and to introduce an operating model that ensures equal access. This will enhance the security of supply.”
Currently 14 leases in IVP are on a month-month arrangement. An additional lease expires in 2020 which will potentially free up three sites in the IVP.
All of these affected leases will be advertised through an open tender process, commencing in 2018. The open process will allow for shortlisting of bidders and only shortlisted bidders will be eligible to submit final bids.
Qalinge said that existing operators could re-bid but would need to fulfil the stringent transformation and job creation requirements of Transnet SOC Ltd. Potential new entrants will be required to meet certain transformation criteria such as Level 4 BBBEE and TNPA will seek 51% Black ownership in the Terminal Operator company.
“The execution of the IVP strategy is a complex process given national imperatives, but TNPA requests industry to embrace the IVP outcomes and to work with us to effect a smooth transition,” she said.
All immovable assets in the Island View Precinct will transfer to TNPA as provided for in existing lease agreements. Leases that are currently running on a month to month tenure will be extended to allow for the open process to be concluded and for a smooth transition with the implementation of the IVP strategy. Lease extensions will in general be on the same terms and conditions, but rentals will be market related.
Tenure will be aligned with the condition assessment of existing facilities and terminal operator investment plans and will be capped at 25 years. Tenants will be responsible for decommissioning/ rehabilitation/ remediation of IVP lease sites.
During April 2018 TNPA will be engaging existing tenants in the precinct on an individual basis to discuss and finalise terms and conditions of short term lease extensions and asset transfer. TNPA also plans engagement sessions with other interested parties later in the year.