A major shake-up within the Island View Precinct (IVP), in the Port of Durban, is expected after Transnet National Ports Authority (TNPA) began engaging tenants ahead of the implementation of its new IVP strategy this month.

At a press conference following initial engagements with leaseholders and members of the petrochemicals industry, TNPA CEO Shulami Qalinge admitted that the strategy would require a balancing of transformation with security of supply, while, at the same time, addressing a backlog in infrastructural investment within the precinct.

She said TNPA was aware that the new strategy would have a significant impact. It was a brownfield project and the first of its kind and would affect not only Transnet and the immediate precinct but also the national economy. As a result, she said, Transnet wanted to “tread carefully”.

Although newly appointed acting Durban port manager Nokuzola Nkowane said the engagement with existing tenants, who would ultimately be required to vacate or rebid for their premises, was positive, she said the names of tenants that would be affected and details of leases would remain confidential.

The greater part of the precinct is occupied by cargo owners who act as terminal operators. They are responsible for landing, shipping and storage of South Africa’s petroleum, diesel, chemicals, oils, lubricants and aviation fuel.

The IVP is linked directly to the operation of fuel pipelines, as well as nearby oil refineries Engen and Sapref. Refined products stored within the precinct are moved inland through the Durban–Johannesburg pipeline, the new multiproduct pipeline and by road.

The precinct is occupied by 15 tenants and there are ten berths and 656 storage tanks.

Currently 14 leases in the IVP are on a month-to-month arrangement. An additional lease expires in 2020, which will potentially free up three sites in the precinct.

All the affected leases will be advertised through an open tender process, starting this year. The open process will allow for the shortlisting of bidders. Only shortlisted bidders will be eligible to submit final bids.

The new strategy will require lessees to have a Level 4 broad-based black economic empowerment rating and be 51% black-owned. The new operating model will separate cargo owners and terminal operators, with cargo owners limited to 49% ownership of terminal operator companies.

To encourage new port entrants, members of bidding joint ventures who currently hold a terminal operator agreement with TNPA may not hold more than 49% of individual bidding entities and joint venture companies.

Qalinge said existing operators could rebid but would need to fulfil the stringent transformation and job creation requirements.

Leases that are currently running on a month-to-month basis will be extended to allow for the open process to be concluded and for a smooth transition with the implementation of the new IVP strategy. Lease extensions will be on the same terms and conditions but rentals will be market related, explained TNPA GM of strategy Nico Walters.

He said tenants had signed leases as far back as the 1950s and 1960s and enjoyed tenancies in excess of 50 years, which had contributed to slow transformation within the precinct.

While TNPA has invested in berth infrastructure, terminal investments by operators were lagging.

All immovable assets in the IVP would transfer to TNPA, as provided for in existing lease agreements.

Tenants would be responsible for decommissioning, rehabilitating and remediation of IVP lease sites.

He said that, when it came to signing new leases, tenure would be aligned with condition assessment of existing facilities and terminal operator investment plans and would be capped at 25 years.

The service provider who will carry out the condition assessment of facilities will be appointed in this month and the overall assessment process is expected to be complete by October.

Executive manager of new business development Jacob Nare said he expected some older tanks to be decommissioned as a result of this assessment. However, he believes that the overall effect will be a positive one, with investment in rehabilitating ageing facilities, as well as the construction of new storage facilities on vacant land, likely to generate opportunities for new companies.

TNPA will continue to engage with existing tenants on an individual basis and also plans to engage with other interested parties later in the year.

Nkowane stressed that Transnet would focus on job preservation, while ensuring that job creation within the precinct was realised.