South African state logistics group Transnet signed a 25-year deal with Philippines-headquartered terminal operator ICTSI ICT.PS on Wednesday to upgrade the African country's busiest container terminal in Durban.

The concession agreement is part of the government's plans to address Transnet's chronic underperformance, which has stifled exports from Africa's biggest economy.

Transnet said in a statement that the upgrade and development of Durban Container Terminal Pier 2, which handles more than 40% of South Africa's container volumes, would start from January next year, when ICTSI will take over operations.

Pier 2's capacity and efficiency are expected to increase through the introduction of new equipment and technology.

Transnet Chief Executive Michelle Phillips said working with private companies was an important part of the state-owned company's strategy to modernise and improve its performance.

Transnet will hold a majority shareholding in a new special purpose vehicle set up for the ICTSI partnership, which was delayed by a long-running legal dispute over Transnet's decision to choose ICTSI as a partner.