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Transnet kissing its monopoly goodbye
• 7 January 2025
The publication of Transnet’s Network Statement will enable third-party operators to access South Africa’s rail network, marking the end of the utility’s monopoly over rail services in the country.
Road Freight Association (RFA) CEO Gavin Kelly said this marks an important step in the recovery of South Africa’s rail industry, which has been under immense pressure for years.
Transnet has been in disarray for years from both an operational and financial perspective.
National Treasury has estimated that rail inefficiencies cost the economy more than R400 billion in 2022, while the nation’s minerals council estimates mining exports fell R50 billion short of target.
The poor performance of South Africa’s freight-rail services has increased iron-ore stockpiles at mines and cut coal railings to a 30-year low, forcing producers to switch to truck transport that jammed roads and ports.
In its most recent results, for the six months through September 2024, Transnet reported a R2.2 billion loss, up from the R1.6 billion loss it posted a year earlier.
However, the utility is on the mend, as it is over a year into a turnaround strategy that, if all goes to plan, should revitalise Transnet and increase efficiency at South Africa’s rails and ports.
Part of this turnaround plan is giving third-party operators access to the country’s rail network.
On 19 December 2024, Transnet published its Network Statement, which facilitates open access to South Africa’s rail network by third-party operators.
This statement serves as a unified source of essential information for all Train Operating Companies (TOCs), facilitating a functional rail access system.
It includes time limits, timelines, procedures, services, charging principles, and terms and conditions governing the use of railway infrastructure by TOCs.
Kelly said that, for years, the RFA has been very vocal about the need for “revolutionary” change in South Africa’s rail operations.
This is because, as the efficiency of South Africa’s rail network has declined, road freight has had to bear the burden of transporting goods on the country’s roads.
This has taken a severe toll on the country’s infrastructure and businesses that need to transport goods for export.
Mining companies, in particular, have been impacted, as road freight can prove more expensive and less efficient than rail. These companies contribute a significant share of South Africa’s exports.
Therefore, addressing Transnet’s challenges and restoring the efficiency of the country’s rail network is of the utmost importance to achieve economic growth.
Kelly explained that, despite its current challenges, South Africa’s rail network, with its extensive reach and state-of-the-art infrastructure, has the potential to become a cornerstone of the national economy, driving growth and creating numerous jobs.
However, he said there are still some concerns surrounding Transnet’s ability to create the required environment for third-party operators to operate efficiently on the rail network.
In addition, he said it is still unclear whether the country’s rail network is ready to accommodate a “flood” of trains and a drive from the national logistics chain requirements.
“Whilst a huge amount of cargo is delivered via road every day, the reality is that the cargo needs to move between the origination and destination,” he said.
“The challenge will be creating an environment where system failures – or third-party failures – do not result in the collapse of the various routes identified for open access.”
The RFA has continually noted that rail needs to “carry its load” – and this has been clearly underwritten by the impact seen on roads across the country.
Kelly said the country’s roads were never built to take the volumes of vehicles nor the axle mass loads that Transnet’s failures have resulted in.
He said both roads and towns along the way have had a ‘Jeckell and Hyde relationship’ – damage and wear to the infrastructure but an increase in local business trading to support the increase in road freight traffic through these regions.
“Truly, the publishing of the network statement is an important step,” he said.
“The RFA encourages all companies that could become third-party operators to study the statement and engage with the Department of Transport to restore rail operations to a viable and efficient service.”
“There will be many opportunities for road transport, and there will be changes in how transport is done in the long run, but we need to get the foundation pieces running – reliably, efficiently, securely, and affordably.”
“Surely, by now, there should be no argument that road and rail can – and must – symbiotically work together.”
SOURCE:Transnet kissing its monopoly goodbye – Daily Investor
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