‘This is an exciting and significant milestone,’ says private sector lobby group B4SA. From Moneyweb.
Transnet’s freight rail monopoly is about to end following the publication of a rail network statement that allows private operators access to South Africa’s nearly 21 000 kilometre rail network.
Reform of the country’s rail network has been years in the gestation, but was accelerated in 2023 when cabinet approved the Freight Logistics Roadmap which established the broad outlines of a programme to invite much-needed private participation in the rail sector.
Read: South Africa approves blueprint to open up rail-network usage
“This is an exciting and significant milestone in the journey towards meaningful rail sector reform in South Africa,” said Business for South Africa (B4SA) in response to the network statement published last week by the Transnet Infrastructure Rail Manager (Trim).
Traxtion, which operates one of the largest private rail fleets in Africa, says this will invite private investment into the rail sector and unlock the bottleneck on job creation and economic growth.
Transnet’s mounting debt of more than R130 billion – nearly half of that the result of state capture – has crippled its ability to invest in upgrades and network maintenance, resulting in freight volumes regressing to levels last seen at the end of World War II.
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A draft version of the rail network statement published earlier this year was roundly criticised for proposing unrealistic tariffs that private operators would be expected to pay for use of the network. It also proposed a single tariff for network access instead of the tiered approach requested by private operators.
The latest version corrects this, allowing for differentiated tariffs that are benchmarked to international prices and are in many cases more than 60% lower than originally proposed.
“We can thank Transnet for publishing the Network Statement before Christmas. Open access is now a reality on the SA railway network from January 2025,” says Jan Havenga, professor of logistics at Stellenbosch University.
Under the original network statement, the tariffs proposed by Transnet meant it would cost 2.5 times more to use rail than a truck from Cape Town to Johannesburg, an unsustainable pricing structure that would do little to halt the migration of freight from rail to road. Private operators were expected to pay down Transnet’s debt – something they were not prepared to do.
The fix …
That has now been fixed after consultations with industry experts and private operators. Under the new rules, the allocation of network access falls to the Transnet infrastructure manager, that owns and operates the network, while competition will be refereed by the new transport economic regulator that will come into being following the signing in June this year of the Economic Regulation of Transport Act.
“There has clearly been a lot of work put into the final Network Statement, with tiered pricing that has been globally benchmarked,” says Ian Bird, senior executive for the Transport and Logistics focal area of B4SA.
“The outcome is a commercially responsible approach that is palatable for industry and supports the country’s road-to-rail strategy.”
Read: Transnet’s plan to attract rail investment misses the mark
The published tariff structure and pricing applies to Transnet’s current financial year ending March 2025.
This will be adjusted for the 2025/26 year, while longer term tariffs will be shaped by the competition inquiry into the sector and the creation of the Transport Economic Regulator.
Rail tariff structure
“The access charges which will be paid by private operators will generate a significant new revenue stream for Transnet, improving its financial position,” says James Holley, CEO of Traxtion.
“It is extremely encouraging that the rates for all operators, Transnet and private operators – a contentious point when the first draft of the Network Statement was released for comment – have been significantly reduced… The proposed single network wide access tariff has also been replaced by a multi-tiered tariff which is aligned with international best practice,” he explains.
The release of the network statement comes at a time when Transnet is showing improvements in performance, particularly along the coal corridor connecting the Mpumalanga coal fields to the port of Richards Bay.
In August, the group set itself a target of shipping 170 million tons (Mt) of cargo for the current financial year and was 2Mt shy of this target. This is an improvement on the 154Mt shipped in the prior year.
B4SA says private sector resources can be leveraged to enhance rail infrastructure without impacting Transnet’s balance sheet.
The creation of the Private Sector Participation unit within the Development Bank of Southern Africa, under Department of Transports oversight, is another essential step in managing private entry to the market.
