Transnet ports and rail plan to create competition

Government's new roadmap to urgently turn around South Africa's ports and rail networks plans to create competition, not privatisation, with assets set to remain firmly in the hands of the state.

In an overview of the draft roadmap for the country's freight logistics system, as was presented to a handful of media at the Union Buildings in Pretoria on Monday, government officials said the plan sought to help implement existing policy to turn around ports and rail.

A key objective of the plan is to level the playing field to encourage private sector participation in freight logistics.

South Africa's deteriorated rail performance is taking a major toll on the economy, with some estimates pegging the impact as high as R1 billion a day. For example, amid record-high coal prices, Transnet's export coal line railed the lowest volumes in three decades last year.

Several bulk commodity producers have recently embarked on retrenchment processes, with rail constraints cited among the main reasons.

The country's ports are also not faring well and are ranked among some of the most inefficient in the world.

While existing policy – such as the White Paper on the National Rail Policy and the National Commercial Ports Policy – seeks to drive reform of South Africa's logistics sector, government's freight logistics roadmap aims to enhance collaboration across various entities to accelerate the implementation of identified solutions.

Challenges

"It allows a clear path to address immediate challenges in the short term and the reform of the logistics system in the long term. And this is built on the existing policy decisions that have already been made by Cabinet," said Rudi Dicks, head of the Presidency's project management office.

"So, it's not new. It's developing an inability to implement what we've already decided."

While the draft plan – and the policy from which it draws – seeks to encourage greater private sector participation, this does not equate to privatisation, the officials emphasised.

"It's not about privatisation. But it's creating more competition and investment in the various spaces where Transnet participates," said Dicks.

"The roadmap reinforces our position that these are strategic national assets. We own the infrastructure."

Rather, the roadmap provides the mechanisms to enable private sector investment into South Africa's freight logistics sector.

Private sector participation could take various forms, "for example, third-party access or concessioning to various players on different parts of the rail lines", Dicks said.

Lucrative

This could apply to all rail lines – from branch lines to key lines such as the coal and iron ore corridors, the latter being lucrative lines for Transnet, which was previously not keen to open up to the private sector.

While Transnet recently tried to open up access to private players on branch lines, this was unsuccessful because the terms proved unattractive to private participants, Dicks noted.

The draft roadmap, which News24 has obtained a copy of, has been circulated to key stakeholders for input and is expected to be presented to Cabinet for approval in the coming weeks.

The roadmap analyses the immediate causes behind the logistics troubles – with the identified issues ranging from security to governance and operational inefficiency.

In the short term, the document proposes prioritising three areas – a capital investment programme; operational and rolling stock issues; and security of the rail network.

In the longer term, the draft plan looks at policy and structural interventions and various ways to encourage private sector participation and investment.

The plan includes a long, detailed list of critical actions required to drive implementation, as well as corresponding timeframes.

For example, the infrastructure manager is to be separated from Transnet Freight Rail and established as an operating division within Transnet by the end of October. This reform, which is outlined in the White Paper on the National Rail Policy, is a critical step to enabling third-party access to rail.-Fin24