State-owned freight logistics group Transnet has moved to allay concerns of private sector players about the high costs of participation in the initial two-year period, during which third parties will be able to access its rail infrastructure.
Transnet Freight Rail (TFR) invited bids last week from the private sector to operate 16 slots along its container corridor (Gauteng to Durban) and south corridor (Gauteng to East London). It is moving to improve inefficiencies that have hampered the profitability of critical sectors of the economy.
The sale of the slots will be for a pilot phase of 24 months between 2022 and 2024, raising concerns from potential bidders that investment of hundreds of millions of rand by third parties will go to waste as bidders are unlikely to invest in equipment that will last 30 years for a two-year contract.
The number of train sets available to the pilot project, therefore, will be extremely low and will in effect be limited to train sets previously applied for in other projects in the past that now happen not to be deployed, said Mesela Nhlapo, the CEO of the African Rail Industry Association (ARIA).
ARIA estimates that every 50-wagon train set costs up to R200m and each operator will require three train sets per slot, pushing the price per operator to R600m.
TFR says these estimates are unlikely as the price for brand new locomotives is between R40m and R55m.
“Depending on the length of train that you are running, you might only [require] two locomotives to pull one train ... you might need three locomotives,” said Bessie Mabunda, GM for planning and the operations command centre at TFR.
Mabunda told Business Day that manufacturing locomotives usually requires 18-24 months and the expectation by Transnet is that winning bidders will either be those that will lease locomotives or that already own locomotives.
Full ownership
The sale of slots runs from April 1 to May 31, with the winning bidders expected to be announced in June. Once slots are sold to third parties, Transnet will be the custodian of the infrastructure and will remain as the dominant operator, giving only limited access to third parties to its infrastructure. Transnet will retain full ownership of the rail network and will also be responsible for its maintenance.
“The whole point about the slot sale is not so much about generating revenue, though there will be some revenue ... The way in which the slot price is calculated is on the basis of just looking at what would it take for us to continue providing the infrastructure to the right level of maintenance,” Mabunda said.
“For us to be at a level where we are understanding that we are going to be competing with rail, we have to price it [the sale of slots] in such a way that we are still competitive.”
Transnet says it will make all slots available on a voetstoets basis, meaning third-party operators will have to accept the state of the rail infrastructure, which ARIA says is in contravention of the national rail policy approved in March. Under the policy, Transnet is responsible for ensuring working infrastructure and efficient operations.
Mabunda said that though Transnet continues to work with law enforcement to improve the security of its rail network, the third-party operators will be expected to partner with the rail enterprise to come up with solutions to how the infrastructure can be protected.
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