SA’s dilapidated rail infrastructure and dysfunctional ports are hampering local manufacturers from accessing broader markets, presenting a stumbling block for the country’s localisation drive aimed at overhauling the economy.
In a CEO round-table session on Tuesday in Johannesburg, industry titans, including the Black Business Council, agreed on a plethora of opportunities that localisation presents and highlighted its potential to stimulate economic growth and foster sustainable business models.
However, they cautioned that SA’s rail network was a glaring risk to local manufacturers who needed to move their products across SA or export them to foreign markets.
“All of us are concerned with the state of rail infrastructure in the country,” said ProudlySA CEO Eustace Mashimbye. “If we were to move goods in the same way we have been moving goods on the road over the past couple of years, we are going to have bottlenecks and I think that congestion is of concern.” Mashimbye also highlighted the deteriorating road infrastructure as one of the reasons for road transport’s reduced viability.
Having championed the country’s “buy local” campaign since 2001, ProudlySA seeks to influence local procurement in the public and private sectors to increase local production.
However, constraints in railway infrastructure and port efficiencies operated by Transnet have left many businesses without any option but to move their goods by trucks on the road, an option that is costly and damages the country’s road infrastructure.
Transnet’s sprawling operations of railways, ports and pipelines make it a crucial support structure for the economy. The entity has been underperforming in recent months, posting a nearly R6bn loss in the latest financial year as rail volumes plunged amid infrastructure challenges.
The entity’s request for R100bn in debt relief was put on ice recently by finance minister Enoch Godongwana, who said the National Treasury will not bail out the state-owned logistics company until all other survival options were exhausted.
Pan African Investment and Research Services CEO Iraj Abedian said much-needed investment into local manufacturing was urgently required as the sector was a catalyst for SA’s economic growth with a multiplier effect.
But he lamented the structural headwinds posed by a dysfunctional rail system, saying it impeded any potential growth in the sector. He pointed out how local miners have been hamstrung by these inefficiencies, despite high demand for their commodities on the local and global market.
Coal exports from Richards Bay Coal Terminal (RBCT) hit their lowest level since 1993 in 2022, at 50.35-million tonnes, reflecting a lack of trains to carry coal from mines to port.
Abedian highlighted that a reported 2.5% GDP loss was experienced by coal exporters in SA purely as a result of rail not being able to service that industry, which was a cause for concern.
He said it was crucial to fix the country’s rail networks if SA expected to make headway in economic recovery, implement master plans and save its reputation as a trading partner.
“So rail has caused us much more than a figure could represent,” Abedian said. “It’s lost credibility for the government and it’s destroyed the image of Transnet, which used to be profitmaking.”
The collapse stems from operational failures, increased theft and vandalism, reduced locomotive availability and the poor condition of infrastructure resulting from underinvestment.
Mashimbye said what was even more concerning was that local entrepreneurs were opting to move their products through the Maputo port, which is said to be more efficient and gaining popularity over Richards Bay and Durban ports.
“The fact that we have entrepreneurs who are opting to go that way and use the N12 and N4 to take their products out of the country means that there are bottlenecks,” he said.
“The congestion we are talking about is affecting the rate at which products are leaving the country, as well as the rate at which raw materials are coming into the country, so it is a concern.”
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