Transnet Freight Rail (TFR) plans for rail reform that include opening up its 21,200km network for private sector participation will begin in April with a maintenance backlog of R31bn and debt of R39bn.
The programme, which will begin two years after its initial start date, will be managed by the interim infrastructure manager ahead of the establishment of a separate entities, the Transnet Rail Infrastructure Manager (TRIM) and the Transnet Freight Rail Operating Company (TFROC).
The programme envisages that TFR’s rail network, which continues to battle against the escalation of theft and vandalism of its infrastructure as well as a lack of locomotives, will be reliable and well funded.
However, in the absence of funding from the government, the “interim infrastructure manager should base its initial funding requirements on affordability of investment from access fees paid by access users,” TFR said in a draft tariff discussion paper which was published along with the draft network statement for third party access.
The National Treasury has declined funding requests from Transnet and instead approved a R47bn credit guarantee facility for the entity to service its debt.
“It is envisaged that, similar to global reforms, there will initially be few external operators and the incumbent train operator, being Transnet Freight Rail Operating Company (TFROC), may therefore be the only operator for most of the first year (2024/25) and the dominant user of access services for the foreseeable future based on pre-existing contractual obligation with customers. This situation will imply that the interim infrastructure manager will not generate the allowable revenues and the forecast should be adjusted closer to the likely scenarios.”
The draft network statement, which was released for public comment over the weekend, details the rules, time limits, timelines, procedures, services, charging principles, and terms and conditions which would govern the agreement between TFR and the train operating companies (TOC).
Allowing third private players onto the network is expected to increase competition, boost efficiency and reliability and reduce costs for customers.
Private players who are granted access to the network will be for all slots available on a voetstoets basis, meaning third-party operators will have to accept the state of the rail infrastructure, according to the draft rail access agreement which would be signed by TOCs.
Under the draft agreement, Transnet’s infrastructure manager is not obliged to replace, upgrade or expand the network or rail infrastructure and equipment.
“Although the interim infrastructure manager shall use reasonable endeavours to maintain the network it does not guarantee, warrant or undertake the availability, state of repair, condition and/or fitness for purpose of the network and accordingly the TOC expressly agrees that it shall not have any claim against the interim infrastructure manager in this regard,” the draft agreement reads.
The challenges of TFR’s rail infrastructure, particularly on its coal lines, have been cited as being behind a loss of revenue for some mining houses.
The first and pilot phase of the programme was cancelled in October 2023 with TFR cancelling the contract with chosen bidder Traxtion Sheltam.
The entire process was been cancelled with Traxtion after both parties agreed that the two-year pilot phase, which would have allowed the company access to slots between Kroonstad and East London on the Cape Corridor, was too complex to implement given legislative and infrastructure requirements
The project had previously been criticised by potential bidders for requiring an investment of hundreds of millions of rand by third parties in equipment that would last 30 years for a two-year contract. TFR has previously defended the process despite warnings from the private sector that the requirements to gain access to the slots and the financing required are too stringent for the pilot phase.
In the programme beginning next month Transnet says TOCs that have existing contracts with their customers will be given priority for slot allocation.
Slot allocation will also consider the contribution by respective TOCs to the overall reduction in operating costs, maximisation of yield and improvement in operational efficiency. Preference will be given to TOCs that maximise revenue, offer innovative solutions that will reduce unit cost per tonne-kilometre and will result in improved operating efficiency,” the draft network statement says.
“The interim infrastructure manager may consider proposals from TOCs that are willing to contribute to funding parts of the network. While evaluating the financial model the IM together with the TOC will analyse the options available to recover the investments, including discounted tariff, longer terms contracts and preassigned capacity.”
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