The move by Transnet to allow for third-party access to SA’s vast rail network could be key to unlocking export-led economic growth in the coming years, but about R200bn in investment is required to fix the country’s freight crisis.
This is according to estimates by Investec’s corporate and investment banking (CIB) division, who engaged with stakeholders and executives from the logistics sector last week on the launch of the Transnet Rail Infrastructure Manager (TRIM).
Late last year, Transnet announced its decision to split Transnet Freight Rail (TFR) into an operations division, still called TFR, and a distinct infrastructure management company (TRIM) which would pave the way for third party participation in Transnet’s 21,232km rail network.
TRIM promises to end the TFR monopoly and drive the recovery of SA logistics by attracting more focused, private sector investment into the country’s rail corridors, a critical reform given the outsize role railways play in the domestic economy.
As a small, open economy, exports and imports make up 65% of SA’s GDP and with most of its economic hubs being located far from the ports the economy is hugely reliant on inland transport.
Mining and quarrying are the most vulnerable to freight disruptions, with these sectors supplying 35% of inland transporters’ income last year.
However, amid the deterioration of SA’s rails due to theft, vandalism and mismanagement, long-distance haulage is increasingly propped up by trucks, which are not only less efficient and more expensive than freight trains but also take a steady toll on the country’s roadways.
The deterioration of SA’s rail network, largely because of theft and mismanagement, has seen inland transporters increasingly relying on trucks.
Investec CIB emphasised that “the SA economy grinds to a halt without logistics”, and there is an “oversized benefit” to getting rail and port capacity to a level which supports an increase in volumes.
Previous calculations by the Southern African Association of Freight Forwarders (SAAFF) estimated that the local economy loses R1bn a day in total trade due to the logistics crisis stemming from its overreliance on roads.
Investec CIB economist Tertia Jacobs pointed out the freight crisis was the reason SA missed out on a commodity boom in the coal and iron ore sectors, losing out on an estimated R140bn in export revenue in 2021-23.
In recent years, logistics challenges have prevented mining companies from capitalising on higher prices by increasing their mineral production, with the steady decline in output putting pressure on fixed investment in the sector.
Stats SA’s latest GDP data shows that capital spending in SA mining hardly grew in 2023 and declined by 9.6% year on year in 2024, with the Minerals Council SA calling last year’s fixed investment data a “horror show”.
“The eyes of the international community are on us to see how we can deliver,” said Investec CEO Cumesh Moodliar, who expressed optimism about SA’s logistics challenge given the “significant infrastructure projects this country has delivered in terms of the energy crisis”.
TRIM CEO Moshe Motlohi said he was encouraged that the group has now received 98 applications for third-party access to Transnet’s railways and that TRIM has “heeded the call” to open more corridors than the original five which were proposed.
However, given the R200bn financial hurdle faced by the national logistics provider, TRIM’s optimism is yet to reflect in the results of SA’s major mining companies, most of whom are not forecasting improvements in inland transport this year.
Business Day reported that Kumba Iron Ore reconfigured its business last year to address the logistics constraints, achieving cost savings of R4.4bn against a target of R2.5bn-R3bn and was targeting a further R2.5bn-R3bn of cost savings this year.
Coal miner Thungela’s coal exports went from 16.4-million tonnes in 2019 to only 12.5Mt in 2024 while SA’s manganese exports fell from 19.5Mt in 2019 to 14.4Mt in 2023, according to Investec CIB.
Cash-strapped Transnet has estimated that it needs R14bn a year over the next five years to get its ailing network infrastructure up to standard for private operators.
However, no allocations were made to support Transnet’s large capital expenditure requirements for the major mineral export corridors in the 2025 budget.
“From a mining industry perspective, this is a concern. The lack of support means that Transnet will need to find other funding sources, including through private sector participation on the major commodity corridors,” said the Minerals Council.
“Another potential avenue is direct capex contributions from the mining sector to maintain and upgrade rail infrastructure.”
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