James Holley, CEO of Traxtion, one of Africa’s largest private freight rail companies, has hailed moves made by transport minister Barbara Creecy in speeding up reforms in the sector.
Holley told the Standard Bank African Markets Conference this week that there is an under-appreciation of the work done by the government in following through on the reform agenda for network industries.
He pointed to the request for information process published by the department on Sunday to enable private sector participation and foster increased investment in rail and port infrastructure and operations as an example of the work done to reform the sector.
Game-changer
“It’s hard to exaggerate what a game-changer moment it would be if the SA government is successful in implementing those three projects [in the request for information]. You’re talking about a logistics business that on its own is bigger than the private logistics businesses listed on the JSE,” Holley said.
“We have been optimistic about SA’s rail prospects since the government signalled what they planned to do — and they are doing it — which is very important,” he said.
In December, Creecy approved the publishing of the Transnet Network Statement, a major step in facilitating open access to the country’s rail network by third-party operators — a move welcomed by the business community and industry players.
However, Transnet needs about R14bn a year of investment in its six corridors, which have been plagued by theft, vandalism and outdated systems.
Holley put the figure higher, saying that, in total, about R200bn was needed to revamp the country’s vast rail network, which stretches more than 21,000km.
He added that R75bn in new trains would be needed if Transnet wants to meet its objective to move 250m tonnes annually by 2030.
Transnet is aiming to raise rail freight volumes to 250-million tonnes by 2030 from 150-million in the year ending March 2024.
It has warned it might be forced to revise downwardsthe target to transport 250-million tonnes of freight per annum in the next five years should maintenance funding be delayed or come lower thanits projections.
Transnet, in its five-year maintenance investment plan, said cash from operations, budget facility for infrastructure allocations and other private sector collaborations were required to fund the capital investment requirements.
However, the recently established Transnet Rail Infrastructure Manager (Trim) is gearing up for the allocation of the first route slots to private trains after the landmark decision to allow third-party access to the country’s rail network.
Transnet said that while revenue was projected to increase, it remains insufficient to cover the escalating capital and operational expenditure requirements.
‘Multisource funding strategy’
“To address the funding shortfall, Trim must adopt a multisource funding strategy, leveraging various mechanisms to secure the necessary capital over the next three years (access fees, leasing income, scrap sales, budget facility infrastructure funding, private sector funding, debt relief, project financing, debt and concessions),” the maintenance investment plan said.
“However, Trim requires a substantial cash injection during the two years preceding the implementation of the Catalytic PSP transactions outlined in the freight logistics road map.”
Evert de Ruiter, MD of Auctoro Advisory, said great strides had been made in reforming SA’s logistics sector, which has underperformed over the past few years, dragging down economic growth. He pointed to the announcement of the requests for information for private sector participation in the railway system, with up to 70% of Transnet’s current volumes being in play, a key step forward, among other reform initiatives.
“What is disappointing is that the institutional transformation of Transnet has stalled, and the organisation doesn’t seem to be reimagining its role in the future rail ecosystem of SA.
“Besides solving past problems (for example a mountain of debt), it should also be gearing up for significant competition,” De Ruiter said.
“Most people would be pleasantly surprised about how the market is pulling together across a broad front to remedy this national crisis,” he said.
“The burden and responsibility of SA’s future railway system will soon be shared between the public and private sectors. If we get it right, it can radically alter our beautiful country’s economic trajectory.”
De Ruiter previously served as Transnet Engineering’s chief of staff. Before that, he was a general manager for operations transformation at the state-owned entity.
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