There’s a large chunk of SA’s economy anxious for state-owned rail and port owner and operator Transnet to give private companies access to its infrastructure.
As structural reforms go, this is a very big deal.
Transnet has hardly covered itself in glory when it comes to providing a sustainably reliable rail service to clients. In case this sounds too critical consider just one statistic.
The double railway line between the industrial heart of SA in Gauteng and the large and busy port of Durban handles just one-fifth of the annual freight between the two cities.
The balance goes by road, and any driver on that highway will notice the long streams of trucks and the dearth of trains on the railway that neighbours much of the route.
Particularly infuriating is seeing containers on trucks. This should be Transnet Freight Rail’s (TFR) core business. The other is seeing the convoys of tired articulated trucks carrying copper plates from mines in the Democratic Republic of the Congo and Zambia as well as ore trucks from SA mines. How on earth is this even an economic option let alone an environmentally friendly one?
It’s a point TFR CEO Sizakele Mzimela concedes, acknowledging how unreliable this key arterial rail line has become that customers would rather pay more to ensure on-time port deliveries for waiting ships.
Imagine then, a slew of private operators on that line, for example.
Sure, TFR may have the iron ore and coal lines spoken for, but there are others where its service, reliability and customer satisfaction ratings are dreadful and a private operator can come to the rescue of the economy.
But even on the coal and iron lines, TFR is falling short of customer expectations and cries of exasperation from major mining companies at its poor service.
Consider another statistic.
According to Mesela Nhlapo, CEO of African Rail Industry Association, 80% of Transnet’s 23,000km of rail is less than 30% used.
What a waste of billions of rand and decades of investment and it is hard not to feel aggrieved when looking at the dire circumstances of the economy where one in three adults is unemployed and the outlook is bleak.
The devastating effect of corruption and incompetent management during the nine years of Jacob Zuma’s presidency cannot be understated. Anecdotal stories from management who have fled and customers dealing with Transnet paint an incredibly bleak picture of how rotten the parastatal had become.
That is something the government has to clean out, pursue hefty prison sentences and install the best possible management it can.
Why have a dysfunctional state monopoly like Transnet or Eskom keeping a tight grip with its dead hand on such key sectors of the economy when clearly there is a private sector participation option to kick-start economic growth?
The ANC model of a centralised economy dictated to by the developmental state?
President Cyril Ramaphosa has spoken often about structural reform and private access to the railways is one of the main planks in this strategy. Ramaphosa has spoken of his frustration at the glacial processes to undertake these reforms in parastatal companies.
Imagine being a private company or export/import industry waiting for liberalisation of the rails and ports. Their frustration levels are off the charts. How many have turned their attention elsewhere and the opportunity cost of losing these companies for the economy cannot be calculated.
In her recent interview with Business Day, Mzimela spoke of the billions of rand urgently needed to secure the railway network from rampant theft and destruction Transnet has experienced in the past five years, and the expectation that private companies will “pool” financial and other resources to help resolve the problem that has cut more than 2-million tonnes of rail traffic in the past year.
There is an argument that higher rail utilisation by bringing third party operators onto the line will go a long way to reducing the opportunities for theft of overhead cabling, rails and signal systems as more trains travel the lines more often, leaving less idle time on this infrastructure for thieves to do as they wish.
Second, having private operators on the line will generate revenue for TFR that it does not have now. Roughly one-third of third-party concession tariffs go towards rail maintenance, which largely has a fixed cost. This money could be used on security. Again, it’s money that TFR does not have now, but it could if it got a move on and brought the private sector onto the main railway corridors rather than small branch lines.
TFR is keen to concession branch lines that it does not really use anyway. A cynic might argue it matters little to Transnet if these are a success or not and if they fail then the utility could point to its best intentions of opening its rails — albeit sub-economic ones difficult to turn profitable — to the private sector.
What is needed now is tangible action, with Transnet, its TFR division and the department of public enterprise moving as quickly and sensibly as possible to save SA’s economy by giving it a fighting chance to use Africa’s best railway network, creating jobs, businesses and logistical efficiencies.
It cannot be stressed how urgent and important this work is after so many years of criminal neglect and mismanagement of such a fundamentally critical part of the economy.
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