The strike at Transnet has finally drawn the government’s attention to the collapse of SA’s freight rail operator and highlighted the costs to the economy of its failure.
But there is still little attention being paid to the dramatic collapse of SA’s passenger rail service, and the macroeconomic costs that come with it. And though saving the railways makes an appearance on government’s lengthy list of promised reforms, the signs so far are not reassuring.
Passenger rail had been sliding since the 1980s “lost” a world record 574-million passengers. That’s the decline in the average daily number of passengers over the decade before the Covid-19 pandemic, from 600-million to just 125-million, as the Passenger Rail Agency (Prasa) became more dysfunctional. Then, when it shut down during the pandemic, rampant vandalism and theft pretty much obliterated what was left.
There are no up-to-date numbers on how many commuters can still rely on the railways for transport. But as former Gautrain boss Jack van der Merwe put it in a presentation this week, rail has lost its role as a mass commuter mode of transport.
Only 35% of trips by South Africans to work each day are on public transport, and the minibus taxis’ share of that climbed from 68% to over 80% over seven years (if we can count the taxis as public rather than private transport).
For the rest people walk or drive private cars. And what we do know is that the shift from rail to road, specifically from trains to taxis, has hugely ramped up what it costs poor people to get to work each month. Van der Merwe estimates it has increased by 65%.
There is a 10% benchmark for how much of their expenditure households should spend on commuting; almost two thirds of SA households are now above that. An urban transport survey by the Helen Suzman Foundation a few years ago found the share of household income going to transport in SA, at 16%-18%, was higher than any other region except Latin America. And that’s without even counting the long distances and long hours people have to travel because of spatial legacy of apartheid.
At a macro level that means households have less discretionary income to spend on other goods and services. High transport costs for workers also prompt higher wage demands and so increase inflation pressures and inflationary expectations, especially when fuel prices rise steeply as they have this year.
Even more disturbing is that high transport costs may also fuel unemployment, because they affect the cost of searching for work and may discourage unemployed people from doing so. A study by economists at Stellenbosch University that looked at the demise of passenger rail and its effect on unemployment found a small but significant correlation between the rise in search costs and an increase in discouragement.
All of that is not counting the effect on productivity of a less-than-optimal passenger transport system — nor the effect on SA’s carbon emissions of the long-term shift from rail to road. And let’s not forget the R62bn over three years the government allocates to rail transport, Prasa essentially, to provide just 2% of the 41-million trips South Africans take each day.
Now of course the government is coughing up for freight rail too, even though Transnet was supposed to operate as a commercial entity and can set its own prices for rail. Its latest results underlined how uncommercial and dysfunctional it has become: Transnet would have made a R6bn loss if it had not magically revalued its properties and the infrastructure it has failed to maintain, and its numbers showed steep declines in its operating efficiency.
The African Rail Industry Association’s Mesela Nhlapo points out the 38% decline in efficiency on the general freight line over the past five years equates to 600 locomotives of inefficiency and is an indication of the rail utility’s failing infrastructure.
Transnet has underspent dramatically on maintenance over the past five years; volumes are down by a quarter; costs per employee have ballooned; it has been asking customers for early payment and deferring payments to suppliers so it can dress up its cash flow for its interim results to end-September, according to the African Rail Industry Association.
The litany of woe goes on. Nor should it be news to the government — the mining industry and others have been screaming for some time about Transnet’s inability to transport their exports to market. That was even before the strike, which is estimated to have prevented the transport of R65.3bn of goods.
But the direct losses are only part of the story of macroeconomic damage, which is about how much of SA’s freight demand should ideally be served by rail but has not been for many years. One consequence is that the whole freight transport system tends to disadvantage the bulk, lower-value exports that could create lots of jobs for SA, whereas high-value exports can afford to go out by road or plane. Depending how you measure it, rail’s share of SA’s total freight demand is at most a quarter and could be as low as 10%-11%, down from 19% in 2011, a recent study showed.
One of the government’s solutions is to allow third-party access to Transnet’s hugely underutilised general freight lines (not the lucrative iron ore or coal lines) and President Cyril Ramaphosa promised this by April 1. But Transnet made it all but impossible, with bid conditions that limited third-party operators to two-year contracts and required them to be part of the Transnet bargaining council with its trade unions. It reportedly made it difficult too for potential third-party operators to assess the state of the lines their new rolling stock would have to travel on.
The government finally gazetted its White Paper on national rail policy in May. The document says all the right things about the need to shift from road to rail and to “reposition rail as the backbone of the national transport task”. It talks about talks about introducing regulated competition in freight and passenger services. It talks about more funding and better institutions. Rail’s future is bright, it says, and now is the right time to intervene.
One might be encouraged, if not for the target date it sets, which is 2050. At this rate it might well take that long. The economic and climate costs can only mount.
• Joffe is editor-at-large.
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