It’s not a good look when a company releases important statements on Christmas Eve, even less so when it does so on New Year’s Eve. But there was good reason to welcome the release on December 20 of Transnet’s final network statement, and to applaud the release on December 31 of its half-year results, even if the results themselves were somewhat dispiriting.
Often companies are trying to hide something when they sneak announcements into the market when no-one is watching during the festive season. By contrast Transnet, along with its political principals, deserves credit not just for being transparent about its finances, but even more so for delivering on its promise to publish the revised network statement before Christmas.
It’s hard to underestimate the importance of the network statement. Private rail operator Traxtion enthusiastically described it as “the ultimate Christmas present to the SA economy”. Business for SA (B4SA) described it as an exciting milestone in the journey towards rail sector reform.
It paves the way for private train operators to access SA’s extensive rail network for the first time, bringing an end to Transnet’s monopoly.
The state-owned company will still own the network, but running it is now the responsibility of a new subsidiary, Trim (Transnet Rail Infrastructure Manager) which is tasked with bringing private operators on to use it — just as new private renewable energy generators have come on to SA’s national power grid in recent years.
That could bring billions of rand of new investment in rolling stock into the economy in years to come, along with bringing cash into Transnet, which it sorely needs to fix its ailing infrastructure. Even more important is that the introduction of private operators should bring a surge in efficiency and innovation as new private operators enter SA’s laggardly rail market.
Crucially too, Transnet and the interim rail regulator have proved responsive to the criticism they elicited with the first draft of the network statement in May last year. That draft was widely panned by the industry for proposing a single access tariff that was so unaffordable and inappropriate that it would have stopped private sector participation on the rail network in its tracks, as it were.
December’s new and final version instead introduces a multi-tiered system of access tariffs for different types of rail corridor, with reduced and more viable tariffs. B4SA said in its response to the final version that the modelled tariff structure reflected a balance between stakeholder demands and Transnet’s initial proposals.
B4SA’s Ian Bird said a lot of work had been put into the final network statement, with tiered pricing that had been globally benchmarked: “The outcome is a commercially responsible approach that is palatable for industry and supports the country’s road to rail strategy.”
However, read the small print and Transnet is not promising life will be any better for private operators; unless somebody coughs up plenty of cash to refurbish the network itself, Transnet believes new operators would be just as inefficient as its own poor performing trains.
It is hard to believe this is possible. And the latest interim results are dispiriting not just because they show the financial losses have widened but also because they show such minimal improvement in the performance of Transnet Freight Rail, despite all efforts.
Volumes were up just 3.2% to 78-million tonnes for the six months. If this pace continues, the full-year outcome would be just 156-million tonnes. That is hardly more than the 152-million tonnes achieved in full-year 2024, way below the 2018 peak of 226-million tonnes and even further below the 250-million tonnes that SA’s economy is estimated to need — and which government has set as Transnet’s target by 2029/2030.
The network statement says that delivering on that target would need R11bn-R13bn a year to be invested in the network between now and then. Who is going to pay for that is a question.
Transnet will surely be asking, again, for money. The contestation with the Treasury, which has resolutely refused to bail it out with an equity injection, is bound to continue.
That makes it all the more urgent that SA go much further with private sector participation in rail. It needs to look at opening up the network infrastructure itself to private investment and concessioning. Third party access is just a belated first step, albeit a welcome one.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.