A logistics expert and adviser to the government, Jan Havenga, says rail network access tariffs proposed by Transnet are “too high” and will not help rail operators claw back market share from road-hauled freight.
In a draft statement released for public comment last week, the interim infrastructure manager created within Transnet Freight Rail (TFR) proposed a 19.7c per gross tonne kilometres (GTK) tariff for private operators seeking to access the rail network.
Rail experts and economists have slammed the proposed tariff as predatory and outrageous. They have warned that train operating companies will simply pass the cost on to customers, mostly miners, and that this could exacerbate job losses in the already battered sector.
Speaking in his capacity as emeritus professor in macrologistics at Stellenbosch University, Havenga said the tariff proposed by the interim infrastructure manager would have negative consequences on the rail network.
“In fact, it will make it impossible to get our low-value high-volume commodities to the sea for export, make domestic industrialisation impossible and there will be no chance for a clawback of rail market share.”
The tariff proposal is part of sweeping economic reforms that include liberalisation of the logistics sector to allow private operators to compete with the state-owned rail and ports company. Large customers, especially miners, have complained that Transnet's failure to ensure enough rail capacity has cost them billions in earnings.
As part of the reforms, TFR, Transnet's biggest division, is being broken down into an infrastructure manager focused on managing the rail network and a rail operating company that will compete with private operators on the network.
The interim infrastructure manager — who will in future be completely independent of TFR — will manage third-party access, starting next month, a regime that will be in place until a permanent structure is implemented.
Havenga said using the current single tariff it would cost about R1.4m to haul goods by train one way between Pretoria and Cape Town — calculated by multiplying its gross weight, typically around 5,000t, and distance travelled, 1,400km. This is significantly more expensive than road haulage.
“This is a very simple calculation and it could be argued that road and rail access charges shouldn’t be the same, as road operating cost is higher. But road also has much more externalities. It takes up more space per tonne kilometre, causes more congestion, emissions, accidents and noise damage, and requires more policing.”
He advised that Transnet should charge differently for various parts of the network as conditions and usage differed from one corridor to the next. But he said he understood why the tariff was set so high, as Transnet is saddled with a high debt burden and has to invest in the maintenance of the rail infrastructure. He urged the government to step in and absorb some of the debt.
“The previous management did not prioritise maintenance and badly mismanaged the company.
— Logistics expert and adviser to the government, Jan Havenga
“The previous management did not prioritise maintenance and badly mismanaged the company. These factors will all find their way into the price and I applaud the idea of being honest about it.
“Transnet should not publish a tariff that will make service delivery impossible. But if government now steps in, takes over some of the state capture debt, facilitates the restructuring of the balance sheet and brings road and rail subsidies in line, the price could drop to less than 10c per GTK.”
Brendon Hubbard, a portfolio manager at ClucasGray Investment Management, described the proposed toll fee of 19.7c per km as outrageous, saying the number discussed before this announcement was 8c per kilometre for heavy bulk operations.
“To give you an idea, the 65Mt iron ore line of 860km would bring in R11bn of toll fees. The coal line, with a capacity of 81Mt and 580km long, would bring in R9.2bn in toll fees. Now add the container corridor, the north corridor from Zimbabwe, the Cape corridor and the manganese corridor and you are probably heading for R30bn in toll fees. That’s an outrageous toll fee.”
According to the draft statement, even Transnet's rail operating division has decried the 19.7c toll fee as “unaffordable”.
“The infrastructure manager may consider phasing in the tariff to get to the depreciated optimised replacement cost rates in five years. However, funding will be required to bridge the gap to ensure the infrastructure manager has adequate funds for its short-term requirements,” it says.
The document proposes the phasing in of the tariff over five years, starting at 14.9c per GTK in year one, with the tariff increased to 22.9c by year five to ensure the infrastructure manager has the minimum funds in year one to cover the expenditure on capital assets.
Speaking at the African Rail Industry Association annual meeting on Wednesday, Transnet group CEO Michelle Phillips said the tariff reflected the cost of running the network.
“I have heard a number of people have had concerns about the costs, how we have calculated, and all sorts of things. Again, I would like to say this is a draft, it has a number of dependencies. These are the costs Transnet has been incurring in respect of this network. In fact, we have been paying for it.
“In other jurisdictions, it is supported by government, and I think we are moving in that direction. This is not Transnet trying to increase its revenues, it is an indication of how much it costs to run this network. We expect everyone to interrogate it,” she said.
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