Transnet Freight Rail (TRF) is mulling dumping its corridor focus and returning to the previous strategy of dedicated service to core clients in coal, iron ore, manganese, steel and agriculture.
Speaking during the virtual launch of the Multimodal Inland Port Association (Mipa), TRF CEO Russel Baatjies said Transnet's largest division wanted to change from an inward to an outward approach as it seeks to improve its operating model and provide a better service to customers.
“I don't know how much longer we are going to have the corridors. We might change that. I have said we want to change from the inward-looking approach that we have in terms of corridors to go back to an outward-looking approach and align ourselves and structure ourselves to industry like we had before.
“We had coal business units, we had the iron ore, manganese, steel and cement business units. We had agri. This is the direction we want to go back to because I think you are better aligned with customers, and you can serve them better,” he said.
The corridor strategy was introduced under former Transnet group CEO Portia Derby and ex-TRF CEO Siza Mzimela. TFR's 20,00km of lines were divided into six corridors: the North, mainly for coal exports between Mpumalanga and Richards Bay; the Ore, an 861km stretch from Sishen in the Northern Cape to the Port of Saldhana; the Container connecting Gauteng with Durban Port; the Central, which spans Gauteng and North West, feeding the ports of Maputo, Richards Bay, Gqeberha, Durban and Cape Town; the North East from Beitbridge in Limpopo to Richards Bay via Komatipoort; and the Cape connecting the Northern Cape to the ports of Gqeberha, Ngqura and Cape Town, a key thoroughfare for manganese exports.
TFR has been battling under this model to service key clients. This has been compounded by theft of rail infrastructure, vandalism, and a shortage of locomotives. Coal exports fell to a 30-year low in 2023.
Through the government's rail reform programme, sweeping changes have been introduced that will break TFR's monopoly on the rail network and introduce third-party access. Network access will be managed by an infrastructure manager through a separation of TFR's business.
“I think it is important to understand the market well and you know what is going to happen, or get the best possible sense of what is going to happen, so you can align your strategy according to that,” Baatjies said.
Speaking at the same webinar on Thursday, Jan Havenga, emeritus professor at Stellenbosch University and an adviser to the Presidency on logistics, said while Transnet had new leadership, certain things were still not right.
“We are stuck with certain things that we are not getting right in terms of the restructuring of Transnet. We need to do more work in terms of debt. We are seeing a turnaround, we are happy about that. You have to go back many years, this is where we destroyed the balance sheet, this is where new management that came in after the state capture management basically destroyed infrastructure and morale and we were heading downstream.”
We are stuck with certain things that we are not getting right in terms of the restructuring of Transnet. We need to do more work in terms of debt
— Jan Havenga, emeritus professor at Stellenbosch University and an adviser to the Presidency on logistics
Havenga said the government should intervene to help Transnet more with its debt.
“No company on its own can fix this, not if you have R130bn of debt and half of that is state capture debt ... You cannot survive that on your own. [Group CEO] Michelle [Phillips] and Russell on their best behaviour cannot manage themselves out of this debt. The government needs to step in,” he said.
The newly launched Mipa will focus on the switch of cargo from road to rail through increased use of inland ports.
Warwick Lord, chair of the newly formed organisation, said they were pushing for the use of inland ports or “freight villages” to cut logistics costs, promote sustainability, and enhance connectivity.
“One of the main aims and drivers here is to promote the reduction of the cost of logistics and CO2 output, and this is achieved by moving significant amounts of cargo from road to rail”.
Road freight accounts for 85% of the total freight market share, with transport costs accounting for 60% of the cost of production.
“If we can reduce our costs at the ports and in our supply chain, we will have meaningful difference in our inflation and less cost to South Africa,” he said.
Lord said the organisation would especially facilitate access to inland ports for the private sector.
“We see ourselves acting as a unifying voice for inland ports, specifically because [this] has previously been only available to the public sector, particularly Transnet being able to offer these services. As such the private sector has the ability to speak in one unified voice on what has so far has been a relatively fragmented thought process on how inland ports should operate or be designed.”
Juanita Maree, CEO of the South African Association of Freight Forwarders, said inland ports and trade villages were an enabler for multi-modular freight transport.
“If we want to make our logistics network agile, we need to make sure that trade flows are built on the logistics network and that is going to be our sweet spot going forward so that we make sure we enhance our trade villages and multimodal structures. It will not help us to continue with the road — 80% of our trade domestically moves on roads and our roads cannot carry those volumes”.
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