Traxtion’s recently announced R3.4bn investment in locomotives for the local rail network required “a big leap of faith” in the state’s commitment to genuine and speedy reform, says James Holley, CEO of Africa’s largest private freight rail operator.
“It’s a huge vote of confidence in the rail reform process and the current leaders in government that are driving this process,” he says.
Traxtion’s 46 “high-quality, high-capacity Cape-gauge locomotives” will arrive, second-hand, from New Zealand’s KiwiRail in four batches between April 2026 and August 2027.
Holley says he sees the investment as a “catalytic project” that will crowd in further investment by the private sector. “It comes as a big vote of confidence in the department of transport, which is designing the policy, Operation Vulindlela, which is pushing for the adoption of rail reform, and Transnet, which is translating it into reality.”
The separation of Transnet into a train operating company and an infrastructure manager was “absolutely fundamental”, together with the implementation of the Transnet economic regulator, he says.
“If you look around the world at countries which have successfully rolled out this open access policy, a strong rail economic regulator is always associated with successful implementation. And the implementation and progress we’ve seen that has been achieved by the interim rail economic regulator, and now with the formation of the statutory single transport economic regulator, has been really fundamental.”
Holley is “absolutely confident” this will ensure a level playing field for private sector operators, even if Transnet remains a monopoly.
One of the key objectives of national rail policy is the introduction of a competitive rail freight environment in the country, like we see in our airways.
— James Holley, Traxtion
“You have to realise and appreciate that Transnet has a fleet approaching 1,900 locomotives... [it] will remain the dominant operator. But I think what we have to recognise is that one of the key objectives of national rail policy is the introduction of a competitive rail freight environment in the country, like we see in our airways.”
How will the access tariffs facilitate this competitive environment? “They’re slightly higher than we’d like them to have been, but we believe that where the access tariffs are can translate into successful operations.”
Traxtion is happy that long-term access rights, which were limited to two years in the fiercely criticised network statement of 2022, have been introduced and that network-wide access has been opened up. From a commercial perspective, these are “big wins”, Holley says. But there are critical areas in the current draft agreement that he is not happy with at all.
“What we would like to see in the next version (No 4) of the network statement due to be released shortly, is the introduction of service level commitments [and] revision of the penalty regime to reduce the quantum of the penalties, as well as to make them bi-directional. At the moment, they’re single-directional penalties that only apply to train operating companies and not to the Transnet rail infrastructure manager.”
He also wants to see stronger legal protections and the recognition of lender rights. The current draft agreement doesn’t recognise lender rights, which makes raising finance off the back of the contract nearly impossible, Holley says.
“These issues are key to unlocking further investment. We’ve committed to this programme, and we’re continuing with this programme, and we’ve got funding for this programme. But we have a further R2.4bn investment planned that’s ready to progress upon the release of a network statement that we believe addresses the improvements that we would like to see.”
Traxtion’s initial investment is small compared with the demand. Holley says demand is at 250Mt a year, of which Transnet is providing only 160Mt.
Traxtion’s 46 locomotives will service just 5% of the 90Mt gap. “That gives you a sense of the extent of demand there is for our assets. We’ve engaged extensively with large freight owners in the country, and we have demand for approximately twice the number of locomotives that we’re bringing in at the moment under the current terms and conditions.”
Why did Traxtion invest R3.4bn if it had such serious problems with these terms and conditions?
“We see rail reform as a process and not an event, and we had every anticipation of the network statement needing improvement. We were extremely encouraged by the progress made by the interim rail economic regulator on tariffs, tenure of access and the scope of access across the length and breadth of the 23,000km network, which is the largest in Africa.”
Traxtion currently has a fleet of 55 locomotives in 10 countries in Africa. It has been running trains in these countries for 38 years, he says. “So we have an extremely good sense of what market demand is, both regionally and in South Africa, and a very good sense of what the cost-effective and extremely reliable locomotives are to bring into service.
“For a number of companies in South Africa, additional rail capacity represents a huge opportunity to achieve growth. There are a number of different ways we can deploy these locomotives, and we’re pursuing all of these models.”
He’s not overly concerned about the R200bn he believes it will take to fix the rail infrastructure. “The country’s key freight corridors are economically viable on a standalone basis for the private sector to bring the type of investment needed to uplift conditions, and then to bring the modern technologies that are utilised around the world to operate trains and bring the efficiencies needed.”
These efficiencies, Holley says, can unlock significant additional capacity and “real rail-cost-effective services”.
South Africa is in an extremely fortunate position in having significant rail freight volumes and a long-established rail freight network, even if it does require substantial refurbishment. “We have a high degree of confidence in the ability of the private sector to respond to these major private sector participation projects to uplift the condition of the infrastructure,” he says.
As for the ongoing plunder of overhead cables and signalling equipment, “we’ve got a very carefully thought-through security strategy we believe will deliver security to the railway lines”.
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