Traxtion, Africa’s largest private rail operator, expects more private companies, such as miners, to invest in their own rail operations in the coming years as they seek to take greater control of their logistics, reducing freight delay risks that have hampered local supply chains in recent years.
Troubles at the state-control rail and freight operator Transnet have caused bottlenecks in the movement of goods in recent years.
Traxtion CEO James Holley is confident that the government’s National Rail Policy, which came into effect in 2022, will do much to push private investment in the space.
On Wednesday, Traxtion announced a R3.4bn investment in a fleet of locomotives in a move that underscores the private sector’s belief in the growth opportunity of South Africa’s rail industry.
This is the first phase in a broader R5.8bn investment programme that the company has planned for the country.
The National Rail Policy aims to boost the sector by opening it to private operators through a competitive, third-party access model, while keeping core infrastructure state-owned. In essence, the reform is meant to create a more competitive, cheaper rail and freight ecosystem in South Africa.
Traxtion’s programme, which will comprise a R1.8bn spend on locomotives and R1.6bn on wagons, is the largest private freight rail investment in South Africa yet in terms of fleet size and value.
“It may be that we take up the [transport] slots or that we provide maintenance with full operations to the freight owners themselves. Or it could be that we provide full maintenance leases, over these trains, to other train operating companies that want to take up slots,” Holley told Business Day.
“There are multiple avenues for the deployment of the assets. We use all of those models in the 10 countries where we operate trains outside South Africa.”
The added capacity Traxtion provides, is expected to address about 5% of the national freight rail capacity shortfall.
Transnet transports an estimated 160-million to 165-million tonnes of freight annually. However, the country’s demand is closer to 250-million tonnes.
Despite being founded and operating in SA for the past 38 years, this will be the first time that Traxtion will actually operate trains locally. The company, whose origins trace back to Port Elizabeth in 1987, operates 55 locomotives outside South Africa.
Its investment will see 46 locomotives — acquired from KiwiRail in New Zealand — coming into SA and being upgraded before going into local service. Upgrades will include modernisation of engines, control systems, servicing and repainting.
The locomotives will be shipped in four tranches between April next year and August 2027, with upgrades being done at Traxtion’s rail services hub in Rosslyn.
Private equity firm Harith, a long-term investor in Traxtion, is confident in rail’s potential to unlock immense economic value.
“This programme sets a new benchmark for how private investment, aligned with policy certainty and local value creation, can deliver transformative outcomes for South Africa and the continent,” said Harith CEO Sipho Makhubela.
Harith is a $1.2bn (R20.4bn) infrastructure fund associated with Tshepo Mahloele, chair of Arena Holdings, which owns Business Day.
“The intent behind railway reform is to unlock the bottleneck to growth in the upstream economy. The rail industry employs [about] 100,000 people, but the upstream economy employs 16-million,” said Holley.
“Rail is a critical network industry for South Africa’s competitiveness.”
He said just less than 50% of the rail track infrastructure on the continent lies within South Africa.
“That has the potential to be a significant competitive advantage for our upstream economy,” he said.
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