Transnet has gone to market seeking transactional advisory services to prepare a bankable business case to woo the private sector into investing in the crucial container corridor that links the Port of Durban with the Gauteng economic hub through a 688km rail network.
The state-owned freight and logistics major is forging ahead with the deepest reforms in a generation, with the private sector set to play a pronounced role in South Africa’s network industries.
The container corridor, one of the six designated corridors in the country, is the backbone of South Africa’s overall rail freight network. Commodities and dominant industries serviced and railed in the corridor include containers, automotive goods, grain, fuel, chemicals and coal, with Toyota, Ford, Shell, BP Southern Africa, Engen and Harmony as some of the key customers.
In a request for proposal document, Transnet said it is looking for specialist transaction advisers who will also assist it in preparing a transaction strategy and structure, and external partner selection plan.
“The primary objectives of this transaction include attracting private sector capital investment for the rail network, enhancing the efficiency and performance of rail operations along the corridor, while increasing rail market share of overall freight sector and maximising the contribution to Transnet’s bottom line,” it said.
“Furthermore, the rail infrastructure and operations aspects of the [private sector participation] will also need to be defined with careful consideration of all aspects of rail reform, ensuring compliance with the national rail policy and the Economic Regulation of Transport Act.”
The request for proposal says the transaction adviser must demonstrate experience in delivering and managing large and complex private sector participation transactions.
A few years ago, Pegasys joined forces with a consortium to support Transnet in a comprehensive evaluation of the container corridor. It found that the corridor’s performance had declined due to management challenges and this resulted in unreliable services and prolonged travel times, undermining its efficiency.
To compound matters, freight companies have increasingly opted for more dependable alternatives such as road transport, causing Transnet’s market share for rail container traffic from Durban to Gauteng to decline from 19% in 2011 to 13% in 2023, Pegasys found.
Consequently, the condition of roads has rapidly deteriorated due to the surge in container freight traffic, exacerbating road congestion and contributing to persistent CO₂ emission concerns.
With the continued growth in container traffic and Transnet’s planned expansion of the Port of Durban over the next decade, addressing the efficiency and reliability of the rail corridor becomes imperative.
Request for information
In March, transport minister Barbara Creecy issued the request for information to interested parties for private sector participation projects in the rail and port freight logistics sector.
The focus of the request for information was on the Northern Cape to Saldanha bulk minerals corridor, which is primarily for iron ore and manganese exports, and the Northern Cape to Nelson Mandela Bay corridor, primarily for manganese exports. It also covered Limpopo and Mpumalanga to Richards Bay Bulk Minerals corridor for coal and chrome exports, including coal exports from mines in Lephalale.
The 2023 roadmap for the freight logistics network said many of the efficiency problems in the freight rail network are due to a backlog in infrastructure investment.
The Transnet Rail Infrastructure Manager, recently separated from Transnet Freight Rail, concluded a process to appoint 11 train operating companies selected from 25 companies that applied to operate on Transnet’s freight rail network.
The operators are expected to carry 20-million tonnes of freight annually, easing pressure on Transnet. The group is aiming to move 250-million tonnes by 2030, from 160-million tonnes at present.
Transnet has been hard at work behind the scenes to fast-track the participation of the selected operators on the rail network, which includes giving the operators the group’s underused wagons and locomotives.
In September, Transnet boss Michelle Phillips told Gulf investors that Transnet seeks to invest about R125bn in its operations and infrastructure over the next five years.
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