The future of South Africa’s railway sector

The future of South Africa’s

railway sector

In March this year the White Paper on National Rail Policy – which outlined plans to revitalise rail infrastructure and enabling third-party access to the freight rail network - enabling third-party access to the freight rail network – was approved by Cabinet. President Cyril Ramaphosa then directed Transnet to ensure the implementation of thirdparty access to the freight rail network by April 2022.

By Mesela Nhlapo, CEO at The African Rail Industry Association (ARIA)

The current state of rail in South Africa

The National Rail Policy has been gazetted and this means that private sector participation and the transformation of the South African freight rail network is a reality.

The African Rail Industry Association (ARIA) has been instrumental in lobbying the government to develop policies and regulations to enable this important evolution in rail policy. The National Rail Policy stipulates that thirdparty access should happen in a way that promotes investments and creates an equal level playing field for all players in the industry. Rail is an enabler of economic growth.

This private sector participation is crucial in assisting the South African economy to expand and to address transformation issues – such as the inclusion of women and youth – in the freight rail industry.

Challenges and solutions

With the proper introduction of the National Rail Policy, 58 million tons of goods can be moved from road to rail immediately. The obvious benefit of such a move is the freeing up of our road network for cars and people transport, rather than massive trucks hauling goods between centres. The damage to the road infrastructure is well documented.

However, the biggest challenge is the fact that Transnet’s preconditions to private third-party access is not in line with government policy. A conversation with government and stakeholders needs to take place to address this.

Transnet’s provisions for 3rd-party access include: • A demand that bidding parties must belong to the Transnet bargaining council. This is uncompetitive behaviour and there has been no consultation around this issue. • A voetstoots requirement – if we are to use the infrastructure as is, we need access to the infrastructure to assess the risks private investors will be taking on. • The two-year contracts offered by Transnet effectively keeps out women-owned and blackowned companies as a short-term contract cannot justify the amount of investment capital needed. It is anti-transformational because it allows only companies with cash to participate.

We have, despite our concerns, advised our members to participate in the process to get more information. So far 19 companies have expressed an interest in bidding for the third-party slots. This does not mean that they (the 19) have all the resources they need to bid. There is no transparency in the process though, and this is of great concern to us.

We believe the challenges can be addressed by having a consultative meeting with Transnet, chaired by the Interim Regulatory Committee, to ensure fairness in the third-party access and to ensure that their terms are in line with government policy – which they are currently not.

You cannot have a government policy on the one hand, and a government entity on the other hand, come up with a policy that differs from the government’s policy. We need to ensure that this process takes place correctly to attract investment and bring jobs to the country.

There is a R54 billion demand for rolling stock once third-party access is in place, and this can be manufactured locally – bringing in jobs and rebuilding the manufacturing sector.

ARIA’s position is that there must be a directive from the presidency – third-party access is not a suggestion, it’s a remedy to the issues the rail sector faces. We cannot afford to waste any more time. Opening the rail freight sector to private operators will realise the vision of moving freight from road to rail, but this won’t happen if the industry is not talking to each other about it.

It’s really all about the economy

Countries all over the world rely on freight rail to provide the efficient transport and delivery of food and goods. A functional rail system needs to be protected to ensure the efficient flow of commerce. Freight rail is a key driver of a nation’s logistics performance, which in turn drives greater economic performance.

Rail reform represents an opportunity for investment, competitiveness, growth, and significant jobs. Early projections by ARIA suggest that additional parties using the rail network rail will create tens of thousands of upstream jobs by enabling industry (like smelters, steel mills, manufacturing, and agri-processing) and mining (new coal, manganese, and iron ore mines, among others) to become internationally competitive.

Similarly, rail corridors into Africa would create cost-effective gateways to take South African goods into these markets.

Private third-party access to, and participation in, the freight rail network’s performance is crucial to South Africa’s economy and the continued growth of our industry. 