Transnet too risk y for pr ivate investors

PresidentRamaphosahastoldthestate-ownedlogistics companyto‘implementreformsswiftly’afterthefailureof itspublic-privatepartnershipofferin2022

By XOLISAPHILLIP inJohannesburg

SouthAfrica’s state- owned logistics company needs aninjectionof private-sectormoney. The government’s Operation Vulindlelais a programmeof reforms designed to unlockit. Thus, in February 2022, President Cyril Ramaphosa was allsmiles whenheannounced that national railoperator Transnet would beallowingthird parties accesstothe Transnet Freight Rail (TFR)network.

On28March2023,thepresident wasbeatingadifferentdrum.He putoutastatementsayinghehad ‘directed Transnettoimplement reformsswiftlyandcompletely toturnaroundthecrisisinSouth Africa’s logisticssystem’.

Transnetadvertisedthesaleof 16slotsonatwo-yearcontract basis.Biddingisathree-stage process:thesuccessfulfirst-stage bidderis requiredtocomplete asecondstage, whichinvolves gettingthegreenlightfromthe RailSafety Regulatorandother conditionsimposed by Transnet. Shouldthebidderfulfilall requirements,third-partyaccess wasdue tokickoffinthe2023/24 financial year,whichstartson1April.

However, by theendof Novemberonlyonebidder, TraxtionSheltam,hadsuccessfully completedthefirstphase.

African RailIndustry Association (ARIA)CEOMeselaNhlapo says 18companies initiallyshowed interest. “Two [companies] applied for access andonlyone was successful. This provesthat Transnet’s onerousterms and conditionsare notappealingtoprivate investors,” shetold journalistsat a November mediabriefing

Longgameapproach

Nhlaposays ARIAconsiders third-partyaccess “a longgame”. Therefore, thetwo-yeartrialperiod offered by Transnet is insufficient considering theupfrontcapital costswhichwill be incurred for participation.

“You can’t have anassetthat costs R50m ($2.9m)thatisonly going to work for two years. It’snotinvestmentfriendly,” shesays.

Furthermore, shebemoans Transnet’s retention ofgrandfatheringrights, the lackofsecurity guarantees, and voetstootsprovision, whichmeansaccess willbe provided tothe freight railnetwork infrastructure asis, no matterwhat condition it is in.

Universityof Johannesburg’s transportprofessor Jackie Walters tells The Africa Report that there are “huge issues” withTFR’s current operation. “You can see itall the way downtotheRichardsBay port with coal. Last year, they managed onlyabout 55m tonnes, where[as] thecapacity oftheport is 71m tonnes,” Walterssays Transnet cites vandalismandtheunavailabilityof locomotives as constraints toTFR’s performance

Some18companieswereinterestedin takingupslotson Transnet’sfreight routes;onlytwoapplied

Inthesix monthsto30September 2022, Transnet reported R36.1bn ($2.116bn) in revenue, equivalentto the company’s debt repayments, and R5bn profit, afteranR8bn lossthe previous year.Nhlapo issceptical abouthow the company reevalued its assets, and wentso far as tosay that Transnetis “another Zondo commission” waiting to happen.