Mail & Guardian

Crucial ways to get Transnet back on track

- Kevin Tutani Kevin Tutani is a political economy analyst.

To curtail the decline in South Africa’s freight logistics system, the cabinet published the freight logistics roadmap in December. The document contains various strategies the government says will help to resuscitat­e bungling divisions in the nation’s freight logistics system.

Proposals tabled include the introducti­on of private sector participat­ion, particular­ly in rail and ports.

But, although impressive, the document can do with additional suggestion­s to ensure greater effectiven­ess.

The roadmap seems to have left out the changes needed to improve the operations of Transnet pipelines. An analysis in the pipeline sector is crucial to determine whether the introducti­on of the private sector would improve performanc­e.

For example, an infrastruc­ture manager could be created to oversee the physical infrastruc­ture (pipelines), while competing distributo­rs from the private sector are allowed to use the same pipelines in exchange for access fees.

This would bolster competitio­n and improve prices and service quality for local consumers of petroleum products (petrol and diesel), whose products are the main line of business for Transnet pipelines.

On the same note, prohibitin­g cross-subsidies from other divisions of Transnet to the pipelines division is important, so the state-owned liquid freight distributo­r does not enjoy an unfair advantage over private-sector competitio­n.

Looking back to 2007, cross-subsidies from other divisions of Transnet were a key reason Petroline abandoned its Maputo-to-gauteng pipeline developmen­t.

Transnet pipelines could afford predatory (extremely discounted) pricing because of the cross-subsidy “guarantees” from other profitable divisions of Transnet. Petroline deserted the project because of unsustaina­ble pricing which would make their services unviable.

Regarding vertical separation at the country’s borders, the government could choose to be merely the “landlord”, while it invites private sector participan­ts to build infrastruc­ture and compete with each other as they clear freight.

For its role as landlord, rent (monthly payments) would be due to the government as a percentage of the tenants’ revenue or a fixed amount.

Government security personnel and auditing systems could remain at the borders and play a crucial oversight role.

The competitio­n would lead to the introducti­on of new infrastruc­ture, technology and investment­s across the country’s borders. It would then be possible for private-sector-owned bridges, roads and railway lines to be built, allowing greater flow of exports and imports in the African region.

An efficient national freight logistics system is characteri­sed by swift clearing of goods at the borders — and at a reasonable cost.

Exporters and importers could get their goods to their intended destinatio­n in a shorter timeframe, which also provides more profit-making opportunit­ies for businesses.

The higher movement of merchandis­e equates to growth in GDP and higher revenue for the government through taxes and various charges levied on the freight.

The costs charged for each freight truck or train at the border should also be reasonable, because high fees discourage the speed of trade, and economic activity.

The Border Management Authority should continuall­y compare the charges levied on trucks and trains crossing the borders with those of other countries in the region.

Slow clearing speeds and high charges could result in the regional freight industry establishi­ng new traffic routes and supply chains which avoid South Africa.

All borders need to be upgraded to one-stop posts where both travellers and freight have their documents processed in only one of the two countries. This improves efficiency.

High-level discussion­s are being held to implement one-stop systems at Beitbridge, which connects to Zimbabwe. It is a wonder that it took so long to have such a progressiv­e initiative implemente­d.

The roadmap emphasises the need to have a rail sector security strategy and a security co-ordination forum, under the National Joint Operationa­l and Intelligen­ce Structure. The rail sector security strategy will incorporat­e the police, the defence force and the State Security Agency.

Theft and vandalism of Transnet infrastruc­ture has persisted, even in the presence of private and Transnet security personnel.

It is fair to suspect the criminals are part of organised crime rings that work with rogue Transnet employees. If that is the case, the theft and vandalism will not cease unless they are convinced that the security responses are impermeabl­e.

In other words, the crime will not

stop until the whole railway track — 18907km — is covered by sufficient­ly armed and responsive human resources. This would require the government to understand that Transnet is not capable of handling such a task or deterring such threats.

Because of Transnet’s importance to the economy, the government should treat this as a matter of national security. This would mean the cost would be transferre­d from Transnet to the state.

If it means assigning 5000 soldiers to the task, the government should supply such resources.

South Africa cannot afford to have a failing logistics system much longer. Such interventi­ons have become urgent and offer a chance to salvage Transnet’s impending demise.

 ?? Photo: Guillem Sartorio/getty Images ?? Powertrain: The government’s roadmap to improve Transnet’s operations is not enough to get the vital service running efficientl­y.
Photo: Guillem Sartorio/getty Images Powertrain: The government’s roadmap to improve Transnet’s operations is not enough to get the vital service running efficientl­y.

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