Crucial ways to get Transnet back on track
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.