Reform ‘key to getting rail back on track in SA’
Reform is key to unlocking South Africa’s rail potential as third-party access is expected to gain momentum after the launch last year of the white paper on national railways policy, says Traxtion CEO James Holley.
“Railways have been dominated by monopolies, either state-owned companies or World Bank-type concessions, where they ask one private party to run the railways as a private monopoly on behalf of the government. We have seen the introduction of reform increasing across the region, where private operators can operate under third-party access and pay access fees or toll fees on the national network.”
Traxtion is Africa’s largest private rail operator, with interests in eight countries.
The company has invested R800m in the past five years to tap into opportunities in the continent’s structural rail reform, said Holley, adding that this would help improve “interconnectedness” in the region.
Instead of trains running to borders and stopping, often for long periods, they could cross multiple jurisdictions, like they do in Europe, which is extremely beneficial for regional economies, he added.
Five years ago, Mozambique was the only country in the region with rail reform. Since then, private rail companies have started operating in countries including Tanzania, Namibia and Zambia, said Holley, who is hoping for tailwinds for private players as South Africa steps up rail reform.
He added that it is not privatisation, saying the analogy to use is that of airports, where the government, through the Airports Company South Africa (Acsa), owns the country’s airports which have multiple private operators and SAA.
“That is important to achieve the efficiency of air travel in South Africa. If we only have one service provider, we will not see the kind of efficient pricing that we see for air travel in South Africa.
“That is no different to having a significant amount of slot capacity that is unutilised on our rail network and have private operators coming to take over those slots and pay for those slots, generating additional revenue for Transnet to assist it with the maintenance burden of its huge network.”
Structural reform in the sector was introduced when the department of transport launched the white paper on national rail policy, paving the way for private participation in the network and infrastructure development.
Last year, Traxtion became South Africa’s first privately owned rail operator to participate in Transnet’s third-party access process when it was awarded a contract to operate slots on the Cape Corridor between Kroonstad and East London.
Holley was unable to share details of the contract due to a non-disclosure agreement (NDA) with Transnet.
“As long as we are involved in commercial discussions with them, I’m bound by the terms of the NDA. We are still under commercial discussions, so we are still discussing the contract at this stage.”
The project is deemed a pilot programme.
In January, Transnet said it would lease the 670km Container Corridor between Johannesburg and Durban to third parties for 20 years, saying the agreement would help reduce cargo on roads and result in efficiency of the line.
Holley said Traxtion had thrown its hat into the bidding for the corridor as part of a consortium led by the Pan African Infrastructure Development Fund, a dedicated infrastructure investor.
His biggest concern regarding successful rail reform is the need for significant investment in track infrastructure. In the context of Transnet’s R130bn debt, the private sector is able to invest in infrastructure, Holley added.
“The Transnet balance sheet is constrained. You have a national fiscus with competing constraints for its money. It means the natural next place to look for funding is the private sector. The concessioning of sections of the core network makes a huge amount of sense in that context.
“If we do not see the backlog maintenance being addressed, we are going to see the continuous degradation of the volumes moved on that network. It has to be addressed quickly.”
In its 2023 integrated annual report, Transnet said insufficient cash from operations to fund infrastructure maintenance had resulted in “deteriorating asset health”.
The entity aims to invest R122.7bn over the next five years on items including locomotives and wagons, port fleet and pipeline equipment.