Transnet hints at tariff rise for high-value goods

Transnet, which has been struggling to stay afloat, is pushing for a review of its general rail freight tariff structure — which could see key foreign-exchange earners such as agriculture pay more to move their products.

“In rail economics, you charge tariffs on the basis of the weight of the commodity that you move, but as you know higher-value manufactured commodities are not heavy,” Transnet Group CEO Portia Derby told MPs on Wednesday.

“So, agriculture, autos they are low weight. And because they are low weight in a system which is biased towards charging on weight, we have always under-recovered.”

Derby was part of the stateowned ports and railway operator’s delegation briefing parliament’s appropriations committee on its finances and recent allocations by the Treasury.

She hinted that tariffs could be linked to the value of the goods moved.

A hike in tariffs could be devastating — not least for the agricultural sector, which transports some of its products to ports by rail. SA’s agricultural exports hit a record high of $12.4bn last year, but like many other sectors, the industry has been somewhat under the cosh in recent times due to rising input costs and interest rates.

While Derby did not specify what a new tariff structure could look like, she pointed out that for every R2.18 Transnet spends to look after and run its rail system, it recovers on average R1 in fees. Transnet has been unable to achieve the revenue targets it requires, recording losses of close to R3bn a year on running the container corridor.

“So, it’s obvious we will be taking a hiding ... Transnet rail infrastructure requires significant maintenance; full recovery of such investments will not assist with the mandate to lower costs of logistics,” Derby said, adding that the government also

needed to step up financially to help Transnet meet its mandate.

Its rail and ports facilities are a crucial cog in driving SA’s exports of bulk commodities such as coal, iron ore, chrome and manganese.

But it has been hampered by poor maintenance, a lack of spare parts for trains, copper cable theft, vandalism and most recently industrial action, which disrupted services, costing the economy billions of rand.

The company was also hard hit by the floods in KwaZuluNatal which destroyed crucial infrastructure.

The crises previously forced it to declare force majeure — a doctrine in law in which unforeseeable circumstances prevent someone from fulfilling a contract through no fault of their own. It is most often used when a company is unable to meet its payment obligations.

In the medium-term budget policy statement tabled in parliament last month by finance minister Enoch Godongwana, Transnet was allocated R5.8bn, half of which will be used to repair infrastructure damaged by the floods, and half to repair and maintain freight rail locomotives.

Derby said total losses as a result of the floods were about R7bn, some of which was not covered by insurance.

“We are insured at R2.3bn. However, we have to take the first loss of R500m and so the claim we have put in with insurance is R1.8bn, which is currently in assessment.”

Derby said the insurance payout and the funding from the government would help Transnet refund some of the programmes that were halted.

She said a number of external and internal factors had negatively affected the financial position of Transnet, and the support of the Treasury was to partly reduce the impact of external factors. However, Transnet has had no financial support in more than 15 years, resulting in a growing debt burden it has been struggling to deal with.

“Transnet is advancing the private sector partnership strategy to increase capacity without adding the debt burden on the balance sheet. We look forward to engagements with the government on the funding of infrastructure from road to rail, to”enable she said. the shift

Responding to questions in the National Assembly later on Wednesday, public enterprises minister Pravin Gordhan emphasised the need for industry to move goods via rail.

“Transnet subscribes to government policy to move goods from road to rail. There is no doubt that an excessive number of trucks on the road are a threat to the conditions and repair of roads and to the safety and wellbeing of citizens,” Gordhan said.