Refine rail network statement for benefit of all parties

Asignificant step has been taken to facilitate the private sector’s participation in freight rail with the release for public comment of a draft network statement, providing for the first time the necessary requirements for third party access to SA’s freight rail network.

This is a milestone for the logistics sector, giving business a starting point to determine the financial viability of access to rail and an opportunity to engage in this crucial process.

The network statement released by the Transnet rail infrastructure manager in March is a component of a suite of documents and legislation that aims to achieve the stabilisation and growth of freight rail, and hence the economy, through the introduction of competition on our networks as well as regulation across the transport sector. It provides detail on the rules, procedures, services and charges for use of the railway infrastructure by train operating companies.

Elements in our current operating environment, including operational inefficiencies, infrastructure theft and vandalism, historical debt associated with state capture, as well as cancelled rolling stock supply contracts, have debilitated the rail network, forcing some mining companies that are unable to export adequate volumes and have unsustainable stockpiles to retrench employees.

For example, coal exports are at a 30-year low, resulting in SA losing out on foreign exchange. Meanwhile, growing reliance on roads has had a negative impact on road infrastructure and raised the cost of doing business for most sectors.

However, through the national logistics crisis committee, which was established in May 2023 comprising the presidency, state-owned enterprises (such as Transnet), relevant government departments and the private sector, substantial progress in addressing these challenges has been made.

The release of the network statement ahead of an April deadline was driven by the National Treasury, which included its release as one of the conditions for the R47bn guarantee for Transnet.

Facilitating third party access to the freight rail network in SA is complex, and the statement has provided the detail industry has been asking for the last five years.

It includes the application fee and contractual and compliance requirements such as staff qualifications, specifications for rolling stock, a proposed gross tonne kilometre rate of 19.79c, and penalties for overloading, underloading or incorrectly loading wagons, as well as delays in providing a service, all of which are essential for business to assess the required investment and potential risks.

In the public comment process, which is being facilitated by the interim rail economic regulatory capacity, business needs to interrogate the financial, technical and compliance terms that the Transnet rail infrastructure manager is proposing, including the implications of the current high cost base of the rail rate. The process closes on April 26.

Transnet has been bloated with state capture debt and inefficiencies. For example, its payroll accounts for more than half of its operational costs, while the government requires a commensurate return on the risk for it being the infrastructure manager.

In making a final determination on the rail charges for the private sector the Transnet rail infrastructure manager and government need to acknowledge the enabling factor freight rail provides for upstream industries, and that the economic viability of rail will enhance SA’s position as a location for international companies, enabling them and local companies to compete internationally on exports.

There are other avenues for the government to raise funds for investment in freight rail infrastructure. Rail is a low carbon form of transport, and with SA’s logistics sector focused on road transport there is an opportunity to source climate funding for the decarbonisation of our modal mix.

The role of the Transnet rail infrastructure manager is to maintain and invest in rail infrastructure and provide safe passage, which includes dealing with theft and vandalism as well as residential encroachment on the rail network. It is critical for the private sector to understand what the infrastructure manager’s plans are to deal with safety and security issues.

The private sector has already made substantial investments in security on certain rail corridors, for example by deploying patrols, drones and helicopters to monitor and safeguard networks. The security solution will require a twofold approach: deploying police and other state security structures and private security, as well as developing community engagement platforms to inform residents who live near railway lines what the rail service means to that community.

Sasol has effectively engaged with communities along the rail corridors it uses, inviting schools and community leaders to learn what a particular train means to that community in terms of employment and economic activity. This type of approach is an essential component of raising awareness around the tangible effect of crimes that damage the rail network.

The progress that has already been achieved by the private sector and government through the national logistics crisis committee in addressing the challenges faced by the freight industry, reinforces that by working together with a clear goal in mind SA can resolve its challenges.

The engagement process on the network statement, which is now under way, offers business an opportunity to put forward its business case, and through this process work with the government and the Transnet rail infrastructure manager to refine the network statement for the benefit of all parties.

Mathe is deputy CEO of Business Unity SA, and Bird is with Business for SA’s transport & logistics focal area.