Africa’s largest private rail operator Traxtion Group is getting ready to make a further R2.4bn investment in South Africa’s rail industry depending on the terms of the government’s rail network statement, it said this week.
The rail network statement, a document outlining private access on the rail network, is due for release early next year, and Traxtion expects the terms to enable a low-risk environment for lenders.
Speaking to reporters this week Traxtion CEO James Holley said focus of the first version of the network document was on access and tariffs, with ‘onerous’ one-sided penalties that should be addressed in the fourth version of the document.
“The fact that lender rights were not recognised will be largely addressed in version four,” Holley said.
Traxtion, which operates in the Democratic Republic of the Congo and Angola, made the biggest investment in South Africa’s rail network this week, announcing a R3.4bn investment in rolling stock.
The investment is a boost for rail infrastructure that has grappled with inefficiencies due to years of under-investment and a lack of maintenance.
In August, government opened the gates for private access to Transnet’s rail network, announcing that 11 private companies would operate on 41 corridors.
Stellenbosch University’s Prof Jan Havenga said Traxtion’s investment was a vote of confidence in the rail industry.
He said the investment followed firm policy commitments from transport minister Barbra Creecy and the work being done to solve the infrastructure problems, though more work was needed on infrastructure.
“I share Traxtion’s trust that we’ll get it done ... a first mover advantage in investment will be in Traxtion’s interest and will most certainly cause other train operating companies to follow or increase their efforts,” he said.
The rail infrastructure owner must now give us a railway that looks like Sanral’s roads. That will solve everything
— Prof Jan Havenga, Stellenbosch University
He said the investment was not a leap of faith, but “a well calculated strategic move that should work for them”.
The network statement released in 2022 was part of the government’s reforms that resulted in the breaking of Transnet’s rail monopoly.
Havenga said the first network statement had ridiculous access charges in it, which have been lowered significantly.
He said the focus should not be so much on the access charge, but on how to guarantee it. He said this will be hard without a well-functioning network, but just as Traxtion and others are making a seemingly leap of faith so should the government.
“The rail infrastructure owner must now give us a railway that looks like Sanral’s roads. That will solve everything. And as a first step, guarantee it to that level so that more people can invest. We all want to see our country and rail succeed,” he said.
As part of the R3.4bn investment, Traxtion acquired 46 new diesel-electric locomotives from New Zealand’s KiwiRail, marking the biggest investment in South Africa’s rail industry.
Holley said the acquisition would address 5% of the national capacity shortfall and meet the demand for high-quality capacity assets at a cost-effective price.
“We don’t have to take up slots ourselves to take up slots in the market, these locomotives can be supplied to mining houses that under the terms and conditions of the network statement can take up their own access rights,” Holley said.
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