SA is losing as much as R50bn a year as the government drags its heels on implementing polices that would encourage the transport of cargo via rail rather than the country’s battered roads.
This one of the findings of contract research company, GAIN Group, which has looked into the cost to the economy of moving cargo by road instead of using the rail network.
Zane Simpson, a director at GAIN, said the minimum calculation was R15bn and the figure could be as high as R50bn if all related factors were taken into account.
He said the calculation was based on a detailed analysis of all freight flows in SA recorded in the group’s freight demand model, which considered all commodities and modes, rail suitability and transport costs.
“This is not just a failure of Transnet, but a failure of the country and government to invest in, support, and exploit the opportunities of rail,” Simpson said.
For rail to have a bigger say in moving freight, the Department of Transport’s rail master planning unit and regulatory function needed to have access to evidence-based planning and recruit skilled people to help turn the situation around, he said. Government must also invest in adequate rail infrastructure, he added.
Simpson was also critical of Transnet’s model for third-party rail access, saying it needs to be managed better to attract new private operators.
“Transnet must not be allowed to cherry pick slots; slot prices must be fair, barriers to entry must be low and slots should not be sold “voetstoots”, or “as is” [which means that private operators will have to accept the current state and performance of the network].”
In April, Transnet announced it was opening 16 rail slots to third parties — six on the underperforming container corridor between Durban and City Deep in Johannesburg, and 10 on the southern corridor between Gauteng and East London/Gqeberha in the Eastern Cape.
Mesela Nhlapo, CEO of The African Rail Industry Association (ARIA), which represents the interests of original equipment manufacturers, rail operators and rail component manufacturers, said the proposed allocation of slot sales was a deterrent to private investment because Transnet limited slot access to two-year contracts on a voetstoots basis, while reserving special rights for itself.
“The terms and conditions under the Transnet 3rd Party access bid is a recipe for disaster. We want a 3rd Party Access that will be investor friendly,” adding that only a portion of the network was being offered with no transparency in the calculation of fees. “Currently, TFR is both the player and referee, which we do not agree with”.
Nhlapo said logistics is the backbone of the SA economy and unlocking its potential is key to improving growth.
“We have seen the damage [caused] by trucks on our roads; if you drive to Durban you will see how congested roads are. We need to move freight from road to rail to boost the automotive, mining, agricultural, timber, and forestry sectors,” she said.
According to research by Aria, if impediments on the railways were successfully removed, 58-million tonnes of cargo a year would be moved from SA’s road to rail. The organisation also estimates that R45bn in rolling stock alone would be required to service this volume requirement.
“The R45bn will do a lot for local manufacturing of rolling stock,” Nhlapo said.
SA has the world's 11th-biggest rail network but its underperformance means that it accounts for less than 10% of the passenger market and less than 20% of general freight, Nhlapo said. Businesses and commuters were using more reliable alternatives due to the deterioration of rail infrastructure, lack of investment, and theft including vandalism.
“Under-utilisation of the rail infrastructure invites criminals who vandalise the network. We can blame zama-zamas and vandals for the destruction, but with the practical implementation of third-party access as stated in the National Rail Policy, the destruction of our rail infrastructure could be reduced,” Nhlapo said.
We have seen the damage [caused] by trucks on our roads; if you drive to Durban you will see how congested roads are
Jan Havenga, a professor of logistics at Stellenbosch University, warned that SA would fail if the state doesn’t fix the rail network and use it to move more goods.
“If we don’t get our railway working we will lose our rail market space,” Havenga said.
While not all freight can be transported by rail, Havenga said that only 55% of domestic minerals are moved via rail, “which is very bad for our rural roads”.
“About a quarter of manufactured goods are on rail. This freight often uses our major transport corridors such as the N1 and N3, and causes the major congestion that we now know. Also, about a quarter of agricultural commodities that should be on rail actually are.”
Speaking at the 40th SA Transport Conference in Pretoria this week, Havenga said coal exports via rail were only between 75% and 80% of what they could be.
“The loss to our economy at the current high coal price is tragic,” he said. “A world without mass-guided transport is a failed world. A failed railway will be a nail in the coffin of a failed state. We have to make it [the rail network] work”.
In May, the Department of Transport gazetted a national white paper on rail policy that aims to make rail the backbone of passenger and freight transport by 2050.
Transnet Freight Rail (TFR) has lifted force majeure on nine of the coal exporters that signed a deed of amendment with it. TFR declared force majeure in April, citing its inability to fully meet its contractual conditions because of a shortage of rolling stock and the state of the network. That resulted in coal exports via the Richards Bay Coal Terminal falling to 58.72-million tonnes in 2021, the lowest in 25 years.
TFR said this week that the permanent change in the sites from which coal was loaded for export added to system constraints.
“It is now taking longer for TFR to collect coal from its customers, which reduces its throughput capacity,” it said, adding force majeure had been necessary to renegotiate tariffs with major coal exporters locked into long contracts.
“It is worth noting that the emerging miners have been subjected to annual tariff increases whereas those [major coal exporters] locked into long-term contracts, have not,” TFR said.
Earlier this year Minerals Council SA estimated that companies mining iron ore, coal and chrome had missed out on R30bn in 2021 because of the inability to rail efficiently and timeously ship bulk commodities overseas at a time of record commodity prices.
Speaking at the transport conference, Jan David De Villiers, chief director of the Department of Transport, said the white paper on rail would kick-start a rebound for SA’s railway sector.
“Everybody that is sitting here is interested in seeing implementation. We want to see things happening. We are tired of planning and presenting, we want to implement,” De Villiers said.
