When cabinet approved the National Rail Policy in March 2022, South Africa started a journey towards meaningful reform to reinsert freight railway transportation into the country’s supply chains, massively contribute to GDP and create employment.
An important starting point is the government’s recognition that the private sector should be approached to partner with it to revitalise the freight logistics system.
The policy stresses the need for the state to provide policy clarity and create conditions to make investment in the freight railway system attractive and sustainable.
However, a major area of concern for any private operator wanting to be part of this process is that Transnet, in its reading and implementation of these reforms, has proven incapable of being a referee and player.
The policy makes it clear there are three distinct role players in this reform process.
- The asset owner (or “landlord”): the government, directly or indirectly via Transnet, is solely responsible for fulfilling this role.
- The infrastructure manager (IM): the entity responsible for managing railway networks or corridors. The operations, maintenance and investment into core rail capacity are its responsibility.
- Train operating companies (TOC): Transnet and Prasa are de facto TOCs that will operate on the lines managed by the respective infrastructure managers, but private third-party companies will also be able to operate on the railway system with their own or leased rolling stock.
From this proposed structure it should be evident that independent, competent and well-funded infrastructure managers will attract private-sector investment into South Africa’s failing rail infrastructure and ensure equitable private-sector participation.
Transnet recently announced the creation of an IM position by October this year, after President Cyril Ramaphosa’s 2023 state of the nation (Sona) address. The president said this would be an important step towards the implementation of third-party access to the rail network.
We have embarked on an exciting journey towards economic competitiveness by embracing a unique partnership between the government and the private sector. The state has laid out its policy, but it now needs to be implemented fully to allow private-sector capital to inject much-needed life into our railways
This step, albeit important, is not entirely correct or desirable. It seems Transnet unilaterally, against the spirit and intent of the policy, asserted this right for itself. The policy stipulates there should be a split between infrastructure and train operations to facilitate third-party access across the network.
The African Rail Industry Association (ARIA) believes that if the IM is not completely independent and impartial, rail reform in South Africa is doomed.
Due to Transnet and Prasa's decline, the rail ecosystem has been decimated over the past decade, to the detriment of core railway capabilities. Commercially viable investment by the private sector in the network and rolling stock will stimulate development of the next generation of people and companies that will service the system. But this will only happen with an independent IM.
Transnet’s lack of railway network maintenance discipline in recent years adds more urgency to such an appointment. By its own admission, it has a massive backlog of maintenance activities that has so significantly constrained the system's capacity that Transnet can no longer fulfil its maintenance obligations.
ARIA believes the following principles are critical and need to be adequately addressed during the implementation of the reform process:
- Interoperability between the IM functions for concessioned or leased railway lines, and Transnet and Prasa lines, needs to be established;
- The IM that oversees core elements of the Transnet and Prasa railway system needs to be completely independent;
- The principles of fair and equitable access across all lines to all operators (private and public) must be required of all IMs. Compliance will be enforced by the future, single transport economic regulator. Tariff and penalty regimes will therefore be managed transparently.
- The IMs must attain and maintain safe operating standards, as enforced by the Rail Safety Regulator.
Equally important is that proposed partnerships with the private sector do not constitute privatisation, but rather the embrace of well-established transactional models whereby government and private capital engage in meaningful ways to trigger growth.
It is important to remember that the government remains the owner of the infrastructure, with private players becoming involved in the operation and maintenance of such assets.
The recently established National Logistics Crisis Committee (NLCC) is another development aligned with the National Rail Policy. The NLCC will focus on improving the operational performance of industry supply chains, including freight rail and ports; implementing reforms to modernise the freight transport system and restore its efficiency and competitiveness; and creating enabling conditions for the freight transport system to operate effectively.
Railways ignite economies and we have embarked on an exciting journey towards economic competitiveness by embracing a unique partnership between the government and the private sector. The government has laid out its policy, but it now needs to be implemented fully to allow private-sector capital to inject much-needed life into our railways.
Kope-Nhlapo is CEO of the African Rail Industry Association (ARIA)
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