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Ramaphosa highlights importance of new rail Infrastructure Manager in paving way for private operators

President Cyril Ramaphosa

President Cyril Ramaphosa

28th March 2023

By: Terence Creamer

Creamer Media Editor

     

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President Cyril Ramaphosa has described the establishment of a separate Infrastructure Manager (IM) within Transnet Freight Rail (TFR) as a crucial step towards creating a level playing field for public and private operators on the country’s rail network.

In a statement issued following a meeting between Ramaphosa and the Transnet board and executive management convened at the Unions Buildings to discuss the “crisis in South Africa’s logistics system”, the President argued that enabling third-party access to the network was critical for addressing freight rail’s declining performance.

Therefore, he welcomed Transnet’s commitment to establish the IM by October, adding that the initiative would ensure that the network itself remained under State ownership as the system was opened to private participants.

The separation of the infrastructure and operational aspects of the rail business has been likened by TFR CEO Portia Derby to the move under way at Eskom to separate the transmission grid and system operator from generation and distribution so as to level the playing field between Eskom power stations and independent power producers.

It is also in line with the policy direction outlined in the White Paper on National Rail Policy, as well as the reforms being pursued under the aegis of Operation Vulindlela to open the freight logistics system to private operators.

The reforms are seen as particularly urgent in the rail sector, where there has been a serious deterioration in the performance of certain key corridors, including the North Corridor, on which coal exports are railed, the North-East Corridor, which handles chrome, and the Container corridor between Durban and Johannesburg.

The three corridors account for about 50% of TFR's revenue.

A long-running dispute between Transnet and Chinese locomotive supplier CRRC has hit the coal corridor particularly badly, as it has resulted in hundreds of relatively new locomotives being removed from service, owing to CRRC’s refusal to provide TFR with the spares required to allow them to return to operation.

Settlement talks broke down late last year and, while TFR is still hoping for a resolution, the South African rail operator is now also pursuing a replacement original equipment manufacturer (OEM) in parallel to step in and provide spares and maintenance for the long-standing locomotives.

Should a settlement be secured with CRRC, it is estimated that many of the locomotives could be reintroduced to the network within six months. A solution involving a replacement OEM, on the other hand, is likely to take years, as it would involve a re-engineering of the parts and components.

Following the March 28 meeting it was confirmed that Public Enterprises Minister Pravin Gordhan would lead a delegation to China in April to meet with his counterparts in the Chinese government as part of efforts to fast-track the delivery of locomotives and spare parts by CRRC.

"A key requirement for CRRC to continue doing business in South Africa, is the normalisation of its relationship with key regulatory authorities – the South African Reserve Bank and the South African Revenue Service. Up to now, the Chinese OEM has declined to do so.

"Minister Gordhan remains hopeful that talks with his Chinese counterparts will yield positive results, in the interest of both State-owned companies and relations between the two countries," a statement issued by Transnet and the Department of Public Enterprises after the meeting read.

Ramaphosa also reaffirmed that “ensuring that sufficient rolling stock is available to increase the volume of goods transported by rail” would form part of the “roadmap for Transnet” that he announced would be developed in his State of the Nation Address.

The other elements to be covered included: upgrading infrastructure in rail and ports, addressing security challenges, and implementing reforms to enable private sector investment.

“There is work underway between the various departments to finalise this roadmap, coordinated by Operation Vulindlela, and I would like this process to be completed as quickly as possible.

“We must remain focused on structural reforms to improve the efficiency and competitiveness of the transport sector in the long term,” Ramaphosa said in the statement.

He added that strong collaboration with the private sector, organised labour and other social partners was vital to improving logistics performance and made specific reference to the willingness of members of Minerals Council South Africa and others to invest in rolling stock and other equipment, as well as to contribute skills and resources.

These collaborative efforts, he argued, were essential to formulating workable solutions to fix the country’s transport system.

“Transnet must quickly embark on a clear path to take us out of this crisis and ensure that the operation of our railways and ports contributes to the growth of our economy,” the President added.

Edited by Creamer Media Reporter

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