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White Paper on rail lauded as SA loses at least 1% of GDP to Transnet inefficiency

31st March 2022

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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The South African coal, chrome, iron-ore and manganese mining sectors lost between R39-billion and R50-billion in export earnings last year as Transnet struggled with capacity to rail bigger volumes of these commodities to ports, says economists.co.za chief economist Mike Schussler.

“To put this into context, this is about 1% of the country’s gross domestic product, and it would have added about 12.5% to the whole mining sector.

“And I’m not even talking about losses in the agriculture sector here.”

In total, rail traffic volumes in South Africa have dropped by 2.9% from a year ago, this while road transport (ton/km) has expanded by 16.8%, says Schussler.

Rail’s share of general freight in South Africa reached 7.5% in 2020, he laments, down from 26.8% in 1990.

While Schussler applauds the introduction of the new White Paper on National Rail Policy, he warns that it will not be a “fast road back to rail”, as “the infrastructure side” may be found lacking.

Road freight operators have also developed sophisticated door-to-door systems, with cargo that can be temperature controlled and tracked every step of the way.

The trucking industry, especially coal transporters, are also unlikely to simply surrender their customers.

Taxi operators may also prove unwilling to give up their share to passenger rail, as can be witnessed in the frequent attacks on bus operators.

New White Paper
Cabinet on March 23 approved a document 12 years in the making – the White Paper on National Rail Policy, which is to be gazetted in April, says Department of Transport deputy director-general rail Ngwako Makaepea.

African Rail Industry Association (Aria) chairperson James Holley says the industry body applauds the launch of the document, which should lead to private sector participation in the rail sector.

He notes that Transnet has already announced that Phase 1 of third-party access (or private sector access) to its infrastructure would see the State-owned enterprise make six slots available on the container corridor between Durban and Johannesburg, and ten slots between Johannesburg and East London and Nelson Mandela Bay.

“Last week the White Paper was adopted by Parliament. Furthermore, last week the Luxembourg Rail Protocol to the Cape Town Convention on International Interest in Mobile Equipment was signed by Transport Minister Fikile Mbalula.

“Goodness me, this is progress,” says Holley. “Our industry is starting to believe in government’s reform agenda.”

Holley says the Protocol will lower the cost of financing “materially”.

It will also create alignment between South African law and international laws, which will assist in the sourcing of international funders for the local market.

Holley says while Aria has not seen the last version of the White Paper, the last version it did view “was encouraging”.

In terms of freight, the new policy, which sets the stage for third-party access, sees the creation of an interim regulator to oversee implementation of the first phases of the planned rail reform, and to mediate disputes. This regulator will be replaced by a Transport Economic Regulator upon its formation.

Holley says the White Paper also allows for the vertical separation of Transnet into infrastructure owner, infrastructure manager and train operator, in line with global best practice.

“It sets out the equal rights of private operators and Transnet.

“It sets out that branch line concessionaires should have complete main line access for the freight they have sourced.

“It talks about network – about wide access and not just limited access.

“It talks about the infrastructure manager providing access rights if the conditions for acceptance are in place.”

Holley says it is equally important that the White Paper sets out that there should be implications for the non-use of slots by operators, and the non-provision of slots by network operators.

“This goes a long way to provide certainty to operators who are to invest billions of rand in new train assets, and this should be celebrated.”

As for commuter rail, Holley also hails the policy objective that operations of the Passenger Rail Agency of South Africa should be devolved to metro councils.

He sounds a warning, however, on the White Paper’s proposal to move to standard gauge, compared with the narrower Cape gauge that can currently be found in South Africa.

Private operators will be investing in Cape gauge for the long term, and uncertainty around the timing of the conversion to standard gauge could undermine private sector investment, says Holley.

Makaepea notes that the White Paper states that the long-term strategy for the country is to move to standard gauge.

The aim is to conclude the first business case of the first standard-gauge pilot project by 2030.

* Holley, Schussler and Makaepea spoke at an Aria webinar, held on Thursday.

 

 

Edited by Creamer Media Reporter

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