Locomotives industry in SA improving

8th November 2013

By: Carina Borralho

  

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The inadequate state of the South African railway industry in the last decade poses a challenge in meeting the requirement for rapid infrastructure development to support the country’s urbanisation and economic growth, says auditing, consulting and financial advisory firm Deloitte corporate finance advisory leader for Africa André Pottas.

“South Africa’s population growth averages 1.3% a year, while its gross domestic product growth is just under 4% a year. However, rail corridor traffic has declined by 20% over the last 15 years, with people opting to use road transport instead,” he says.

“Over the same period, road corridor traffic has more than doubled. Road freight makes up 89% of freight volume and rail only 11%,” Pottas notes.

He adds that South Africa’s rail industry has not progressed and developed at a rate that has kept up with demand over this period, although there is a concerted effort now being made to reverse the decline in rail corridor traffic, which is starting to show positive results.

“The Passenger Rail Agency of South Africa’s (PRASA’s) R124-billion rolling stock fleet renewal procurement programme and Transnet’s locomotive procurement programme for the acquisition of 1 064 new locomotives at an estimated R35-billion, which is part of its R300-billion upgrade for railways and ports to overcome freight bottlenecks, will go a long way towards revitalising rail as a preferred passenger and freight transport mode in the country,” says Pottas.

He notes that rail service declined during the 1990s and during the first part of the 2000s. Maintenance has been a challenge in the past and contributed to the decline of the South African rail network. Pottas adds that the general business community currently prefers road transport, owing to the flexible service it offers.

More focus has been placed on road as a result. “This flexibility needs to be weighed, however, against the significant financial cost associated with maintaining the road network as a result of wear caused by heavy vehicles and road congestion,” says Pottas.

“The environmental cost resulting from the additional greenhouse-gas emissions and the cost of human life lost because of truck accidents, like the recent accident on Fields Hill, in KwaZulu-Natal, in which 24 taxi commuters lost their lives, also need to be considered,” he adds.

Pottas says the answer to reducing these costs is an integrated multimodal transport network using the rail network for long-haul transport to and from inland dry ports and trucks for local deliveries. A recent example of progress in this regard is the collaboration agreement signed by freight and logistics firms Transnet Freight Rail (TFR) and Imperial Logistics.

The two firms signed a memorandum of understanding in early October that will divert freight transported on road to a multimodal transport system that will use rail in long-haul transportation.

The Effects of E-Tolling

Pottas notes that the yet to be fully implemented e-tolling system, in Gauteng, will increase the average cost for each ton of goods transported by road.

“However, the average time taken for delivery has decreased, owing to improved roads that can accommodate greater volumes of traffic with less congestion,” he adds.

“If freight and commuter rail had been historically more dominant, the need to expand the road network and the consequent introduction of e-tolls might potentially not have been considered,” adds Pottas.

He notes that PRASA, public transport provider Gautrain and TFR are all likely to register positive spin-offs from the introduction of e-tolls, provided that they can guarantee an efficient, comfortable and on-time experience for new users. In October, Gautrain announced a planned additional 140 km of rail comprising seven new routes to expand its network.

Challenges for SIP 2

“Government’s sizable Strategic Infrastruc- ture Project (Sip 2) is a long-term initiative to improve the country’s overall infrastructure; it is also daunting, especially the new dig-out port in Durban, KwaZulu-Natal,” says Pottas.

Many Sip 2-related projects are already under way, including the back-of-port upgrades for the Durban harbour, the new Harrismith logistics hub and the container terminal at City Deep, with the new multi-products pipeline dedicated to transporting petrol, diesel and jet fuel from KwaZulu-Natal to Gauteng nearing completion.

In 2010, Transnet confirmed that 3 255 km of branch lines had been closed and would not be maintained or repaired.

Global Trends

“The Japanese have had great success with their high-speed rail infrastructure,” says Pottas, adding that the Japanese Shinkansen bullet train could conceivably complete the 569 km from Durban to Johannesburg in 2.5 hours.

“It takes about ten hours to drive the average truck from Durban to Johannesburg. A feasibility study has been performed by the Japanese to build a R170-billion high-speed rail corridor from Durban to Johannesburg, carrying passengers by day and freight by night, but this project has not yet reached the stage of any serious formal consideration by government and industry as the high cost at first glance seems prohibitive,” says Pottas.

Meanwhile, the biggest immediate competitor to the Durban port, in KwaZulu-Natal, is the Maputo port, in Mozambique, which is the closest port to Gauteng.

“There are improved road and rail links to Maputo and ongoing investment in the Maputo port infrastructure. This provides an increasingly attractive alternative to the Durban port,” says Pottas.

To counter competition, Transnet is responding with several investments in port, rail and road infrastructure to increase the efficiency of the Durban container terminal and to ease traffic congestion for trucks transporting containers to and from the port.

“The aim is also for Richards Bay to have another container terminal installed, but our understanding is that this is not part of Transnet’s plans at present,” says Pottas.

The Port of Ngqura, 20 km north-east of Port Elizabeth, which is the only deep-water port in South Africa, will also serve as competition for the Durban port as container vessel sizes continue to increase. This will demand the development of rail, since larger volumes will need to be transported.

There are also a large number of mooted port expansions or new port developments on the east and west coasts of Africa that will compete with Durban port in years to come, which will subsequently result in an increased demand for adequate rail infrastructure to transport goods in South Africa.

“Significant expansions are being planned for Lamu and Mombasa, in Kenya; Nacala, Maputo and Beira, in Mozambique; Windhoek, in Namibia; Luanda, in Angola; Tema, in Ghana; and Lagos, in Nigeria,” says Pottas.

Impact on Community

A key implication of the rail corridor from Durban to Johannesburg is the job oppor- tunities in the construction and maintenance phases of the project, combined with new skills training and development.

“Local-content requirements will boost local industrialists and suppliers. On the downside, truckers and those employed at facilities serving the road haulage industry may need reskilling to serve the rail side of the corridor, if the proposed significant shift from road to rail is realised in future,” concludes Pottas.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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