First attempt to add third-party rail participants derails amid moves towards bigger reform

23rd October 2023 By: Terence Creamer - Creamer Media Editor

First attempt to add third-party rail participants derails amid moves towards bigger reform

Photo by: Creamer Media

Transnet Freight Rail (TFR) and Traxtion Sheltam report that they have agreed to terminate the conditional 2022 award of slots to Traxtion Sheltam between Kroonstad and East London on the Cape Corridor amid progress towards a new third-party-access framework.

The joint announcement ends an unsuccessful pilot project, which the two companies dubbed Phase 1, initiated in April 2022, through which TFR sought to sell 16 slots to private operators on its container and Cape corridors through a competitive process as part of an initial effort to open its network to third-party operators.

From the outset, potential participants warned that the two-year slot contract was simply too short to ensure that returns could be made on what could involve significant capital investments in light of limited rolling-stock leasing options.

Only two companies made formal applications – two for the Container Corridor and one for the Cape Corridor – by the August 31, 2022, submission deadline and on November 25 of that same year, TFR announced the conditional award of slots to only Traxtion Sheltam.

The award was subject to the completion of the application process, including the fulfilment of all condition’s precedent before the planned start date of April 1, 2023.

In the statement the two companies confirmed that the negotiation phase had been protracted and complex, with various design challenges that made it difficult to finalise a commercial service offering.

“Given the above scenario and the reform work that the Department of Transport, and the Interim Rail Economic Regulator Capacity have embarked on, and which informs Phase 2 of the third-party open access regime, TFR and Traxtion Sheltam have jointly agreed to terminate the current slots awarded under Phase 1,” the companies said.

They added that they recognise the increased speed of government’s reform agenda in the sector, including moves to separate the vertically integrated structure into one that includes infrastructure owners, infrastructure managers and rail operators.

Under the emerging framework, the rights and obligations of the various participants would be clarified and implemented under what has been dubbed Phase 2.

No mention was made of a proposed 20-year operating lease offer for Transnet’s underperforming and crime-ridden container corridor between Durban and Johannesburg, which has also not progressed as initially anticipated.

Traxtion Sheltam said it was looking forward to participating in Phase 2 and the realisation of rail reform in South Africa.

The termination of the slot sale also comes as government is finalising a so-called Freight Logistics Roadmap in response to the collapse of the freight rail service on certain corridors, which also led to the creation earlier this year of the National Logistics Crisis Committee (NLCC) under Operation Vulindlela.

On October 26, the NLCC is scheduled to brief the media on plans for the modernisation of the freight transport system.