South African Minister of Transport, Barbara Creecy, has announced a series of plans aimed at improving the country’s logistics sector. She underscored that the transportation system for people and goods has been ineffective in recent times, leading to significant inefficiencies.
Addressing a meeting of the African Railway Industry Association (ARIA), Creecy highlighted how logistical inefficiencies have caused delays in commodity transportation, forcing freight onto South Africa’s road network. This has led to increased road accidents and damage to infrastructure.
To address these challenges, the government has embarked on rail system reforms. In 2022, the Cabinet approved the National Rail Policy, which provides a structured approach to managing the rail transport industry. The policy aims to reposition rail as the backbone of transportation for both passengers and goods.
Additionally, the policy outlines the establishment of a fair and transparent economic regulatory system to enable third-party participation in the rail sector. In December 2023, the Cabinet passed the Freight Logistics Roadmap, detailing the transformation process for the state-owned logistics company, Transnet. This roadmap includes steps for creating an economic regulator and enabling third-party access to rail infrastructure.
Creecy confirmed that the government has already set up an interim economic regulator to oversee third-party rail access, ensuring regulatory certainty and fair risk allocation. As part of these reforms, the government has implemented a Network Statement and Rail Access Tariffs. The Network Statement specifies the terms and conditions for accessing national rail infrastructure, including capacity allocation and pricing structures.
The implementation of these measures has already received stakeholder feedback, and the new tariff framework is expected to be rolled out in the current financial year. President Cyril Ramaphosa has also stressed that open rail access will increase freight transportation capacity while ensuring that the rail infrastructure remains state-owned.
Transnet has made progress in increasing freight transportation. In July last year, it established a ‘war room’ that helped boost freight transport from 149 million tonnes. The company aims to raise this figure to between 160 and 164 million tonnes by the end of the financial year, with a long-term goal of moving 250 million tonnes annually.
Creecy acknowledged that private operators have raised concerns about the poor state of rail infrastructure, including issues with signalling and cabling. In response, the government has invited private sector participation in key freight corridors, such as: the Northern Cape to Saldanha Bay corridor (for iron ore and manganese exports), the Northern Cape to Nelson Mandela Bay corridor (for manganese exports) and the Limpopo/Mpumalanga to Richards Bay corridor (for coal, chrome, and magnetite exports).
The government is also exploring private sector investments in intermodal supply chains, including the container and automotive sectors. There is potential for designating South Africa’s container port system as a regional transhipment hub for major shipping lines.
In August, Transnet will issue requests for proposals for investments not only in freight transportation but also in rail network infrastructure. Creecy noted that South Africa, as a latecomer to rail reform, has the advantage of learning from global experiences where reforms have sometimes led to network fragmentation, competing ownership, tariff escalations, and network deterioration.
To avoid such pitfalls, the government sees the Transport Economic Regulator as crucial in ensuring independent and transparent rail tariff determinations. Additionally, the government is setting up a Private Sector Participation Unit under the Development Bank of Southern Africa (DBSA) to oversee private investments in rail and port sectors. A memorandum of understanding with DBSA and the National Treasury is in progress to formalise this initiative.
Transnet has already appointed an infrastructure manager, ensuring that its rail infrastructure division will operate independently from its freight division. This structural separation is expected to be fully operational as a distinct Transnet division by the new financial year, promoting efficiency and competition in freight transportation.
To achieve its goal of moving 250 million tonnes of freight by 2030, the government aims to attract new investments into Transnet’s network while allowing third-party access. Furthermore, Transnet will seek National Treasury funding to enhance infrastructure along priority corridors.
Creecy plans to appoint a Transport Economic Regulator to oversee third-party access rules, ensuring that Transnet is not both a regulator and a competitor. She also revealed that Transnet and the Passenger Rail Agency of South Africa (PRASA) are considering setting up rolling stock companies.
Written for Railways Africa by Chamwe Kaira
