At the recent South African Heavy Haul Association (SAHHA) conference, Russell Baatjies, CEO of Transnet Freight Rail (TFR), gave a detailed presentation on the current state and future of TFR, highlighting its challenges, outlining the recovery plan, and sharing the company’s vision moving forward.
TFR is the largest railway operator in Africa, employing approximately 25,400 people. The company owns and maintains a network spanning 21,000 kilometres, with the total track length extending to 30,000 kilometres due to the inclusion of double lines and yard tracks. TFR’s assets include 1,924 locomotives and a wagon fleet of 57,000 units. It serves around 215 customers, ranging from large companies like Kumba to much smaller clients.
In 2017-2018, TFR transported 226.5 million tonnes, but last year, the company moved 151.7 million tonnes, narrowly missing its target of 154 million tonnes. In 2017-2018, the company was structured around commodities, with distinct business units for coal, iron ore, steel and cement, and containers and automotive. Currently, TFR operates using a corridor approach, which could be changing back to commodities soon.
As an example, under the North Corridor, TFR manages the coal export line to RBCT, with a target of 67.76 million tonnes. The Ore Corridor, which includes iron ore and manganese operations, has a target of 60.5 million tonnes. Baatjies noted that these targets are not the full contract values but represent realistic goals based on the resources currently available, reflecting what TFR aims to achieve by the end of 2025.
The board’s approach in the recovery plan was not solely focused on reaching 170 million tonnes; rather, the goal is to restore TFR’s capacity to the full 226 million tonnes and beyond. The 170 million tonnes is simply a milestone in the broader recovery journey, indicating where the company expects to be at a specific point in the recovery timeline.
Baatjies explained that TFR faced its most challenging year in 2022-2023. In 2017-2018, the company had a headcount of 30,500 employees, which reduced to 25,700 in 2022-2023—a difference of 5,000 employees. He clarified that the intention is not to increase the workforce but rather to provide a comparison of the changes over time.
Regarding locomotives, TFR had 2,215 locos in 2017-2018, but this number dropped to 1,477 in 2022-2023, a reduction of approximately 750 locos. The wagon fleet at the time was 47,000. However, due to various initiatives undertaken over the past year, TFR has managed to increase the number of locomotives to 1,590, reflecting the company’s ongoing efforts to improve its asset base.
Baatjies explained the challenges associated with manual authorisations, likening them to a “stop and go” situation during roadworks where one must stop and wait for the other side to clear before proceeding. Security incidents have significantly increased, from 1,598 in 2017-2018 to 3,877 in 2022-2023. Additionally, cable theft rose dramatically as well.
Examining the performance of various commodities, iron ore exports dropped from 58.5 million tonnes in 2017-2018 to 50.9 million tonnes last year. Coal exports also declined from 77 million tonnes to 52.3 million tonnes. While discussions about rail recovery often focus on bulk commodities like coal and iron ore, the General Freight Business (GFB) has seen the most significant loss, with a reduction of 40 million tonnes.
Baatjies highlighted that to recover volumes, Transnet should not only concentrate on coal and iron ore but also give significant attention to the general freight sector. Future freight growth is expected to come largely from the General Freight Business (GFB), which includes commodities such as steel, cement, containers, manganese, some Eskom coal, general freight coal, and agricultural products. Addressing challenges in this sector is essential, as it is crucial to the South African economy.
Key challenges include the significant rise in theft and vandalism. Baatjies pointed out that capacity has decreased substantially due to inadequate investment in both rolling stock and infrastructure maintenance. This has resulted in a considerable backlog, causing the network to operate below optimal conditions. Additionally, Transnet faces the burden of historical debt from previous issues, which must be carefully managed as part of the broader recovery strategy.
These are the issues TFR is currently grappling with. Despite these challenges, the focus remains on making the best of available resources and enabling a turnaround as swiftly as possible. Last year alone, theft and vandalism impacted 6.4 million tonnes, locomotive availability affected 6.2 million tonnes, and infrastructure issues accounted for a loss of 9.6 million tonnes. There were about 396 long-standing locomotives last year, reflecting a 47% reduction in the available fleet.
The reduction in available locomotives is also tied to problems with material supply from some Original Equipment Manufacturers (OEMs). For instance, when a Chinese locomotive, such as the 20E, 21E, or 22E, fails, there often aren’t replacement components available due to a lack of supply agreements with the OEMs. Since around 2017-2018, the number of long-standing locomotives, especially from the Chinese fleet, has increased.
In 2017-2018, TFR started with about 100 long-standing locomotives, but by the end of the previous financial year in March, this number had risen to 393. These long-standing locomotives are mostly newer models, not the older ones, having been purchased in the 2000s. The high number is largely due to issues with the Chinese locomotives. Additionally, newer locomotive types, like the 19Es used on the coal line and the 15Es, lacked maintenance support agreements, leading to inadequate skill transfer and training, which contributed to these locomotives becoming non-operational.
One specific Chinese locomotive model, the 45D, experienced inherent engine issues, which TFR has since managed to address. However, the overall lack of proper maintenance support agreements has left many of these relatively new locomotives standing idle, further impacting TFR’s operational capacity.
Baatjies pointed out that those familiar with the rail industry, particularly in the maintenance sector, would understand that neglecting maintenance doesn’t cause immediate problems. The consequences might not manifest this year or even the next, but when they do, the impact can be severe. This is exactly the situation TFR currently faces. He compared it to missing car services; initially, the car may run fine, but eventually, it will break down, and the repairs will be costly.
For the last year, TFR required 10.5 billion rand for maintenance, but due to affordability constraints, only 4.4 billion rand could be invested. This situation is further aggravated by the fact that a significant portion of the maintenance budget is diverted to address theft and vandalism. In the previous financial year alone, TFR spent 805 million rand on replacing stolen or vandalised components and assets. As a result, the maintenance backlog continues to grow, posing a serious challenge unless a solution is found to ensure adequate investment in the South African rail network infrastructure.
Climate change also appears to be negatively impacting the rail network. Transnet relies on historic rainfall patterns to identify areas prone to flooding, installing culverts to ensure proper water flow, and preventing washaways. However, many of these historic trends have changed, leading to flooding in areas previously unaffected, such as significant washaways in KwaZulu-Natal (KZN) and, more recently, the Western Cape.
Extreme temperatures are also a concern. To mitigate rail breaks on the ore corridor during winter, speed restrictions were imposed.
Reviewing the condition of various corridors reveals that the ore corridor’s primary issue is infrastructure, particularly the track. On the North Corridor, especially the coal line, the main concern is signalling.
From a recovery standpoint, the strategy is to first fix and optimise the existing business. This aligns with a two-pronged approach: implementing the recovery plan while also preparing for rail reform.
Recovery Efforts and Future Outlook
Ultimately, it is essential to grow the business and improve safety performance across all operations. Although there has been a 20% reduction in derailments this year, this improvement is not enough, as even a single derailment remains a serious concern. Key areas of focus include improving the state of the rail network, further reducing derailments and security incidents, and enhancing locomotive reliability and availability. New locomotives are also being built, with 47 scheduled for completion this year.
Additionally, enhancing customer service is crucial, alongside efforts to recover the volumes lost since 2023. Specific areas targeted for recovery include export coal, with a deficit of 28 million tonnes, about 12 million tonnes of Eskom coal, and export iron ore, which needs to increase by approximately 7.5 million tonnes to match previous levels. Manganese has shown growth, but continued efforts are needed to regain lost volumes and stabilise operations.
Currently, TFR has a plan to return 125 of the long-standing locomotives to service within the next 24 months. As of the end of March, there were 392 locomotives out of service, but this number has been reduced to 362. Efforts are underway to continue decreasing the number of non-operational locomotives. A deal has been concluded with WABTEC to repair 58 of these locomotives. Additionally, work is in progress to finalise the return of 48 Chinese locomotives to service as part of the first phase of this initiative, with further proposals pending for the remaining Chinese locomotives.
A procurement process is also nearing completion to return 19 Toshiba locomotives to service—five of which will be deployed on the ore corridor and 15 on the coal line. Progress on these efforts is positive; however, challenges remain, particularly when involving third-party Original Equipment Manufacturers (OEMs) who need to establish and source supply chains. This means that components will not be available immediately, but the expectation is that by the second quarter of next year, some of the Chinese locomotives will start returning to service.
In June, a maintenance support agreement was signed with Alstom for the next 12-15 years to provide maintenance for the 23E locomotives on the manganese line, with plans to deploy these locomotives to the coal line as well. TFR is also pursuing OEM-backed support for maintenance across its fleets, as decided by the board, and is working on securing maintenance support agreements with other OEMs to bolster the reliability and performance of the entire locomotive fleet.
TFR has made significant progress with its corridor shutdowns. The North Corridor shutdown has been completed, unlocking additional slots for operations. The Northeast Corridor has also concluded, showing strong performance over the past weeks.
On the ore corridor, TFR is focusing heavily on rail replacement, with plans to replace about 200 kilometres of rail this year. Given the corridor’s length of approximately 1,700 kilometres (861km x 2), there is an intention to expedite this work, with plans to replace between 250 and 300 kilometres of rail next year to improve overall rail conditions. In addition to rail replacements, sleeper replacements are also underway, and there are plans to address the signalling system. An independent technical assessment has been completed, and a project team will be set up to collaborate with Kumba to restore the corridor’s capacity. The goal is to increase the available slots back to 42 and restore the locomotive sets to the original 16.
Regarding the coal line system, particularly for heavy haul, TFR has conducted a detailed review of the available components, including slot availability, locomotives, wagons, and loading and offloading capabilities. In 2017-2018, there were 15 slots available for AC locomotives running 200-wagon trains. Recently, the available slots have been increased from 12 to 14. TFR currently has 71 wagon sets, with plans to increase this to 75 sets by the end of October.
For coal line locomotives, TFR previously had 24 AC and 25 DC sets, but these numbers have fluctuated and currently stand at 16 each. These figures vary day by day; however, with the introduction of new locomotives, including the 23E locos, TFR expects the numbers to stabilise and gradually increase.
For signalling, TFR has approached the market not only to fix but also to modernise the existing signalling systems. Currently, the TFR is reviewing various inputs and information received from the market and will soon make a decision on the future direction for signalling in South Africa. Many of the current signalling systems in South Africa are over 50 years old, contributing to inefficiencies and safety concerns. This outdated infrastructure needs to be replaced as quickly as possible to improve both the efficiency and safety of the rail network.
Regarding commodity performance, iron ore has not yet seen improvement. In April, TFR had an unplanned shutdown of five days, which set production back by approximately one million tonnes. However, this shutdown was necessary and with warmer temperatures now arriving, the numbers are beginning to improve. Overall, TFR is just below 3% in terms of volume growth, with about 2 million tonnes more year-on-year compared to last year.
To successfully navigate the challenges ahead, TFR is set to focus on strategic improvements, modernisation and efficient management of resources. As the organisation moves towards rail reform, the need for a sustainable and profitable operational model becomes ever more critical.
