Rail reform ‘more urgent than ever’ after Transnet CEO resigns

Rail reform and the implementation of the National Rail Policy is more urgent than ever after the CEO of Transnet resigned last week. The track quality of South Africa’s 20,000-plus kilometres of rail network is in appalling condition and needs significant investment.

Transnet’s deteriorating performance, highlighted by the release of the entity’s 2023 financials earlier this month, points to an organisation under deep duress and the urgent need for private sector investment to arrest the decline is evident, Mesela Kope-Nhlapo, CEO of the African Rail Industry Association (ARIA), says.

The rail entity reported a R8.8 billion loss for its 2023 year before tax and fair value adjustments after a loss of R4.7 billion in the previous financial year. Kope-Nhlapo says the loss aligns with what ARIA anticipated due to the 24 million ton drop in volumes Transnet Freight Rail moved in the financial year.

ALSO READ: Transnet CEO Portia Derby and CFO Nonkululeko Dlamini resign

“The drop in freight rail volumes from 226 million tonnes in 2018 to 149.5 million tonnes in 2023 is of huge concern.”

She says ARIA believes Transnet Freight Rail’s biggest challenge is the collapsing physical track and signalling infrastructure.

“We have highlighted the fundamental underinvestment in maintenance for the past twelve months. This has continued into the current year, with Copex underinvestment by R4.4 billion. In addition to this, ARIA estimates that Transnet Freight Rail should have spent R6 billion, but actually spent R2.8 billion, taking the total under-investment in maintenance over the last decade to R30 billion.”

Private investment in rail network vital

Kope-Nhlapo says a commercially viable investment by the private sector in the rail network is vital to stimulate development and create meaningful reform that will allow freight railway transportation to take its meaningful place once again in the country’s supply chains, make a massive contribution to GDP and create employment.

“The time has come to be transparent and a detailed understanding of the true condition of the infrastructure is now critical so that Transnet, government, business and labour can collectively craft solutions.”

She says the unprecedented coalescing of interests across these key stakeholders represents a real opportunity for effective and lasting solutions to the rail crisis South Africa faces.

“We must purposefully engage on the NRP with the National Logistics Crisis Committee (NLCC) and expedite rail reform. Private sector participation with its huge investment is key to rail reform in South Africa and for the economy.”

With new leadership in place, ARIA recommends that these six things issues be tackled immediately:

• Be honest and transparent about the true state of the total national track infrastructure and what investment is needed to repair it to its design condition.
• Engage with the NLCC in good faith and seek meaningful and lasting reforms that will address the collapsing rail infrastructure.
• The Interim Rail Economic Regulatory Capacity (IRERC), as set out in the NRP, should oversee negotiations between Transnet and the private operators, setting the process and procedure for accepting private operators and implementing access agreements.
• Bring back staff with strong rail freight operations capability and focus on grassroots operational efficiency.
• Reinstall the MultiRail network operating system (or a similar alternative) and install fleetwide tracking systems to remove the opportunity for ghost trains and the fraudulent manipulation of trains.
• Recruit a replacement CEO who will transition Transnet from a closed monopoly to a reconfigured open and transformed organisation in line with National Rail Policy and the broader economic needs of the South African economy.

ALSO READ: Transnet’s deteriorating performance means government must act fast

Collapsing logistics system acute challenge

Busi Mavuso, CEO of Business Leadership South Africa (BLSA), says in her weekly newsletter today that the country’s challenges are acute and clearly in everyone’s interest to resolve.

“The mining sector is now facing significant retrenchments, with some 35,000 jobs at risk. The collapsing logistics system is one of the main drivers. The urgency of fixing Transnet and our road networks is clear and both government and business are working hard together to find solutions.”

She says the National Logistics Crisis Committee (NLCC) has six of its eight streams fully operational, while the remaining two will transition from Operation Vulindlela.

“The NLCC’s interventions aim to improve the functioning of bulk rail systems and the ports. Five strategic corridors were identified and recovery teams with industry representatives and independent experts were established to work with Transnet to increase freight volumes.”

A team was formed to tackle congestion at the Lebombo border crossing, while another work stream is focusing on restoring passenger rail services, while law enforcement is working to protect rail infrastructure through several interventions.