Transnet unlikely to develop southern rail corridor anytime soon

Proposals to Transnet by automotive and other potential customers for the state-owned company to develop the southern rail corridor to the Eastern Cape – to reduce dependence on the Port of Durban in KwaZulu-Natal – appear unlikely to result in this corridor being developed any time soon.

Transnet Freight Rail (TFR) spokesperson Dikatso Mothae said the increase in rail capacity from Gauteng to the Port of Port Elizabeth will depend on the funding being made available.

Mothae said Transnet has spent R9 million on a prefeasibility study for the projected capacity ramp up on this route, and that the funding required for the infrastructure alone is about R1.6 billion.

She was responding to a query from Moneyweb following confirmation earlier this month by Ford Motor Company Africa region president Neale Hill that the rail link to its Silverton plant in Pretoria is not fully operational.

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Hill said the company is transporting almost 100% of the Ford Ranger units it is producing for the export market by road.

He added that the rail link is a very important and integral part of the development of the Tshwane Automotive Special Economic Zone (TASEZ), which was developed in tandem with Ford’s $1.05 billion (R15.8 billion) investment in its local operations and supplier tooling in preparation for the production of the new Ranger.

Mothae said TFR has provided Ford with existing rail capacity to the ports of Port Elizabeth and Durban, but that it requires more capacity to the former in line with the increase in capacity at its Silverton plant.

Mothae said the increased rail capacity requires significant investment into the rail network as well as the acquisition of specialised rolling stock.

She said Transnet has had discussions with Ford, the Industrial Development Corporation (IDC) and government on possible funding and operating models for this capital intensive process.

“At the current rail tariff, the project would not be feasible for Transnet to fund on its own,” she said.

“The feasibility thereof does not justify the investment from Transnet’s balance sheet without the corresponding increase in tariffs to support this service. This was confirmed by an independent study done by [the] IDC.”

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Hill said Ford SA is disappointed that the development of the southern rail corridor has not kept pace with the promises and commitments it had made to build a SEZ and bring new investment into the country.

“We have delivered. So we would love to see Transnet step up and deliver on that.”

‘Viable business case’ possible, says Ford

Hill added that Ford SA started the conversation about the southern rail corridor and believes that together with the other vehicle original equipment manufacturers (OEMs) they can build a viable business case for the project.

“There has to be volume on the line because that line has to pay for itself.

“We have our engine plant in Port Elizabeth so we would be bringing engines up from Port Elizabeth via train [as well as] containers for components we bring in.

“When you start looking at the viability of a line like that, you have got us [Ford SA], BMW and Nissan in the Gauteng area plus Volkswagen and Isuzu based at the coast.

“So just between those five OEMs, I think there is ample business to provide a business case to make that line viable and I’m pretty sure that you will find other OEMs that would give serious consideration to Port Elizabeth port as an alternative,” he said.

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Hill said Ford SA has very actively engaged with government about the high capacity southern rail corridor it has been promoting, and is working very closely with the government and ministers in the presidency to make it a presidential priority.

He said the rail line at the moment moves manganese ore for export but cannot be able to handle the volume Ford would put onto the line.

“The line capacity would have to be literally doubled, which means putting in two extra lines,” he said.

Hill said there is also a challenge with rolling stock in terms of the actual wagons used to load the vehicles because double stack wagons will be needed.

He said some of the feedback it has received from Transnet is that Ford SA will have to invest “R1 whatever billion” in rolling stock.

“Our answer is flatly no. We are not interested in that. We are not in the business of rail logistics,” he said.

Hill said Ford SA believes it has put a very compelling business case on the table in terms of which it will export 120 000 to 140 000 vehicles a year and has to transport components from the coast.

“So run your maths, do your business case, and tell us. Also shop around to the other manufacturers as well because there are volumes of vehicles and components to be moved,” he said.

Hill stressed that Transnet needs to do its job.

“Their job is to run the ports and run the rail lines and they are not doing that.”

Hill said Ford SA continues to engage Transnet because the most efficient way anywhere in the world outside of South Africa to transport vehicles is to use rail infrastructure as opposed to using trucks to transport vehicles.

He stressed that strategically South Africa cannot continue to rely on the KwaZulu-Natal corridor and the Durban port as the sole port for import and export because it makes the country exceptionally vulnerable.

Hill said the recent flooding in KwaZulu-Natal again highlighted the vulnerability of the country in relying on this corridor and the Durban port, with only one train line working between Johannesburg and Durban following the floods.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.