Transnet seeks to form partnership with private sector but denies privatisation

With its flagship subsidiary Transnet Freight Rail (TFR) hit by an increase of 550% of tons lost – translating to R4.1 billion over the past five years due to a 179% spike in infrastructure vandalism – embattled state-owned rail logistics company Transnet wants to form a partnership with the private sector but denies a move towards privatisation.

Non-maintenance of the container corridor from City Deep in Johannesburg to Durban, decline of locomotives and revenue lost to customers preferring road freight have contributed to TFR sitting with a market share of below 30% in rail.

Fears of privatisation

As most MPs serving on the public enterprises portfolio committee on Wednesday expressed fears that an increased partnership with the private sector could lead to Transnet being privatised, company chair Popo Molefe said the collaboration would be restricted to concessions, enhancing investment in infrastructure, boosting operational efficiencies and skills sharing.

Molefe added: “We wish to emphasise that there aren’t material assets of Transnet that we are privatising. “All we are doing is to invite the private sector to put its hands on deck in partnership with us to resolve challenges that are facing the country – instead of being told how efficient the private sector is and how inefficient state-owned entities are.

“Concessions with the private sector on some of the assets means that we will continue to retain ownership of the assets, but for a defined period.”

Corruption galore

With billions of taxpayers’ money siphoned off during the state capture years, which became the subject of the Commission of Inquiry into State Capture, Transnet is among many state-owned entities hollowed out by massive corruption.

After years of being wholly government-owned, Transnet, which has continued to lose a significant market share of rail logistics to road freight, has been forced to come up with a revised business model that involves private sector participation.

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Addressing maintenance backlog

Transnet group chief executive Portia Derby said the company was seeking state funding “to address the maintenance backlog and to restore the network to acceptable standards and recover eroded capacity”.

Transnet, she said, has also gone to market “seeking qualified parties interested in entering into an operating lease for the operation of the container corridor”.

Said Derby: “If you are not running the trains and not generating the revenue, you won’t be able to buy the spare parts and fix the rail tracks.

“TFR generates 47% to 50% of our revenue. If we are not pumping enough tons at TRF, that will have a direct impact on the rest of operating divisions.

“To be able to move 230 million tons is important, but it is more essential if other people can enable us to move that. “Mindful of the fact that we have to fund ourselves from our own balance sheet, we are approaching government to help fund us on infrastructure maintenance.”

‘Underinvestment’

According to TFR chief executive Siza Mzimela, in 2019 alone the company lost 6.3 million tons due to theft and infrastructure vandalism.

He said: “While we have the capability to move 430 million tons, you need to take into account maintenance that has to be done on the line and the separation of trains when they move.

“In respect of the container corridor, which has for years been loss-making, it is not only about going out to find a partner.

“The reason why today we are sitting on a market share below 30% in rail is because the system is unreliable due to underinvestment in the infrastructure, which has now been eroded.

“It is in this corridor where we have experienced very high levels of cable theft and vandalism. “We need to go out and find a partner with cheaper capital to work with us to ensure greater movement on the rail system.”

READ MORE: Transnet still in financial trouble despite Moody’s new rating

– brians@citizen.co.za