Billions expected as private sector investment in South African railway system

Posted On Tuesday, 11 June 2024 10:30 Published by
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THE government’s commitment to allow private sector access to the country’s rail networks will trigger an estimated medium-term investment between R200 billion and R400 billion into locomotives plus additional spend on facilities, maintenance and land development.

This is according to Flying Swan senior project manager and Interim Rail Economic Regulatory Capacity member Jan-Louis Spoelstra during his address to the South African Property Owners’ Association (SAPOA) KwaZulu-Natal regional chapter networking session. Spoelstra said the private sector would have access to the rail network in direct competition to the Transnet Freight Rail

Operating Company (TFROC) by October in a bid to enhance South Africa’s connectivity and boost the economy. As the country’s custodian of ports, rail and pipelines, Transnet must be divided into two entities, Transnet Infra Manager (TRIM) and TFRO, by September 2025, while costing and fees for private rail use will be finalised a year earlier.

This means private train operating companies could compete with the national system this year. Six South African companies already have locomotives and Spoelstra anticipated another three international companies and network operators serving neighbouring countries to be on the network within two years. “Concessions will be issued on main and branch lines and underpin a significant boost into multi-logistics solutions involving road and rail.

The outcome will be a growth in demand for property developments on land adjacent to rail networks – manufacturing sites, freight villages and multi-modal logistics facilitators,” Spoelstra said. 2 SAPOA regional chapter chair Bernadette Khumalo said revitalising the country’s railway network has a spin-off for back-of-port operations, effectively creating development nodes that facilitate an ease of flow.

The privatisation move comes as Statistics SA (StatsSA) revealed the economy contracted 0.01% in Q1 2024 and official unemployment stands at 32.9%. Meanwhile, the dire state of the railway system recently saw container trucks queuing for 50km to enter the Richards Bay harbour following congestion in Durban. Spoelstra said historically the Nationalist Party government adopted mass privatisation to logistics, introducing the user-pay principle and toll roads in the late 1980s.

This saw an explosion in freight logistics and today the country spends billions on road maintenance, but Transnet services for smaller businesses has disappeared. Consequently, the country currently transports 150 million tons against 220 million tons in the pre-Covid era, while container transportation via road has dropped 75% in six years.

Given the unsustainable cost of moving goods by road, Spoelstra emphasised the country had to create a new logistics system. “It is vital to regain volumes on to the rail network as the Richards Bay congestion demonstrated,” he said. The initiative to revitalise the rail and port logistics system would introduce privately owned trains operating on the existing railways and underpin investment into the infrastructure.

Operations Manager TbM - Southern Africa and Islands Junaid Kathrada said the company’s local focus had shifted from container shipping to intermodal logistics, effectively capitalising on the opportunity to levy strengths and initiate efficiency growth and cost savings for customers.

“Efficiency demands bi-directional flow for importers and exporters – full containers in both directions,” he said. Cato Ridge Logistics Hub Consortium member and SAPOA regional committee member Warwick Lord said once intermodal models have instilled efficiency, property development opportunities around the rail and road infrastructure would “fall into place … the property will become easier to develop”.

Last modified on Wednesday, 03 July 2024 10:36

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