Rail utility Spoornet is set to increase its freight capacity 30% over the next five years while at the same time reducing the cost of doing business in SA, President Thabo Mbeki told Parliament on Friday.

Mbeki's announcement adds impetus to Spoornet's plan to "re-engineer" the firm to enable it to play a pivotal role in the logistics supply value chain, helping lead to the sustainable economic development of SA.

The freight business contributes 95% of Spoornet's turnover, with the remainder being derived from bus passenger service Shosholoza Meyl and Blue Train operator Luxrail.

Spoornet CE Dolly Mokgatle said recently that the general freight business unit, which has been losing about R1m a day for the past three years, was back in the black and had recently achieved increased tonnages using less resources. These improvements were evident in the coal and timber industries, the firm said.

Mbeki said the focus in the next five years would be on growth, development and modernisation of the "first economy" (the mainstream economy). In doing so, he said, SA would be able to respond to the challenges of the second economy (the informal economy), "which constitutes structural manifestations of poverty, underdevelopment and marginalisation in our country".

He said state-owned utilities such as Transnet, which owns Spoornet and SA's seven commercial ports, would play a leading role in encouraging growth and development while at the same time eradicating poverty and underdevelopment.

The national ports operation would "also be urged to lower the costs of moving imports and exports to encourage new investment".

"We will work to raise the rate of investment in the first economy. To this end we will engage our social partners to implement the decision taken at the Growth and Development Summit that 5% of funds held by the institutional investors will be invested in the real economy.

"This discussion should be completed before the end of the current calendar year," Mbeki said.

The South African Chamber of Mines welcomed the move to reduce the cost of doing business in order to raise the rate of investment in SA.

"We remain convinced that to achieve second economy goals, first economy fundamentals should be firmly entrenched," the chamber said in a statement.