Transnet set to offer more private investment in rail operations

After six years of steadily declining performance Transnet group CEO Michelle Phillips says there are some green shoots appearing at the state-owned ports, rail and logistics company.

But she emphasised there was still some catching up required as the group dealt with the consequences of “many years of under-investment”.

Speaking at the Joburg Indaba on Wednesday, Phillips said that after completing the split of Transnet Freight Rail (TFR) into separate infrastructure and operations divisions earlier this week, management hoped to go to market soon with a number of transactions that would enable private sector investment.

Transnet said it will only release such transactions once the rules, structure and regulations are in place. The investment proposals would range from maintenance joint ventures to partnerships on the heavy-haul corridors, and the disposal of noncore assets.

The separation of TFR into two operating divisions — Transnet Infrastructure Manager and TFR as the operations company was completed on Tuesday.

The unbundling is one of the conditions for a R47bn guarantee facility from the National Treasury and part of Transnet’s turnaround strategy that is being implemented in collaboration with the national logistics crisis committee.

Transnet aims to improve its rail haulage performance to 170-million tonnes in the 2024/25 financial year compared with 152-million tonnes in the previous year and 149-million tonnes in 2022/23.

However, under phase two of SA’s government and business partnership that was launched on Tuesday, the railage target was increased to 193-million tonnes.

Phillips said meeting that target would require more collaboration between the private and the public sectors.

“With the assistance and support that we are getting, we are hoping to fast-track a number of the initiatives we now have on the table,” she said.

Transnet is working more closely with customers on the bulk lines for coal and ore, for example, to get a clearer picture of the state of these networks to speed up the rate of improvement, Phillips said.

“But neither Transnet nor the government has the money [to make all the necessary improvements], which is why we need the private sector,” she added.

“The network is deteriorating as we speak, and we are told it will take about five years to implement some of the repairs. We don’t have that much time, so we need to crowd in private sector [investment].”

Kumba Iron Ore CEO Mpumi Zikalala said Transnet needed an integrated approach that would address all the challenges affecting performance on the ore rail line simultaneously.

Kumba, along with other members of the Ore Users Forum, have suffered serious losses due to the deterioration of rail services.

Kumba announced earlier this year that rail issues had forced it to revise down production guidance for the years 2024-2026 to between 35-million and 37-million tonnes a year from 42-million tonnes previously.

Zikalala said Kumba was working on a collaboration agreement with Transnet, similar to the co-operation effort between coal exporters and Transnet which includes such as Richards Bay Coal Terminal buying spare parts to maintain Transnet’s locomotives on the coal line.

erasmusd@businesslive.co.za