MESELA KOPE-NHLAPO: Future of SA rail is at an inflection point
Private sector investment needs a level playing field
The recent appointment of an interim infrastructure manager at Transnet is a big step forward in the implementation of the national rail policy and getting our railways back on a competitive footing.
Earlier in 2023 President Cyril Ramaphosa announced the establishment of a separate infrastructure manager in Transnet Freight Rail and said this was a crucial component in creating a level playing field for public and private operators on SA’s rail network.
We are now at an inflection point regarding the rail industry. Change has to happen, but it must happen correctly and to the benefit of all stakeholders in the rail freight industry. The appointment of an infrastructure manager is part of that change, but in the view of the African Rail Industry Association there are red flags about this appointment.
We want to highlight one of the key aspects that will have a major effect on efforts to level the playing field and inviting private investors in. As an industry body we have argued that the infrastructure manager must be entirely independent of the Transnet management structure, simply because that independence will guarantee private sector participation. As we have previously stated, Transnet cannot be a player and a referee in this game.
The national rail policy states that there should be a split between infrastructure and train operations to facilitate third-party (private sector) access across the network. Our rail network system is in urgent need of revitalisation, both in infrastructure and rolling stock. The private sector is ready and keen to make these investments, but only if the playing field is indeed level.
The association believes that for rail reform to be meaningful, and in line with the national rail policy, it is important for all stakeholders to be involved in these consultations. There has to be transparency about this process so that the outcome is equitable and fair to all parties.
Therefore, an infrastructure manager should be entirely separate from the freight operations, and must be responsible for the master schedule of the whole system — in effect controlling the network, while freight operations at Transnet competes with private players.
We believe there are five major concerns that need to be taken into consideration before the appointment of the infrastructure manager:
- Transnet’s demand that bidding parties must belong to the Transnet bargaining council is uncompetitive behaviour, and there has been no consultation about this issue.
- The voetstoots requirement, which says infrastructure will be used as is. Investors need access to the infrastructure to assess the risks they will be taking on.
- Transnet has reserved special “grandfather rights” for itself. Only a portion of the network is being offered, with no transparency in fees calculation, among other issues. This approach offers no long-term prospects for potential investors.
- The reasonableness of access fees payable by private operators.
- Reasonable penalty regimes for both sides.
President Cyril Ramaphosa has reiterated that the freight logistics roadmap will outline actions to enhance efficiency and competition and enable greater public and private investment. He acknowledged that enabling private sector participation will mobilise much-needed investment in the country’s infrastructure and help state-owned enterprises such as Transnet improve their financial position and increase competitiveness.
In advance of the appointment of the infrastructure manager, these are the things we hope Transnet is taking into consideration, and that it is working in a consultative manner with the interim rail economic regulatory capacity to ensure the infrastructure manager is established in a way that enables the private sector to invest in train sets in the first place. We hope extensive consultations will take place before the terms and conditions and the service level agreements are announced in 2024.
The African Rail Industry Association believes that if the infrastructure manager is completely independent of Transnet Freight Rail. that would place all interested parties and participants in a better position. However, if this position is not set up in the right way, the private sector is not going to invest in expensive rolling stock, and third-party investment in the rail freight network will become an irrelevant discussion.
It is important that the national rail policy is implemented and private sector money flows into the network to guarantee Transnet’s future success and the economic success of the country, but the complexity of the process should not be underestimated.
We encourage Transnet to fully implement the proposals of the national rail policy so that we can get money flowing back into the rail industry.
• Kope-Nhlapo is CEO of the African Rail Industry Association.
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