HILARY JOFFE: Tardy Transnet plays catch-up as co-operation powers Eskom ahead

It wasn’t much more than a year ago that Eskom’s target was to end load-shedding by 2025. Now we are approaching 160 days without load-shedding, and while Eskom deserves some credit, it did not do it alone.

It did it working with the National Energy Crisis Committee (Necom), with a lot of help from outside experts and a fair bit of funding from business to support the experts. As the presidency’s Phindile Baleni put it in a recent oped in these pages, it required a collaborative effort, under the leadership and authority of the president, that brought the requisite urgency and accountability to the process.

Now that the performance of key power stations has been stabilised, the partnership between business and government can turn its attention to the reforms that must still be implemented to shape a competitive electricity industry that can deliver for SA into the future.

As Transnet gears up to release its year-end results on Monday it is unclear whether the same sense of urgency and accountability is there yet to tackle SA’s logistics crisis, nor even whether the requisite ambition is there on Transnet’s part.

It railed 149-million tonnes of freight in financial 2023; its target for financial 2024 was 154-million tonnes and it may achieve just 150-million tonnes. It now aims to lift that to 170-million in the new financial year, a target CEO Michelle Phillips has described as ambitious. But SA needs at least 250-million tonnes. And as recently as six years ago Transnet was doing 225-million tonnes a year. An operational update in April showed the turnaround at the group’s ports was similarly slow, even though performance had stabilised.

There is growing frustration in business and government at the slow pace of the logistics turnaround, and the limited ambition. There’s concern too at Transnet’s perceived resistance to accepting the external assistance that’s on offer, and to working closely with the National Logistics Crisis Committee in the way Eskom has worked with Necom.

At President Cyril Ramaphosa’s recent meeting with the business-government partnership, electricity minister Kgosientsho Ramokgopa is said to have been one of those who took Transnet to task for its tardiness. No wonder Transnet chair Andile Sangcu has made sure to approach Eskom chair Mtheto Nyati to ask him to share the secret of Eskom’s load-shedding success.

Meanwhile it feels like hardly a day goes by without another upbeat statement from Transnet on its fix-up efforts. It has launched seven new tugboats. It has found spares suppliers for the idled Chinese locomotives (something it should and could have done five years ago when the Chinese contract soured). It has cancelled tenders for private partners in the Durban-Joburg rail corridor and the Ngqura port terminal and will reissue these on terms more attractive to private bidders (hardly news given that the tenders were withdrawn last year, and Transnet has yet to sign with the private partner it actually did choose, more than a year ago, for Durban’s crucial container port terminal 2).

Communication is good, and Transnet’s PR offensive is to be welcomed. But one can’t help wondering whether this is really Transnet saying “we’re on it, we can do it by ourselves”. Business welcomed Phillips’ appointment as CEO and she has been more open than some of her predecessors. Transnet certainly says it is supportive of the far-reaching reforms government has in mind for the industry. Indeed, Transnet issued a statement at end-July to say it was making considerable progress in implementing the reforms contemplated by the Freight Logistics Roadmap, which cabinet approved last year, and imposed on it by the Treasury’s guarantee conditions. 

But there’s a distinct sense that Transnet would like to be controlling the pace and shape of reform itself. The old monopoly mindset is still there. The instinct to safeguard the empire is no doubt still there too, just as it was at Eskom, where it has taken a long time for reforms to gain traction and support. Business Leadership SA’s Busi Mavuso has described Transnet as having a limited conception of what is possible by drawing on the public sector, and steps towards reform as “lukewarm”.

In a way it’s not hard to understand the resistance to change. The changes government policy envisages for SA’s freight logistics sector will radically reshape the sector and Transnet’s role in it. The roadmap’s narrative of reform is carefully crafted: it is not about privatisation, nor about a smaller Transnet.

The state — that is, Transnet — will continue to be the infrastructure owner, the owner of SA’s rail network and the landlord of the ports. But it will over time be less of an operator of trains or of port terminals. Instead, there will be a range of leasing, concession, equity partnership and other arrangements with private operators, who will put in the investment Transnet and the state quite clearly can’t. As the road map delicately puts it, reforms in rail and ports will introduce competition and private investment and make SA’s rail and port services more efficient.

The building blocks are already being put in place to separate infrastructure and operations within Transnet, with the creation of a separate rail infrastructure operator — which is meant soon to start offering slots on the railways to new private operators — as well as the establishment of Transnet National Ports Authority as an independent entity that can contract with private operators. Going from monopoly to market requires many other regulators and regulatory steps. It is taking time and trouble.

As often the case in the public sector Transnet is blaming some of its tardiness on money. It cites the crippling interest burden on its R130bn of debt — an update on which is due at next week’s results. It insists that about R60bn of that is state capture-related debt that government must take over. And some in the industry are sympathetic to that argument, at least in principle.

But Transnet’s money woes would rapidly dwindle if it were to press ahead with private participation in its rail network, which could raise upwards of R15bn, and sign with the new operators of the Durban container port terminal, raising about R12bn. And there’s far more: investors, commercial banks and development banks, local and international, have much appetite to finance logistics infrastructure, and there are experienced private operators with appetite to run those trains and terminals. If Transnet draws on the help that’s available to fix its own network faster, it can start repairing that balance sheet itself.

From this week, Transnet has a new shareholder in the person of transport minister Barbara Creecy, whose department has taken over the responsibility from public enterprises. She is said to be reform-minded and open to working with business. Her challenge will be to set the tone for a Transnet that must face up to competition if SA’s economy is to grow.

• Joffe is editor-at-large.