Transnet State looks at rail to lower cost of business in SA

[Steve Appleton]

From Business Day, 25 August 2011. http://www.businessday.co.za/articles/C ... ?id=151563

State looks at rail to lower cost of business in SA

Move to involve private sector has stalled as Transnet accused of ‘putting up hurdles’, writes Nicky Smith
Published: 2011/08/25 06:58:49 AM

CHANGE is being forced on to state-owned Transnet’s sprawling rail business. The operator of much of the country’s transport infrastructure has an enormous mandate which includes lowering the cost of doing business in SA and enabling economic growth and job creation — and the government is eager to find ways to make the parastatal more competitive.

For one, it is determined to see changes in the way freight is moved in SA, taking freight that is rail-friendly off the roads and on to railways. Between 2003 and 2007 the volume of freight in SA more than doubled. Concurrently, more freight was transported by road — 80% of freight was moved by road in 2003. By 2007 this had grown to 87%.

The National Freight Logistics Strategy, approved by the Cabinet in 2005 and now under review, also seeks to create a national rail infrastructure agency leaving Transnet as the operator of rail services.

The National Planning Commission will today hear a proposal on the separation of Transnet Freight Rail from its infrastructure in line with the national strategy. This policy view will also have ramifications for the Transnet National Ports Authority, which may be split up along the same lines as Transnet Freight Rail.

Then there is a drive to introduce private-sector participation into what has, until now, been the exclusive preserve of the state-owned monopoly. Transnet has plans to offer concessions on its secondary network, or branch lines, to private operators. It opened the branch line concession programme in June last year. The branch line network is 7278 km long and accounts for more than a third of SA’s total rail network. Of the total network just 3928 km are still operational, the rest has been shut down.

Transnet claims the branch lines "are an underutilised part of the country’s transport infrastructure and their revitalisation could unlock economic potential". About 115 private sector companies registered interest in participating in the process. Of these, 47 went on to apply for an expression of interest, and in September last year a briefing was held with these companies.

Last week, the interdepartmental infrastructure cluster — which includes the departments of energy, communications, transport and water affairs — announced that private operators were being introduced for three pilot branch line concessions. These include the Belmont-Douglas line, the Nkwalini-Empangeni line and the Bethlehem-Kroonstad line.

However, other than naming the pilot concessions, it is not clear what progress has been made since September as Transnet declines to comment on the process or the thinking behind programme.

Transnet Freight Rail CEO Siyabonga Gama said last week he could not comment on the process as it was "sensitive" and not yet completed. The third phase of the process of calling for requests for proposals has yet to take place, Transnet says.

Forestry SA (FSA), which represents timber growers responsible for about 95% of production, says it seems the process has stalled. "Absolutely nothing is happening," FSA chairman Roger Godsmark says. The FSA has applied to manage a network of about 700 km of branch lines around the Pietermaritzburg area in KwaZulu-Natal. Mr Godsmark criticises the model chosen by Transnet, arguing that the structure of the agreements would preclude concessionaires from accessing the main network. There are "major problems with the economics of this," Mr Godsmark says.

Transnet is offering concessionaires the use of the branch line to a consolidation point such as a siding, where the concessionaire would unhitch its trucks or unload the cargo and leave it there for Transnet to pick up. "The concessionaire will not have access to the main lines."

FSA says a "concessionaire must be allowed to take a train from the point of origin of the goods to its destination. Otherwise, if you are allowed to operate on branch lines only, the economics of branch lines are far more costly than the main lines. It will never be financially viable."

James van Zyl, director at NCT Forestry Co-operative, SA’s third-largest timber producer, says Transnet’s vision for operators on its branch lines will be "born dead" if it does not allow access to its main line or give concessions to operators that do not own commodities. "There is not enough margin." Mr van Zyl says he does not trust the Transnet process. While introducing the private sector is a policy for the Department of Public Enterprises and Department of Transport, Transnet is fighting the changes "by putting up hurdles".

A deadline of December has been set to have the three branch lines operational.

"We may miss the deadline but we have started the process," acting deputy director-general in the Department of Transport, Clement Manyungwana, says.

[Aidan McCarthy]

Hi,

Bethlehem - Kroonstad is strange as according to Transnet it is a main line which is why Reefsteamers has to be hauled by electric when they go down to the Cherry Festival.