Revitalised TFR grabs growing share of containers

[Steve Appleton]

From Business Day, Friday, 21st August 2009:

Revitalised Transnet Freight Rail grabs growing share of container business.
Companies from Woolworths to LG and BMW show the way, writes Artwell Dlamini.

TRANSNET Freight Rail (TFR) is making a comeback, at least in the container business.

The group, formerly called Spoornet, has started grabbing market share from road transport groups, which still dominate. The market share split for road and rail by tons transported stands at 87/13, according to the latest state of logistics survey.

However, companies ranging from Woolworths to LG and BMW are entrusting a greater part of their products to TRF, signalling that it is becoming efficient and reliable.

If it keeps its clients and signs up new ones, TFR threatens to add competitive pressure on transport firms such as Imperial Holdings and Super Group, which are grappling with the recession.

Murray Bolton, CEO of Cargo Carriers, says the company does not fear the resurgence of Transnet . “Most of our work is not on the trunk routes,” Bolton says.

But, he admits, if the transport parastatal operates on proper economic principles, without help from taxpayer money, some transport businesses will face pressure in some sectors — especially in the container market and bulk agriculture business.

But it is TRF itself, rather than road rivals, that might put brakes on the advances. It has cut back investment in the thriving container business and this could slow the momentum the unit has gathered.

Transnet has deferred some of the R1,7bn capital investments earmarked for the container business — although it is the biggest division by revenue — due to the recession and low volumes.

Frans Seloane, executive operations manager of container and automotive at TRF, says the group now intends investing R55m to revamp mainly cranes and repair surfaces at the City Deep Container Terminal, the largest inland terminal in southern Africa.

Bheka Xaba, executive manager of container and automotive at TRF, says the unit has had to revisit its capital expenditure programme, which was based on assumptions of robust growth in container volumes before the onset of the economic downturn in September last year.

“We looked at areas that would not be affected by delayed investment and where we believed we have sufficient capacity to handle the volume,” Xaba says, noting the group continues to invest in critical projects such as cranes and equipment such as reach stackers.

But the investment cutback seems to slow the pace of creating “capacity ahead of demand”. Without sufficient capacity, TRF might struggle to take advantage of the recovery once it takes hold.

By utilising existing capacity TFR has gained market share, Xaba says, winning business from trucks.

The Natal corridor, the railway line between Johannesburg and Durban, has boosted its market share from 22% in October last year to 30% last month.

Companies, he says, are trying to save on logistics costs. Hauling goods by rail is on average 35% cheaper than on the road.

The container unit, he says, is attracting high-value cargo such as flat-screen television sets, microwave ovens and dish washers as the company improves efficiency, reliability and safety.

It is also winning market share in minerals, including chrome, copper and manganese, and is now targeting retailers.

Xaba says the container unit has gained a foothold in the refrigerated container market, mainly handling fruit. It has 2% market share in an industry that exports 220000 20-foot equivalent units, but is targeting more than 50% in the long term.

Overall, Xaba says, TFR is eyeing 30% market share.

TFR still faces a number of challenges, including derailments, cable theft and cargo security.

Thuthuka Dladla, senior manager of inland intermodal and automotive operations at TFR, says the group is making progress in limiting cargo risk and containing cable theft, and reducing the number of derailments.