- Large parts of South Africa’s rail sector has been a disaster area in recent years due to insufficient investment, corruption, vandalism, and theft.
- Government is hoping to revitalise rail by allowing private companies to provide train services.
- Here’s what two of the corporate contenders have in mind.
- For more articles, go to www.businessinsider.co.za.
Decades after many other countries opened their railways to the private sector, South Africa is making the move – at the same time as India, which also recently announced that it would allow corporate operators on its tracks for the first time.
Last week, in his economic recovery plan presentation, President Cyril Ramaphosa confirmed that businesses will be granted greater participation, and will get access to the rail network. Draft legislation to allow this may be finalised within six months.
While the national department and ministry of transport did not respond to requests for more information, there are already some indication how SA rail could change in years to come thanks to liberalisation.
Government sources told City Press that the country’s two busiest commuter rail lines - between Mabopane and Tshwane, and the central Cape Town route - could be the first to see private operators.
Already dysfunctional for many years, both lines are now nearing total failure, after a big spike in vandalism and theft during lockdown. Signalling services, cables and battery banks were destroyed, as well as expensive equipment such as overhead cables and transformers, reports City Press.
This week, the cash-strapped Passenger Rail Agency of South Africa (Prasa) warned that full operation on both lines may only be restored by 2022. Meanwhile, around the country, only 80 of Prasa's 280 train are currently running.
According to Western Cape Transport MEC Bonginkosi Madikizela, the Cape Town commuter rail service has already collapsed. He welcomed Ramaphosa’s announcement, which he interprets as a move to privatise the commuter rail service.
“Rail passengers currently face an impossible situation of either having no rail service, or an unreliable service,” says Madikizela. “Travel times are long and planning around the commute is difficult, if not impossible.”
The frontrunner to take over the Cape Town commuter rail service is Hosken Passenger Logistics & Rail (HPL&R), which currently manages the Golden Arrow bus service. It is owned by HCI, which also has stakes in eTV and Tsogo Sun.
Two years ago, HPL&R spent R700,000 on a proposal to government that would see it run a part of the Cape Town service, using the current trains and infrastructure, while committing to help modernise the infrastructure in future years.
“The primary aim would be to use private capital to stabilise, optimise and further develop a selected rail line in Cape Town,” says Bronwen Dyke-Beyer, spokesperson of HPL&R.
The company says the Western Cape government was “excited” about the proposal and approached the national government. While the province would support private sector rail involvement, it doesn’t have the authority to grant it, says Madikizela. Rail is controlled on a national level, and liberalisation would have to come from the top.
“Unfortunately there have been various administration changes at national level (since 2018), which has delayed the discussion process,” says Dyke-Beyer.
“Rail has always been a national competency and without significant political will at national level we do not believe that public private partnerships will become a reality. We are very concerned about the significant deterioration of rail infrastructure over the last two years and we believe that now is the time to take drastic action.”
While initially focused on Cape Town, HPL&R believes its proposal to assume management of passenger train services is “replicable” in other provinces.
Transnet has some 36,000km of installed railway lines – 75% of the total African rail capacity. But over past decades, the railways have deteriorated due to insufficient investment and corruption, becoming unreliable for many companies who want to transport general freight.
This resulted in a massive shift from rail to road, which now carries almost 80% of land freight in South Africa. This is bad for the environment as road traffic carbon emissions are much higher than rail, and in addition, trucks wreck roads, and add to congestion and vehicle accident rates.
Government wants to reverse this trend, and – unlike passenger trains, where private partners are expected to make use of state-owned trains - it is expected that private companies will be able to run their own trains on certain lines.
There are already a number of companies eyeing opportunities to get involved in private rail, including Bombardier Transportation and Traxtion, the private locomotive repair and leasing company previously known as Sheltham and part owned by fund manager Harith General Partners and UK-based investment company Principle Capital.
The mining sector is already well served by Transnet, which handles massive tonnage from the mines, says Traxtion CEO James Holley.
Some of the high-capacity mining rail lines – the line from Mpumalanga to the Richards Bay Coal Terminal, for example – are so busy that they have very little, if any, capacity left for private operators, he believes.
Instead, Traxtion wants to focus on helping general freight companies switch from road to rail.
It has already started talks with some of South Africa’s biggest industrial freight movers, which currently rely on trucking, to provide them with rail services. Holley says they found an “enormous appetite” for this prospect among these companies.
The big benefit would be efficiency, and much lower risk: while a train can move thousands of tonnes of freight at one time, a large freight truck is capped at 32 tonnes.
Trucks would still be needed, to transport goods to and from rail stations, and to deliver good at end points. But rail can cover the largest distances, which will make bulk freight much easier to manage, says Holley.
If it is granted access to Transnet lines, Traxtion has committed to invest R1.5 billion in new locomotives and wagons immediately.
“I believe that we are experiencing a genuinely transformational moment for South Africa’s rail industry,” says Holley. “In the past five years we have seen massive retrenchments, liquidations and business rescue in the South African rail market, but the advent of open access represents a new dawn.”
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