By Eamonn Ryan, derived from the podcast
In a podcast hosted by Peter Bruce of FM, Jamie Holley, CEO of Traxion, shared insights into the challenges and opportunities in the South African rail logistics sector. This article explores the challenges and opportunities within South Africa’s rail system, offering insights that are highly relevant to the cold chain industry. This is Part 8 of a 12-part series.
While there are many positive developments in the policy and regulatory framework, the path to a fully functional and competitive rail system in South Africa is still a long one. The need for more trains, improved infrastructure and effective regulatory oversight remains urgent. The road ahead will involve a delicate balancing act between public and private interests, with both sectors needing to work together to turn the rail industry around.
Holley acknowledges that while it is clear South Africa is in a crisis, the government’s willingness to engage with the private sector and its commitment to reform are promising signs that things can improve. The key now is to act quickly and decisively to ensure that the rail system can handle the demands of the modern economy and contribute to the country’s long-term growth. The success of the private sector participation model will be instrumental in shaping the future of South Africa’s rail network, and with the right investments and reforms, the country can emerge from its rail crisis stronger and more competitive on the global stage.
Private sector involvement and infrastructure investment
In terms of who will fund the infrastructure improvements, it’s clear that the private sector’s role will be split between two key areas: train operators and infrastructure investors. Companies like Traxion, which are train operating companies, would focus on operating the trains themselves, while investors focused on infrastructure—such as track, signaling and other necessary systems—would handle the upliftment of the rail network’s quality. These investors would come from both private capital and specialised infrastructure investment firms, such as those already involved in African development projects, like the African Development Bank. The government and Transnet themselves won’t be expected to cover the entirety of the costs for this necessary work.
However, the investment won’t be expected across the entire South African rail network. Given the vastness of the network—comprising around 40% of Africa’s total rail infrastructure—it’s considered impractical for the entire system to be concessioned. Instead, the government and private investors will focus on strategic sections of the network, where significant improvements are needed, like the Johannesburg-Durban line, which Holley estimates would require a significant investment of around R15 billion for upgrades. While these investments would be a fraction of the cost of rebuilding the system from scratch, the scale of the required investment still remains massive.
The financial challenges and the role of the state
The financial situation is indeed a challenge. Holley highlights that Transnet has faced significant issues with maintaining infrastructure. He points to the backlog in maintenance that’s built up over the years, with an alarming drop in spending from R3.4 billion in 2012 to just R1.3 billion in 2013. This failure to keep up with infrastructure upkeep has resulted in an estimated R33 billion maintenance backlog over the past decade, when accounting for inflation. Even when considering the R3 billion figure that was projected for the Northern Corridor’s maintenance, Holley notes that this is actually just a small fraction of the total needed to address the much larger issues facing the entire rail network.
Despite these challenges, Holley is optimistic. He points out that there’s significant global precedence for large investments in rail infrastructure, and South Africa’s case is no different. Companies have expressed interest in investing in rail infrastructure projects like the extension of the Richards Bay freight line, are examples of how large-scale investments are possible. And when you look at global rail systems, what South Africa needs to implement is actually smaller than what other nations have done to modernise their infrastructure. With the right investment and planning, South Africa could get its rail system back on track—figuratively and literally.