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 10 of a 12-part series.
Currently, the system is not operating as efficiently as it should, and rail operators like Traxion are accepting that they’ll have to work with some inefficiencies, such as longer offloading times or slower train turnaround. However, Holley remains optimistic about the potential for investment, particularly in the bulk freight sector. Bulk freight is a major contributor to South Africa’s economy and has a huge price advantage over road transport. For instance, moving coal via rail costs roughly R250/ton, while trucking the same amount costs 2.5 to 4 times more. Given this significant price differential, there’s a real opportunity to increase rail volumes for bulk commodities and ease the pressure on the road network.
Traxion’s business case studies over the past few years suggest that with targeted investment, particularly in the bulk freight segment, there is substantial economic growth potential for both the rail system and the South African economy at large. This is an area where private sector involvement could make a big difference.
While the bulk freight sector offers clear investment opportunities, the general freight market presents more challenges. Holley notes that there hasn’t been a solid business case found yet for general freight given the longer cycle times—the time it takes for a train to complete its journey, unload, and be ready for the next load. The cycle times in general freight are currently not efficient enough to justify major investment, especially when road transport remains highly competitive.
Concessioning challenges
One of the significant barriers to private sector participation in South Africa’s rail network is the way concessions are structured. Holley points out an example from the network statement, which suggests that Transnet is proposing to concession only one slot per week for a corridor, such as the Johannesburg-Durban line. This means that, under the current proposal, a private operator could only run one train per week on that corridor, which would be a significant limitation.
The container corridor between Johannesburg and Durban, for instance, is designed to handle up to 72 slots per direction per day—144 slots per day in total. This means the system’s potential capacity is far greater than what is currently being offered under the concession model. As Holley describes, the limited slot availability (only five slots per week, not per day) could lead to inefficiencies where trains might have to wait for days before being able to continue their journey. This not only increases transit times but also prevents operators from optimising train schedules and assets, which ultimately impacts profitability.
Regulation and service level agreements
One of the fundamental issues in the current system is the lack of clear service level commitments. The network statement doesn’t offer guarantees for the timely and consistent provision of rail services, which is essential for private sector operators who need reliable operations to justify investments. Holley stresses that the introduction of a rail economic regulator could help resolve some of these issues by enforcing service level agreements and ensuring that operators can rely on the availability of rail slots, making the business case more attractive.
Despite these significant hurdles, Holley is confident that progress will be made. He believes that the current challenges are not insurmountable, and there’s an ongoing effort to resolve the issues around slot availability, cycle times and service levels. Once these issues are addressed, he sees the potential for a more efficient and profitable rail system that will benefit both private operators and the broader South African economy – and perhaps the cold chain at harvest time.
The need for reform is urgent, as the rail system is a crucial part of South Africa’s logistics infrastructure. If these issues are addressed and the system is modernised, it could significantly improve South Africa’s cold chain competitiveness in global trade and make the rail sector a key player in driving economic growth.