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 7 of a 12-part series.
South Africa’s rail system is grappling with two major issues: a shortage of available trains to move freight and an infrastructure that is in poor condition. Both of these problems exacerbate each other and create a vicious cycle of underperformance. The government and Transnet have acknowledged the state of the infrastructure, with the National Rail Policy and other government documents confirming that the tracks and facilities are in urgent need of upgrades. Holley points out that the rail system’s deterioration has reached a point where the network is not just struggling with capacity but is actively preventing the economy from reaching its full potential.
On top of the immediate need for more trains, there is also a pressing need to improve the condition of the existing infrastructure. Holley stresses that the solution lies in addressing both of these problems simultaneously. South Africa needs more trains running on the tracks, and the tracks themselves need to be upgraded to handle modern freight traffic efficiently. Without this combination, the system will continue to lag behind international standards and fail to meet the growing needs of the economy.
Policy and reform: a step in the right direction
Despite the challenges, there is hope that things can improve. Holley highlights the work done by the Department of Transport and the implementation of the National Rail Policy in 2022, which sets a clear direction for the future of South Africa’s rail sector. The policy’s main tenet is the vertical separation of Transnet’s freight rail operations: separating the management of the tracks and infrastructure from the train operating companies. This distinction is vital because it opens the door for private operators to enter the market and invest in the maintenance and operation of trains, thereby fostering competition and efficiency.
The policy’s approval also led to the establishment of the Rail Economic Regulator, which is an essential component of this reform process. The role of the regulator is to ensure fair pricing and resolve disputes between private sector players and Transnet infrastructure managers. Holley views this as a critical development because economic regulation is a key element in successfully integrating private train operators into a national rail system. The regulator’s ability to set tariffs, manage disputes and create a more competitive environment is essential for attracting private sector investment and increasing the efficiency of the entire system.
Private sector participation and the role of investment
A central part of the reform agenda is the Private Sector Participation (PSP) framework. The government has made it clear that it is not in a position to bail out Transnet, given the company’s financial duress. Instead, the government is looking to the private sector to step in and help fund the necessary infrastructure improvements. Holley notes that this is where the role of the PSP unit becomes crucial. The unit works independently of Transnet and is tasked with structuring and managing private sector participation projects to attract investment in infrastructure upgrades.
Through this initiative, Holley sees significant opportunities for the private sector to contribute to the revitalisation of South Africa’s rail network. However, this also requires careful planning and collaboration between government, industry and private companies to ensure that investments are made in the right areas and that the upgrades meet the needs of the economy. Holley stresses that while these efforts are promising, they will require time and sustained commitment from all parties involved.