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Transnet needs rethink of freight rail-slot sales, says rail association

THE PRIVATE sector won’t recover its investment in terms of two-year contracts, says the African Rail Industry Association. Picture: Bloomberg.

THE PRIVATE sector won’t recover its investment in terms of two-year contracts, says the African Rail Industry Association. Picture: Bloomberg.

Published Apr 6, 2022

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THE African Rail Industry Association (Aria) yesterday questioned the feasibility of Transnet’s recent announcement to sell time slots on its rail network to third parties and whether it was worth it for the private sector.

Investment of up to R54 billion is required by the mining, forestry and agriculture industry to take advantage of the slot sales announced by the state-owned logistics firm on Friday as it liberalises the rail sector.

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Aria chief executive Masela Nhlapo said yesterday that “it has been widely reported that slots will be sold for a two-year period. While Aria recognises this is a pilot project, this is perhaps the biggest challenge to effective third-party access.

“Every 50-wagon train-set costs up to R200 million, and Aria estimates each operator will need three train-sets per slot.

“Given the uncertainty in timing and the applicable terms, the private sector has not yet invested in train-sets, and while there is an appetite to invest, no private sector player will invest R600 million per slot for equipment that will last 30 years for a two-year contract,” Nhlapo said.

Transnet will release further details of the slot sales on April 8 of its initiative for the bidding process for 16 rail slots, which will be sold to third-party operators for a period of two years on a take-or-pay basis aptly described as “voetstoots“.

A bid submission date of May 31 has been set and Transnet expects to announce winning bidders on June 30.

Successful bidders would then need to secure an operating licence from the Rail Safety Regulator and Transnet is optimistic that the first third-party operators should be able to begin moving cargo by October.

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Six slots have been advertised on the under-performing container corridor between Durban and City Deep, while a further 10 slots are being made available on the “southern corridor” to East London, in the Eastern Cape, including two slots that could open rail access for automotive cargoes to and from Pretoria, in Gauteng.

Aria said the number of train-sets available to the pilot project would be extremely low and will effectively be limited to train-sets previously applied for other projects in the past that now happened to not be deployed.

The association also questioned Transnet’s retention of Grandfather rights on all current slots in that it was in contravention of rail policy, which stated that all operators would have equal rights and should operate on a level playing field.

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However, Nhlapo said the private sector was ready to respond to the third-party rail access opportunity to help drive the revitalisation of the country’s rail sector, and most importantly broader economic recovery.

“But we need the right conditions, policy certainty and a level playing field to trigger the much-needed investment.

“Transnet’s suggested phased approach concludes with only certain lines being opened to structural reform and third-party access. The rail policy refers to access to all lines in the country and Aria is concerned that Transnet may not be planning full implementation of rail policy,” Nhlapo said.

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