Transnet was reorganising key elements of the country’s rail freight ecosystem to align with the government’s evolving transport policy and as it looked to boost private sector partnerships, the logistics parastatal said in a statement on Thursday.
This as the troubled state-owned enterprise is trying to stabilise its house as it confronts major problems with its ports infrastructure and rail network, which is knocking business to the tune of billions of rand, weighing on gross domestic product and deterring investment.
Transnet said: “The policy essentially aims to liberalise the rail sector by regulating rail infrastructure and providing private sector train operating companies with access to the freight rail network.”
As part of this process, to translate the policy commitment to reality, Transnet said it had recently announced the appointment of an interim infrastructure manager, in preparation for the formalisation of a Transnet rail infrastructure manager in 2024.
The separation between rail operation and infrastructure is in line the National Rail Policy and Economic Regulation of Transport Bill, which envisages structural reforms that facilitate private sector investment and a more efficient use of the rail system.
A key objective of the bill, which aligns with Transnet’s growth and renewal strategy, is the formation of private sector partnerships.
Transnet said it was mandated to leverage investment from the private sector for infrastructure and operations to strengthen those aspects of its business. It remained committed to undertake focused transactions to “crowd-in” private sector partners into sectors Transnet serves to unlock growth.
The process will have an impact on the planned Container Corridor Operating Lease, for which an request for quote (RFQ ) was issued on January 27, 2023. It is, therefore, necessary for Transnet to review the Container Corridor private sector participation process and withdraw the RFQ, due to the material change in scope.
Transnet said it would assess the impact of the vertical separation of the network from rail operations in considering the optimal strategy for any future transaction with the private sector on the Container Corridor.
“In a nutshell: Transnet is fully committed to increasing private sector partnerships on key rail corridors, but believes it is necessary to complete the process of bringing the freight rail ecosystem in line with national policy before taking any further steps to do so,” it said.
The government is also laying the ground to help Transnet’s turnaround strategy.
Earlier this week, Minister in the Presidency Khumbudzo Ntshavheni said the Cabinet, in its last meeting for the year, considered and approved for publication the Freight Logistics Roadmap, as well as the Draft Rail Private Sector Participation Framework.
The Roadmap for the Freight Logistics System in South Africa draft document, which was published on the Department of Transport’s website, will be released for broader public consultations before returning to the Cabinet for approval
Earlier this month, the Treasury announced a R47 billion bailout for Transnet in a bid to support its recovery plan. The amount is less than half of what Transnet had requested.
Transnet swung into a loss of R5.7bn for the year ending March 2023, mainly due to inefficiencies of its rail network. It has a massive debt of R130bn with interest costs of R13bn per annum.
In a turnaround plan produced by the board, last month, Transnet asked the Treasury for a R100bn financial support package over the next two years which includes a R47bn equity injection or loan, and for the government to take over R61bn of the company’s debt.