Transnet is set to see a turnaround in 2026, with the utility planning to allow private operators to use its rail network.
This improvement is also supported by improvements in Transnet’s performance, with South Africa’s ports stabilising and rail volumes growing.
However, the utility faces an uphill battle to reform, as in prior years its financial and infrastructure issues effectively rendered it inoperable.
Transnet is widely considered the biggest hindrance to South Africa’s economy, costing the country an estimated R1 billion in lost economic activity daily.
From 2014 to 2024, the utility’s rail volumes fell from 220 million tons per annum to 149 million tons, while its ports were rated the worst in the world.
Along with this, the utility is R145 billion in debt, and the maintenance backlog for its failing infrastructure sits at around R30 billion.
This situation has made it all but impossible for Transnet to turn the situation around itself and resulted in the government taking steps to overhaul South Africa’s rail sector, aiming to open it to private operators in 2026.
As part of this, Transnet will retain ownership of the rail network, and private players will be able to transport goods on it.
This ensures equal access and prevents Transnet from sidelining private users to promote its own services.
ENS Africa experts have noted that 2026 could be a watershed moment, marked by the introduction of the first train operating companies (TOCs) and the ratification of the Luxembourg Protocol.
Additionally, significant port concession deals are expected in the coming term.
Turnaround for state-owned entities
The government has announced the first 11 TOCs, which are in negotiations with the Transnet Rail Infrastructure Manager to access the rail network.
The Manager recently released a template access agreement, which outlines the allocation of access rights, responsibilities, tariffs, and provides a benchmark for future operators entering the market.
Along with this template, the Manager indicated that the new TOCs are expected to contribute 20 million tonnes annually for 2026/27.
This will help Transnet reach its broader target of 250 million tonnes of annual freight by 2029.
ENS Africa estimates that this will unlock over R100 billion in new rail investments while improving the overall efficiency of South Africa’s rail infrastructure.
However, the initial capital injection needed for this means that the first TOCs will be heavily reliant on private funding.
“Taken collectively, the ratification of the Luxembourg Protocol, combined with the introduction of the first 11 licensed TOCs, and the negotiation of access agreements with TRIM, represent a watershed moment for South Africa’s rail industry,” the legal experts said.
Along with Transnet, Eskom is also opening its doors to private players, with the utility currently being unbundled to create an open electricity market.
This process has suffered substantial delays; however, Eskom is concerned about the financial implications of completing the unbundling process for its transmission division.
Given this, Transnet may become the first South African state monopoly opened to private players.
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