Privatisation of South Africa’s transport sector doesn’t go far enough

The Democratic Alliance (DA) has welcomed the announcement that 11 private companies will soon operate on Transnet’s freight rail network, but believes that more should be done to privatise the transport sector.

The party said that it would be writing to Transport Minister Barbara Creecy, urging her and her department to pursue the “full concessioning of key freight rail corridors to private operators”.

DA Deputy Spokesperson on Transport, S’bongiseni Vilakazi, noted that the current interventions do not go far enough, or move fast enough, to address South Africa’s logistics crisis.

“Allowing private trains onto Transnet’s old and failing infrastructure is not the same as introducing genuine competition into the rail sector,” he said.

“South Africa requires privately concessioned management, maintenance, and operation of freight rail lines themselves; not merely limited access to a collapsing state-run network.”

In the past, President Cyril Ramaphosa has repeatedly acknowledged the need for faster privatisation of the local freight rail network.

The DA believes that Transnet maintaining its dominant position will only perpetuate the delays, inefficiencies, capacity constraints, and operational failures that cost the local economy billions every year.

The party added that every month of delay leads to lost export earnings, reduced economic growth, and lower tax revenues for the fiscus.

To counter these losses, increased private sector participation could provide capital investment, technical expertise, and operational efficiencies

According to the DA, Transnet is being kept afloat by the fiscus, including government guarantees amounting to R95 billion over the past year.

At the same time, rehabilitation of critical export corridors, including the Northern Corridor and Iron Ore lines, continues to rely on state bailouts instead of private-sector partners to improve performance and lower costs.

“South African exporters already face an increasingly difficult global trading environment. We cannot continue creating additional domestic obstacles through failing logistics infrastructure,” noted Vilakazi.

Transnet gives private companies access to its network

Transnet granted 11 private companies concessions to operate trains on its freight-rail lines in an attempt to ease logistical bottlenecks that have constrained South Africa’s economic growth.

The company’s CEO, Michelle Phillips, said the conclusion of the selection process marks a significant milestone in South Africa’s journey, transitioning from policy reform to a functioning open-access rail system.

“We have agreements in place with all 11 train-operating companies and engagements are currently taking place” to enable them to begin utilising the lines, she said.

Allowing these companies onto national rail lines marks a crucial step towards addressing South Africa’s logistics crisis and forms part of the new national rail policy.

According to Bloomberg, private operators will access 41 routes and six corridors used to move key commodities such as coal, chrome, manganese, fuel and other goods to ports for export.

“The allocations are expected to introduce an additional 24 million tons of freight capacity to the network, with the potential to scale to 52 million tons over the next five years,” the Transnet Rail Infrastructure Manager (TRIM) said.

This increase will support Transnet’s goal of increasing rail volumes almost 40% to 250 million tons by 2030, it added.

The DA, on the other hand, believes that this increase is “wholly insufficient”, as the targets constitute only around 10% of future freight capacity being opened to private participation.