Access snafu hasn’t derailed rail reform

● Transnet Freight Rail (TFR) says its plans for rail reform are on track despite only one successful application for the 16 slots it has opened to the private sector on part of its rail corridor. People with an interest in rail have been critical of the way Transnet has designed and handled third-party access, saying it was doomed from the start.

But TFR CEO Sizakele Mzimela said this week that the sale of 16 slots was part of a pilot to test the third-party access ahead of the implementation of the white paper on rail in two years’ time.

“We wanted to start to test the concept so that we can use this opportunity to learn and refine it so that at the point when [the white paper] is ready for implementation, which is in 2024 if all goes according to plan, we would be ready and learnt from the work we have done.”

Transport minister Fikile Mbalula gazetted the white paper in May to unlock the economic potential of the rail sector by introducing reforms including opening up space for private participation.

Last month TFR named Traxtion Sheltam the successful bidder to operate a service on the Cape corridor between East London and Kroonstad. Traxtion, which mainly moves agricultural cargo, was one of two parties that applied for the slot by the deadline at the end of August. But the two did not meet the requirements for the advertised container corridor slots between City Deep and Durban.

Mzimela said the company would have wanted to get more parties to operate the slots, resulting in the operator testing the movement of different commodities on the rail line.

“Yes, there are certain things that we are likely to lose out on in this pilot as part of having only one operator that was able to meet the criteria. They still need to go through the Rail Safety Regulator [RSR] process and we hope they will be able to meet the requirements of the RSR to begin operations on January 1.”

She said feedback received at the meeting was that operators preferred a longer access period than the two years offered by

Transnet. She said some industry operators were preparing themselves for full implementation of the white paper and were starting to invest in rolling stock.

“They said whatever we do we should not lock out the system to the extent that people who end up benefiting in the short term are the big players to the detriment of transforming the industry, which is stipulated in the rail white paper.”

However, African Rail Industry Association CEO Mesela Nhlapo blamed the lack of interest on Transnet’s “flawed interpretation” of private third-party rail freight access, resulting in only one successful application bid — proving that the process was not working as intended.

“Transnet is not interested in transformation if only one big company was successful in its third-party bid.

“It has been eight months since Transnet announced its intention to allow private freight operators onto the rail network; 18 companies showed interest, two applied for third-party access and only one was successful. This proves that Transnet’s onerous terms and conditions are not appealing to private investors.”

She said the fiscus was losing billions because the state-owned rail entity was not following the guidelines of the national rail policy.

“The national rail policy stipulates that third-party access should happen in a way that promotes investments and creates a level playing field for all players in the industry. Transnet’s approach to third-party access means there will be no private investment into South Africa’s rail network because no investor will take the financial risks involved,” Nhlapo said.

Transnet’s third-party access is largely based on the German model in which there are a number of rolling stock leasing companies in place and third parties can operate for a maximum of a year.

Mzimela said in Germany one year was the longest period provided for access to the railway network. “In most instances they are providing access or selling slots for a three-month period or less. We chose to go for a two-year period.”

Bessie Mabunda, general manager for the planning and operations command centre at TFR, said they had met representatives of Deutsche Bahn, Germany’s state-owned rail company, last week to discuss issues including rolling stock and the access period.

“It took them close to 10 years for implementation of the rail reform from the time they started having discussions with the government and setting out their policy on rail reform. We asked if they made rolling stock available or extended the access period and the answer was ‘no’ to both. They indicated that their policy was clear and transparent and created confidence, continuity and transparency that allowed anyone interested to take the opportunity on the slot, to make investments in rolling stock. Even though the slot is available for a year there will be continuity.”

Mzimela said what was also key to thirdparty access was the government coming to the party and investing in rail infrastructure.

“If the government invests in infrastructure, it opens up additional slots for sale. We have also highlighted security issues. As much as we are doing all we can, it is not our responsibility totally as Transnet. When we get hit by vandalism and theft we cannot guarantee someone else when we cannot guarantee our own operations at this stage.”

We wanted to start to test the concept so that we can use this opportunity to learn and refine Sizakele Mzimela

Transnet Freight Rail CEO