Transnet on track to do the impossible 

Transnet is on the right track to complete its turnaround plan, with the utility set to allow private operators to use its network in 2026 and beyond. 

This reform process has been coupled with improvements in Transnet’s performance, with the efficiency of South Africa’s ports stabilising and rail volumes improving. 

The current trajectory of Transnet is a far cry from where it was two years ago, with the company effectively being on its knees after the state capture era. 

Transnet had also become paralysed operationally and is now considered the biggest constraint on South Africa’s economy, costing it R1 billion in lost activity daily. 

The decade to 2024 saw Transnet’s rail volumes fall from 220 million tons per annum to 149 million tons, with the utility’s ports rated the worst in the world. 

This is a far cry from the utility’s stated goal of transporting 250 million tonnes by 2030, as laid out in the National Development Plan.

Apart from its operational decline, the utility is now saddled with R145 billion in debt and deteriorating infrastructure, with its maintenance backlog estimated at R30 billion. 

ENS Africa’s Deborah Carmichael, Peta Myburgh, and Liza Vermaas explained that this leaves the company in too weak a position to invest the funds required to maintain and upgrade its infrastructure. 

In response to this crisis, the government is significantly overhauling South Africa’s rail sector, with the network set to be opened to private operators in 2026. 

“2026 is shaping up to be a watershed moment as the first train operating companies (TOCs) are being introduced, the Luxembourg Protocol has been ratified, and significant port concession deals are anticipated in the near term,” ENS Africa’s experts said. 

The government has announced the first 11 TOCs, which are in negotiations with the Transnet Rail Infrastructure Manager to secure access to the rail network. 

The manager has released a template access agreement, which is vital for setting out the allocation of access rights, responsibilities, and tariffs, and also provides a benchmark for future operators entering the market.

According to the manager, the new operators are expected to contribute an additional 20 million tonnes annually from 2026/27, which forms part of the broader target to reach 250 million tonnes of rail freight by 2029.

Watershed moment

ENS Africa’s experts believe that 2026 will be a watershed moment for the logistics sector, with Transnet set to be the first state monopoly opened up to private players.

While Transnet will retain ownership of the rail network, private players will be able to use the railways to transport goods within the country and for export. 

A similar process is unfolding in the electricity sector, where Eskom is being unbundled to create an open electricity market. 

However, this has been beset by delays, as Eskom is concerned about the financial implications of completing the unbundling of its transmission division. 

In contrast, the opening up of the logistics sector appears to be gaining momentum, with the National Rail Policy of March 2022 outlining a framework for private access to state-owned rail infrastructure. 

Crucially, this policy promotes equal access, meaning that Transnet cannot sideline private users to promote its own services. 

ENS Africa’s experts said the opening up of the sector is set to unlock over R100 billion in new investments, which will significantly improve the efficiency of rail infrastructure in South Africa. 

The substantial upfront costs associated with rail operations, particularly the acquisition of locomotives and rolling stock, mean that incoming train operators will depend heavily on private capital. 

“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. 

Despite the reform momentum, significant challenges remain, particularly regarding the condition of Transnet’s infrastructure. 

The deterioration of this infrastructure is a significant cause for concern for freight operators and cargo owners alike, with access provided on an “as is” basis without warranties as to the network’s fitness for purpose. 

Security issues continue to plague the network, with substantial obligations imposed on TOCs to develop their own security plans. 

Critics have also warned that the timeline for expected additional freight volumes is “dangerously slow” for exporters already facing high logistics costs, and that infrastructure maintenance backlogs remain a major hurdle.

Beyond freight, the government has signalled that there may be investment opportunities in commuter and rapid regional rail. 

The Department of Transport is evaluating demand for projects such as high-speed rail connections.