South Africa

Transnet needs R100 billion for rail turnaround

Transnet is making incremental improvements to its operations, but the utility’s turnaround will take time and billions of rands.

According to BMI senior operational risk analyst Lerato Mzezewa, the organisation expects ongoing reform momentum in South Africa’s transport network.

They expect this momentum to continue even after the May elections, as there is broad political consensus that logistics inefficiencies undermine economic growth. 

The organisation expects the upcoming elections to result in an ANC-led coalition, which will likely see ongoing reforms in South Africa’s logistics sector progress, with infrastructure development remaining largely state-led. 

However, they expect rail financing and operations to experience greater private-sector participation to bolster performance.

Mzezewa said South Africa’s rail network faces complex challenges that are stifling business operations and hampering economic growth. 

These challenges range from ageing infrastructure and rampant theft to broader systemic problems, including underinvestment and managerial shortcomings. 

“This translates into steep operational costs and significant delays for businesses, which are eroding South Africa’s appeal as a competitive trade hub,” she said.

One of the key structural problems with South Africa’s rail sector lies in its ageing infrastructure. 

Years of underinvestment in the infrastructure have led to outdated tracks and signalling systems, with the Johannesburg-Durban line – a crucial trade route – frequently requiring emergency maintenance.

This has resulted in considerable delays and reduced cargo throughput – rail cargo volumes declined at an average annual rate of 0.2% from 2012 to 2023, hitting a low of 156.2 mn tonnes in 2022. 

She said this underscores the pressing need for an infrastructure overhaul in South Africa’s rail sector.

In March 2023, the chairperson of the African Rail Industry Association estimated that over R100 billion is required to restore rail track integrity.

This is merely a fraction of what Transnet’s collapse has cost the country over the past few years. The National Treasury estimates that the rail and port inefficiencies cost the economy R411 billion in 2022 alone – almost 6% of GDP.

A study by the GAIN Group revealed that the collapse of South Africa’s rail and port utility is set to cost the country R1 billion a day in economic output, equivalent to 4.9% of annual GDP or R353 billion.

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