End of an era for Transnet

South Africa’s government shortlisted 11 private companies to operate on the nation’s freight-rail network and help tackle logistics bottlenecks that have weighed on economic growth.

The companies will now hold talks with state-owned rail operator Transnet about securing access to 41 routes and six corridors used to move coal, chrome, manganese, fuel and other goods, Transport Minister Barbara Creecy told reporters in the capital, Pretoria, on Friday.

Licenses of up to 10 years will be allocated to firms that make the final cut, and they will be allowed to commence operating once they’ve met the required conditions. 

The government has been pledging to end Transnet’s monopoly over the rail system for several years, and in December, the company unveiled a blueprint for opening it up to private firms.

It provided an overview of the 21,232-kilometre (13,193-mile) network, the access terms and conditions, capacity allocations and pricing. The plan will be revised annually.

The Transnet Rail Infrastructure Manager estimates that the selected private operators will carry an additional 20 million tons of freight annually from the 2026-27 financial year, Creecy said.

That will mean Transnet would have to boost its haulage by about 70 million tons to meet a government target of moving 250 million tons of goods by rail by 2029.

While the rail infrastructure will remain a government asset, enlisting private-sector expertise to utilize it more effectively will underpin efforts to overhaul the logistics system.

Beset by years of mismanagement, underinvestment, theft and vandalism, Transnet’s performance has steadily deteriorated, and coal and iron ore exports have hit multi-decade lows.

Transnet last year said the scale of investment needed to upgrade the rail network was beyond its means and it urgently needed government support to sustain and stabilize its operations.

Last month, the government approved R94.8 billion in guarantees to support the company, R48.6 billion of which will be utilised to ensure all its debt redemptions will be covered over the next five years. The latest support was in addition to a R51 billion guarantee facility that was approved in May.

South Africa’s rail policy envisages private operators investing in locomotives and wagons, and rolling-stock leasing companies being established by both state-owned and private entities, Creecy said. 

“This could be a key intervention for revitalising rolling stock and unlock as much as 100 billion rand in new investments,” she said.