Back on track? The government publishes SA’s draft plan to revive the railways

  • The White Paper on National Rail Policy was released Wednesday with a series of plans for the country’s freight and passenger rail network.
  • The White Paper envisages the improvement of state-owned rail freight and passenger transport operators through greater scope for private participation.
  • Prioritizes strategic investments in railway development by establishing local factories to achieve 65% local content in the construction of new trains.

If the government has its way, the Passenger Rail Agency of South Africa (Prasa) and Transnet are likely to have competitors in the passenger and freight rail markets, resulting in improved entity efficiency.

The Department of Transportation released the draft White Paper on national rail policy on Wednesday evening, two days after an event on Monday, during which Transport Minister Fikile Mbalula originally aimed to launch the document.

The white paper calls for the improvement of state-owned freight and passenger rail operators through increased competition, solutions to infrastructure vandalism and capitalized maintenance.

The draft policy comes at a time when the government’s two largest rail operators have been faltering from years of financial, operational and governance problems.

Transnet recorded its first loss in years last year, and the entity’s rail performance is in free fall. Prasa still struggles with leadership instability as he goes to court to fight for the removal of his ax group CEO Zolani Matthews.

The cabinet approved the latest draft of the White Paper in March. The latest iteration of the government-released policy was released in 2017.

READ | Will Transnet be the next Eskom? Industry warns that the railroad is in free fall in SA

One problem identified by the white paper is the decrease in funding for the government freight rail operator, which was further constrained by Transnet’s recent underperformance, forcing the entity to “limit service production” to “maximize its financial performance. “.

“Both the freight and passenger rail markets are monopolistic. In addition, funding for both sub-models is inadequate. This has meant that the funding of rail freight investments is limited to what Transnet can leverage from its balance sheet, which is not it is sufficient for its current needs, “the White Paper said.

Play in private

He added that the railway industry in South Africa, although well established, had a low market share of 20% for passenger railways and less than 10% for general freight.

“The government appreciates that, although private sector participation appears to be a ready source of funding, the ways to realize this potential are complex and sensitive. It is in this context that the Department of Transport will lead the development of the participation framework of the private sector for the railway industry.

“This framework will aim to drive collaboration between major state-owned companies and private sector companies to deliver new economic infrastructure projects in order to raise the current level of infrastructure projects,” the white paper states.

He added that the government will commit to granting passenger rail lines in support of its strategic goals for moving passengers from road to rail.

“This must be done in consultation with the state bodies that own the railway infrastructure. Prasa must develop skills to attract and manage sophisticated financing vehicles. Where municipalities, provinces or Prasa identify improvements or extensions, they should consider private sector participation as a possible financing vehicle “, reads the newspaper.

Local premises

He added that the investment in railway shares in South Africa should be in line with the country’s strategic investment in the development of the railway sector by setting up local factories to obtain 65% of local production in the construction of new trains.

The document states that provincial governments will develop business cases for regional rapid transport deployment to “maximize connectivity between urban and regional high-speed rail systems, airports and catchment areas.”

Meanwhile, he added that Prasa was expected to extend its corridor network to areas such as Pinaarspoort, Leralla, Naledi, Mabopane, Saulsville, and Daveyton by May 2023.

damage control

To protect the railway infrastructure, the White Paper states that the Department of Transportation and the Department of Public Enterprises will develop a strategy and plan for the safety of the railway sector. The rail industry regulator will develop and maintain a central security risk register to track threats.

Last week in Parliament, Public Enterprise Minister Pravin Gordhan called for the sale of scrap metal to be temporarily banned to reduce the incentive for vandalism and theft of railway infrastructure.

The white paper states that security-related incidents increased overall by 8% between fiscal years 2018/19 and 2020/21, with cases of theft and vandalism on the rise since the advent of the Covid-19 pandemic in 2020 for both Transnet than for Prasa.

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Fikile Mbalula said at a policy release event Monday that the government intended “to put the railway on a solid footing to play a significant role as the backbone of a seamlessly integrated transport value chain.”

“The White Paper introduces secondary interventions that will give effect to the institutional repositioning and enable competition on rail. This will therefore open the rail market to other operators to compete and improve the operational efficiency needed to improve the service.”

It added these interventions aimed at repositioning freight and passenger railways to become more competitive with consequent improvements in efficiencies by allowing market operators to enter.

The minister said that the White Paper on national railway policy foresees political reforms in the short, medium and long term.

These included the accounting unbundling of Transnet Freight Rail’s infrastructure manager and rail operator, the introduction of the National Rail Bill, the introduction of third party access, the granting of branch lines, the finalization of the National Rail Master Plan, and the finalization of the Commuter Rail Devolution Strategy.

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