Getting back on track?

It’s no secret that South Africa’s rail network has been ageing and ailing for decades, but JACO DE KLERK says there might be light at the end of the tunnel… 

One year into her tenure as South Africa’s Minister of Transport, Barbara Creecy faces what she candidly describes as “the best and the worst job I’ve ever had”. “It’s the best because there’s so much to learn and so much to contribute, and the worst because there are lots of things that are wrong – and putting it right is very complicated,” she explained. Speaking during June’s PSG Think Big Series webinar*, Creecy outlined her department’s ambitious vision to revitalise South Africa’s ailing rail infrastructure.

The scale of the challenge

“We’re all too familiar with South Africa’s ageing transport infrastructure and the extent to which it’s impeding economic growth. In fact, the South African Reserve Bank, in its Financial Stability Review, goes as far as to say that the sustained deterioration in critical infrastructure poses direct operational risks that could disrupt the functioning of the financial system,” Alishia Seckam, a skilled anchor, financial journalist, moderator, and the webinar’s host, said as she began the discussion.

Creecy responded: “We’ve heard figures that the logistics problems are costing our economy as much as a billion rand a day. One of the things we did early on was to try to define some specific targets that would guide this five-year term. So that, in amongst all the crises, one is actually making consistent progress that would enable us to have the logistics sector in better shape at the end of this term than it was at the beginning.”

For rail, these targets include some impressive numbers. “We intend to increase the amount of freight that is moving on the Transnet rail system from 149 million tonnes, which is what we found at the beginning of the term, to 250 million tonnes annually. At the end of this last financial year, the Transnet War Room has brought us up to 161 million tonnes. So, there is progress there,” Creecy pointed out.

“In terms of passenger rail, we are looking at restoring the Prasa network so that we should have 600 million passenger journeys a year by 2030. At the moment, we are at 77 million passenger journeys a year. We have managed, with the restoration of the central line in Cape Town, to get 35 out of the 40 priority lines working,” she continued.

Infrastructure investment: The critical gap

The fundamental challenge facing South Africa’s rail network is decades of underinvestment. As Creecy explained: “Our existing network has not been developed since the 1970s, except for the Gautrain. We are also operating on what we call Cape Gauge, which is a narrow track compared with the rest of the world, which is moving towards Standard Gauge. It allows for greater speed and – I’m sure many rail experts will cringe when I say this – double-decker trains, which maximises your output in a single train.”

The rail reform doesn’t need the whole system to be replaced at once, however. “There are some key issues that we have to solve in order to get an escalation in the output,” Creecy explained – adding that the lack of cabling and signalling are the first problems to address, and would improve the tonnage and passenger numbers automatically. The minister estimates that South Africa needs to invest “in the region of about R15 to R20 billion a year into the network to see effective functioning and increased train slots”.

All of these funds don’t have to come from the National Treasury, though. The department has had an overwhelming response to its request for information, which it launched in March, to gauge private sector interest in rail and port system involvement. “We were overwhelmed by the appetite. There were 11,000 visits to that site and 63 submissions in terms of information,” Creecy revealed. “I’m really pleased by the response and interest, and think that future proposals will also be responsive.”

Immediate measures and long-term vision

While structural reforms and private sector partnerships develop, the government is pursuing immediate interventions. Transnet has submitted requests to the budget facility for infrastructure for both July and October windows, seeking what Creecy calls “the short-term infrastructure injection”. The department is also working with National Treasury to develop legal instruments that would allow private sector customers to invest directly in fixing specific infrastructure challenges – a pragmatic approach to accelerating improvements.

Looking ahead, Creecy outlined a vision where “Transnet in the longer term should be an infrastructure provider”, with multiple freight operators using the network and Transnet earning revenue from access fees rather than solely from its own freight operations.

“Obviously, Transnet Freight will still exist, but there will be other freight operators and Transnet would be making its revenue from different freight operators that would be operating on their network,” she explained. “We understand that bringing in third parties to invest in the infrastructure is going to take time. We’ve done a lot of research, and (in) the best case scenario, if we issue the calls for proposals at the end of the year, it will take us two years to reach financial close. That’s why this interim request to the budget facility for infrastructure is so important.”

To provide certainty for investors and continuity beyond political cycles, the department plans to introduce comprehensive rail legislation later this year. “We will be bringing the rail bill later this year. Interestingly, there isn’t a bill that deals with all aspects of rail in our country. So, this will be the first framing legislation,” Creecy announced. “Legislation is always important because then it gives legal certainty to the direction within which one would be moving, other than just a policy that has been adopted by cabinet and could be changed by a future cabinet.”

The road (or rather, tracks) ahead

Despite the scale of the challenges, Creecy expressed cautious optimism about progress. When asked to rate the pace of change, she noted that while not yet at the 20% annual progress needed to achieve five-year goals, “we are close to it”.

For South Africa’s economy, the stakes could not be higher. As the discussion made clear, efficient rail transport is not just about moving goods and people – it’s about unlocking economic growth and creating jobs.

* The PSG Think Big Series is a collection of webinars and discussions by PSG, a leading financial services group, which is free and accessible to all audiences.