Rail reform on track: What does this mean for transport operators?

How will the announcement of the 11 Train Operator Companies (TOCs) impact road freight operators? KEVIN VAN DER MERWE says the move could reshape South Africa’s freight landscape, unlocking long-overdue collaboration between road and rail.

The announcement by the Minister of Transport, Barbara Creecy, regarding the outcome of Transnet’s TOC slot allocation process marks a historic and necessary step towards a more efficient national logistics system for South Africa. This milestone in the country’s rail reform journey is a clear signal that the government is committed to the structural changes needed to revitalise the sector.

The first 11 private TOCs have been invited to engage with Transnet on contract preparation, which will set the conditions under which they operate. The goal is to increase Transnet’s current freight volume from 160 to 250 million tonnes annually – an additional 90 million tonnes over the next five years.

This development was welcomed by the Road Freight Association (RFA), as it marks the end of Transnet Freight Rail’s (TFR’s) monopoly and opens the door for private sector participation in rail freight movement. According to the African Rail Industry Association, around 1.4 billion tonnes of surface freight is transported by rail or road across South Africa each year.

In 2023, under new Transnet Group CEO Michelle Phillips, rail freight volumes rose from 152 million to 160 million tonnes – a 5.3% improvement following years of decline. This implies that the remaining 1.24 billion tonnes of freight – or 88.6% of total surface freight – is moved by road, compared to 11.4% by rail.

Balancing road and rail

The RFA has long argued that South Africa’s economic success depends on a well-integrated and collaborative freight logistics network. Both road and rail have essential roles in ensuring the efficient, cost-effective movement of goods within and through the country.

The new TOC framework has the potential to revitalise rail and reduce congestion on South Africa’s roads by shifting rail-suitable freight back to the tracks, ultimately lowering the cost of logistics. Importantly, the RFA acknowledges that increased rail freight volumes will create jobs and generate new business opportunities for road freight operators, particularly in first- and last-mile connections to multi-modal hubs and terminals.

Targets and infrastructure challenges

In a recent SABC interview, Phillips stated that TFR aims to increase volumes to 180 million tonnes by 2026 (a 12.5% rise) despite challenges of ageing infrastructure, theft and vandalism. While some rehabilitation work has begun over the past 18 months, around R30 billion/year will be needed to restore the network to optimal condition.

The first 11 conditionally appointed TOCs expect to move about 20 million tonnes/annum once operational, with more TOCs to be invited to apply for access slots as capacity expands. When fully restored, the current network’s optimal throughput could reach 250 million tonnes/year.

According to Mordor Intelligence, the South African freight market is projected to grow at a compound annual growth rate (CAGR) of between 6.24 and 6.8% from 2025 to 2030. Even at a modest 6% annual increase, total surface freight could rise from 1.4 to 1.8 billion tonnes over five years – an additional 400 million tonnes. This growth easily offsets the 90 million tonnes targeted for rail, ensuring there will still be strong demand for road transport.

Regulation and readiness

The 11 TOCs will need to contract with Transnet, the rail network owner, to secure operating slots. A clear and stable regulatory framework – particularly the implementation of the Economic Regulation of Transport Act – will be crucial in determining access fees and operating conditions.

The success of this initiative will depend on:

• Transparent, predictable regulation
• Equitable access to efficient ports and terminals
• Rapid security and maintenance improvements to the rail infrastructure
• Seamless collaboration between road and rail freight systems

The minister anticipates that the first TOCs will be operational by mid-2026, while others may take two to three years to finalise equipment, facilities and trainsets.

Opportunities for road freight

The RFA recognises that road freight operators will play a vital role in this new ecosystem. Trucks will continue to move goods between mines, factories and production sites to rail loading points – and again from offloading terminals to final destinations. This intermodal cooperation offers major opportunities for the trucking industry to diversify services and strengthen its position in the broader logistics chain.

The RFA will monitor progress closely over the next 12 months, with keen interest in how the TOCs perform once operations begin. Developments such as these could significantly improve South Africa’s economy through job creation, enhanced productivity and increased competitiveness – positioning the country as a vibrant, cost-effective logistics hub for the continent.