Revealed: how SA can achieve a functioning rail freight network – Part 1

Do you fancy the idea of a functioning rail freight network in South Africa? ELVIN HARRIS certainly does. He believes that the solution lies in a direct government contribution to financing the network. This is Part One of a fascinating two-part series on the subject.

Let’s start with a brief history. South Africa’s railway system is almost 160 years old; it’s been at the forefront of economic, technological, social, and even cultural development since its inception. It is one of the oldest railway systems in the world and is one of the top 15 largest railways globally, with a network size of just over 30,000km of track.

Our railway system has evolved with the times. It has acquired many world-class technologies and processes from best practice around the world and it has also been a world-leader in several areas, such as heavy-haul operations and running extremely long trains.

Much of this success was achieved over almost a century (1910 to the late 1990s/early 2000s). I would argue that one of the most critical reasons why such successes were achieved by a railway system far removed from the rest of the world and developed on a Cape Gauge (1,067-mm track gauge) – quite distinct from most of the western world’s 1,435-mm standard track gauge – was due to the fact that from 1910 to 1980 the South African Railways and Harbours (SAR&H) authority was directly supported by funding allocations from the fiscus. There was even a special funding allocation granted to a statutory committee for the supervision, development, and maintenance of railway crossings and bridges.

This financial support lessened quite significantly between 1981 and 1990, the period of SAR&H’s successor entity, the South African Transport Services (SATS), but it did not disappear entirely.

Pursuant to recommendations made by the De Villiers Report on the Management of the South African Transport Services in 1986, Transnet SOC Ltd was formed as a public company (constituted in terms of the Legal Succession Act of 1989), with the South African government as the sole shareholder. Transnet SOC Ltd was, however, established with a mandate to be fully commercially viable on its own with no financial support from the State. Thus, all direct funding allocations from government to Transnet ceased quite abruptly in 1990.

The Legal Succession Act also provided for the separation of passenger rail services from Transnet SOC Ltd via the establishment of the South African Rail Commuter Corporation (SARCC) – now the Passenger Rail Agency of South Africa (PRASA). Only the passenger component of the railway continued to receive direct funding from the State after 1990, by way of an Operating Subsidy to SARCC and lately in the form of a recapitalisation of PRASA to fund a new fleet of train sets and the upgrading of its commuter network and train stations.

Not only did direct funding of Transnet come to an end (which meant no funding of the freight rail network within Transnet), but government also introduced the Transport Deregulation Act (1988) and the Road Traffic Act of 1989. To give effect to both these Acts, government continued to invest in the road network of the country (as it had already been doing since 1910) to enable mobility and flexibility for passenger vehicles. This was also done to improve the efficiency, flexibility, and reliability of the road freight transport market that now (through these pieces of legislation) could compete freely with the railways for freight cargo, due to most previous restrictions having been lifted. 

THE INVESTMENT PICTURE FOR ROAD VS RAIL

For the past 30 years, investment in the country’s roads has outpaced investment in rail by almost 10:1. In other words, there has been 10 times more investment into the road network than into the rail network.

Between 2008 and 2017, R340.6 billion was invested in road infrastructure, while a mere R30.1 billion was invested in rail infrastructure (Figure 1). Since 2009, the gap between road and rail infrastructure investment has been widening in the favour of road (Figure 2).

The maintenance and improvement of road and rail networks, meanwhile, have not kept pace with the growth in traffic and requirements for safe technical standards that need to be met to ensure the safe use of such infrastructure.

It is important to point out that the primary purpose of this article is firstly to highlight the significant discrepancy between direct funding from government to road networks as opposed to rail networks, and secondly to make a case for greater direct government funding to rail networks, given this skewedness over several decades.

It is in no way intended to suggest that funding should be taken away from road infrastructure and instead redirected towards rail infrastructure. What is being called for is a better balance between direct government funding to both road and rail networks, to enhance the efficiency and reliability of the total land transport system over time. This will support the competitiveness of the entirety of the South African economy and, by extension, the competitiveness of the SADC regional economy.

It is inescapable that the road networks themselves, despite being advantaged over many decades, still require significant amounts of funding for backlog maintenance, not to mention investment for new road infrastructure capacity as the networks suffer inevitable wear and tear and as the economy (and the population) continues to grow over time. The backlog in road infrastructure is, in fact, three times that of rail (Figure 4).

If our logistics system is to make any serious contribution to the competitiveness of the South African and regional economies, the generally poor state of our roads must be addressed – less than 50% of SA roads are in good to very good condition. Furthermore, any new road/roadside infrastructure has to be correctly and appropriately maintained in the future. This must be done with a clear intent to prevent any backsliding on the kinds of maintenance regimes that have led us to the present-day situation – a situation which, by the way, is most likely already much worse in 2023 than it was in 2013.

Compounding the significant challenge of less than half the country’s roads being in a good or very good condition, the forecast for road freight traffic growth on these roads is estimated to rise to 900 billion tonne-kilometres over the next 25 years.

Of this growth, heavy commercial vehicles are expected to outpace the growth of light and medium commercial vehicles, which will put even more pressure on South Africa’s road network – such as it is! This does not seem to be a sustainable scenario, and funding all this future requirement for road infrastructure is going to be extremely challenging.

Our only viable option is to significantly increase our spending on rail infrastructure to essentially tackle three core dimensions:

1) Improve and increase capacity on the rail networks in the short-term (primarily maintenance backlogs and some investment in new additional capacity) to arrest their decline and enable an early shift of lost traffic back to rail.

2) Continuous investment in upgrading the rail networks, in order to keep pace with economic growth and market demand for rail-friendly cargo going forward (lest we slip backwards and relive the whole cycle).

3) Keep up with proper maintenance regimes and continuous upgrading of rail network capacity, on the back of a good foundation established with the aforementioned continuous investment upgrading phase.