Business Maverick

AFTER THE BELL

It’s really hard to keep track of Transnet

It’s really hard to keep track of Transnet
(Photo: Gallo Images / Fani Mahuntsi)

Transnet’s problems are getting worse, and its solutions aren’t getting off the ground. The company is SAA on steroids. It is Eskom’s larger brother. It is the bedrock of the economy.

Trains are just so mesmerising; think of all the train sets in attics around the world. And what other industry has people, of a slightly sad disposition if we are being honest, who take pride in just observing the product, known as “trainspotters”? Trains are a wonderfully complicated technical, historical and financial puzzle.

But even with all those caveats, history and complications, it is time to start getting really worried about Transnet.

The reason is that Transnet’s problems are getting worse, and its solutions aren’t getting off the ground. The company is SAA on steroids. It is Eskom’s larger brother. It is the bedrock of the economy.

It has of course been decimated culturally and financially by corruption on a grand scale. It’s not just the money; corruption always results in de-skilling, because unless you are a beneficiary of the corruption, employee morale slips and they tend to leave in disgust. But now the company faces a new and different problem: a distaste vested in dogma for the only possible way out, namely, cooperation with the private sector.

If it were just a bank or a retail company, one would worry, but would not necessarily lose a lot of sleep. But Transnet’s woes cost us — the whole country — enormous amounts of money. Fin24 columnist Carol Paton recently put this into a rather shocking perspective. The mining sector, she wrote, has identified R50-billion in lost export opportunities so far this year alone. The forestry sector says that were it not for Transnet rail and port constraints, it could have increased exports by 14%, earning another R3.9-billion in foreign exchange. Instead, it now does an additional 40,000 road freight trips a year. 


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ArcelorMittal recently took the “extraordinary step” of implementing a one-month shutdown of one of its blast furnaces “to avoid the risk of an uncontrolled stop due to insufficient iron ore”. The company said in July that it had lost R650-million in sales in the first half of the year. And Ford, which has just invested R16-billion in a production line at its Tshwane Ford Ranger plant, is moving “almost 100% of its vehicles by road”. The next-door BMW plant long ago gave up on Transnet.

Key parts of the government are painfully aware of these issues and have proposed a solution: more private-sector involvement. And one does need to sympathise here; there are very few things more complicated than introducing competition into a rail network.

History, for a start, is working against you. Like airlines (until recently), trains were always a function of the state around the world, and in many places still are. That history embeds methods and systems which are hard to split out. Trains are also a network, almost the original network, so the network effect — the winner-takes-all tendency which results from scale economics — is playing against you.

One good example is the decision, in 2000, to privatise British Rail. Higher fees, bigger government grants, more accidents and the financial failure of whole chunks of the network have made the effort hugely controversial. But interestingly, the total number of rail passengers in the UK went from one billion “rides” per year at the point of nationalisation in 1948 to 800 million per year at the point of privatisation in 2000. The privatisation period has seen the number of rides increase to 1.8 billion in 2019 before the Covid-induced transport collapse. And these are not the fancy trains you see in France and Germany; they look and feel very much like the Shosholoza Meyl.

But despite the complexity of the task, it’s hard to fail more completely than Transnet has. The idea, first announced in 2017 (I am not making this up) and since repeated by President Cyril Ramaphosa, is to do two things: concession parts of the rail network which are not used and allow third-party access to the network. The intention behind Plan A is to utilise some of SA’s network, which by the way, is huge. SA has five times more rail already laid than any other African country, but we utilise only about half of the 22,000km of track. The third-party access idea is simply to get a bit of competition going.

So now obviously Transnet thinks this is a terrible idea because as an old embedded monopolist, competition strikes fear into its heart. On Friday, Transnet Freight Rail announced that only two companies had participated in its much-anticipated auction of opportunities for private players. Earlier this year, Transnet announced that 16 slots would be available.

Transnet included five take-it-or-leave-it conditions: the slots were sold on a two-year basis (too short); they were to be sold “voetstoots” (so Transnet would not be responsible for track maintenance failure); Transnet would retain grandfather rights on the lines; bidders would be obliged to join the Transnet bargaining council (so they can compete with Transnet’s inflated wage bill); and, bizarrely, the operators had to have access to electric, rather than diesel, engines (so they can’t compete with Transnet’s diesel fleet when the lights go out).

The very outspoken CEO of the African Rail Industry Association, Mesela Nhlapo, said in response: “This is exactly what we warned would happen. Transnet is not interested in transformation. The fiscus keeps losing billions because Transnet will not follow the guidelines of the National Rail Policy which was developed over a 14-year period of extensive consultations.”

This is all a terrible pity because the underlying logic of transport by train is getting more and more emphatic. Conservatively, a normal train with 60 wagons can carry 120 containers double stacked. That’s the equivalent of 120 trucks, using a fraction of the diesel and the personnel. Most countries around the world are still building bigger and faster railways because they just work. Except in our case. DM/BM

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  • Jane Crankshaw says:

    This saga must rate as one of the biggest individual Government thefts on this Continent? Apart from stripping Suppliers from efficient logistics and the ordinary person from access to affordable and safe public transport, it’s opened the door to the “Taxi Mafia” who not only ensure there is no alternative to their transportation but seem to control the “Protection Rackets” in townships and informal settlements. The loss of this once great SOE under the Nationalist Government was once, like Eskom, the envy of other 3rd world countries. And now we are just one of them!

  • Jane Crankshaw says:

    In my opinion, the information in this article is the very reason we need to get rid of racist BEE policies, privatise SOE’S and resign from BRICS and it’s thieving partnerships!

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