South Africa’s unemployment rate reached 32.6% in the first three months of 2021. This represents an escalating crisis with profound material consequences for people’s lives and our society as a whole. It is incumbent on all of us to work together to resolve this crisis, and the rail industry in particular has a crucial role to play.
In unpacking how the rail industry can make a meaningful contribution to the reduction of unemployment we must begin with a frank assessment of where the industry finds itself. The truth is that the current leadership of both Transnet and the Passenger Rail Agency of South Africa (Prasa) have inherited a significant set of historical challenges.
In 2012, Transnet launched a market demand strategy – a R336-billion capital investment programme with an operating expenditure of more than R420-billion. It was targeted at expanding rail, ports and pipeline infrastructure to foster economic growth.
With respect to rail, the focus was to upgrade, maintain and refurbish the existing rail infrastructure and rolling stock in order to sustain and improve reliability of service. The strategy also focused on expanding the capacity of the rail network for increased demand and future growth.
Many of the targets of the strategy have not been met and the failure to meet them means Transnet has not been able to deliver on the volumes it signed up for with customers. An example of this is the Port of Ngqura manganese export expansion programme which aimed to increase capacity from nine million to 16 million tons per year – this has not been achieved.
The build programme, also premised on the market demand strategy, focused on the replacement of locomotives in anticipation of the growth expectations in freight. Transnet projected a demand of 350 million tons within seven years, which should have been met by 2019. The programme was meant to build and deliver 1,064 locomotives between 2014 and 2021 to meet the projected demand.
The financial reports released by Transnet in March 2020 show that just more than 500 (almost half) remain outstanding. In addition, the manufacture of 340 wagons was planned as part of the process of continuous maintenance. None of them has been built.
When it comes to the maintenance and refurbishment of existing rail infrastructure, the financials released by Transnet also show that of the 250km of rail targeted for replacement in the past year, only 46.6km has been replaced.
The cumulative result of failing to effectively implement the entire rail programme is a systematic destruction of the railway industry. This has led to unreliability of service, or no service at all, which affects freight customers who rely on rail to transport their products.
What does this have to do with high unemployment in South Africa? The answer is quite simple. A successful maintenance, upgrade and expansion programme translates into job creation in terms of the labour required to expand, sustain and ensure a reliable rail infrastructure network as well as the building of locomotives, wagons and sub-assembly parts.
For example the market demand strategy was expected to create and sustain 58,400 jobs in the industry. The build programme alone has the potential to create at least 2,000 direct jobs on the various production lines and that’s before downstream suppliers of components and parts and support services such as lawyers, IT and accountants.
When tonnage targets set in the rail programme are not met, there is also a direct negative impact on both job retention and capacity creation across the industry value chain. This includes secondary industries that form part of the downstream supply chain that have seen significant reduction in production and company closures, which have led to widescale job losses.
An inefficient freight railway system and the failure to expand it continue to compromise and, in some ways, shrink the mining, agriculture and other industries which foster economic growth. The country’s ability to create additional jobs in these industries is being frustrated by the inability to move goods efficiently, reliably and cost effectively by rail.
It also significantly compromises the port infrastructure which should be capacitated to handle more traffic but is hamstrung by the inefficiencies plaguing the nation’s railways.
Getting our freight rail industry back on its feet will result in a meaningful reduction in unemployment not only through the jobs within the primary industry itself, but it will also create a domino effect that will affect job creation in the secondary industries. I am encouraged that under its new leadership, Transnet has developed a much-awaited strategy which I hope forces increased localisation and gradually reduces opportunistic imports.
When we turn our attention to passenger rail, we find a similar situation. Over the years Prasa has been engulfed by allegations of excessive corruption and mismanagement and has failed to upgrade, maintain and replace old trains as well as train tracks.
We have also seen a structural destruction of the rail system through vandalism and arson, which cost Prasa almost R1-billion in damaged infrastructure between 2017 and 2019. The passenger rail system in South Africa is capable of transporting 2.5 million to three million passengers daily. Yet, in 2019 Metrorail made just more than 800,000 passengers trips per weekday due to service capacity issues caused by the various challenges facing Prasa.
The negative impact of this on commuters cannot be overstated. President Cyril Ramaphosa got a taste of the frustrating experience commuters are subjected to daily when a train he was on broke down, turning a 45-minute journey into a three-hour delay.
An unreliable, inefficient and unsafe passenger rail system forces commuters to abandon the system in favour of more reliable, but exponentially more expensive public transport. How this plays out in terms of the numbers is that commuters in our metros are spending an eye-watering 50.4% of their total income on public transport.
By comparison, the global benchmark for how much a person from a developing country spends on public transport is only 10% of their income. This means the disposable income of many South African workers is reduced by a whopping 40% of their total income, which translates to a substantially more impoverished working class.
In this context, Transport Minister Fikile Mbalula’s recent allocation of an estimated 27% (R57-billion) of his department’s budget to Prasa to improve dilapidated infrastructure and increase the number of operating trains is a most welcome and pressing intervention. While it is a drop in the ocean in the context of the investment required, it’s a promising start. It builds on the foundation of solid strategy and a visibly stable corporate structure.
Fixing the problems in the rail sector is imperative to job creation, but this can only happen within the context of strong political support and leadership, coupled with consistent executive leadership at Transnet and Prasa, which we have not seen in a long time.
Often when we think about the rail sector, we imagine it as only the hard metal and the nuts and bolts, when it is fundamentally about people. If you are exhausted from unnecessarily long commutes, impoverished by expensive transport and expensive goods and find yourself unemployed because growth and expansion targets have not been met, this affects your ability to contribute and participate as a member of society and even in your personal life.
An inefficient rail transport system has a very real human cost and unemployment is not just a matter of economics, but an issue of dignity.
Rail is already one of the greatest contributors to jobs in South Africa; if we can get the interventions within the sector right we will see sustained GDP growth between 1% and 3% and this will translate into jobs that allow people to live dignified lives and participate meaningfully in our society. DM