Government is fixing Transnet, but its crisis will cost the economy billions

The Transnet crisis is threatening the economy. Picture: Supplied

The Transnet crisis is threatening the economy. Picture: Supplied

Published Dec 13, 2023


Government says it was making progress in fixing the rail and port crisis in the country after work that has been done in the last few months.

Cabinet has also approved the Freight Logistics Roadmap as the economy has suffered massive losses due to the crisis in the rail network and ports, amounting to R1 billion a day.

A consultancy firm has estimated that the economy will lose R353 billion this year because of problems at Transnet.

Volumes at Transnet have declined over the last few years because cargo has moved from rail to road.

This had an impact on the export of goods from South Africa to the international market.

This is contained in the latest report on Operation Vulindlela, which is driven by the Presidency and National Treasury on structural reforms in the economy.

The report further stated that the poor performance of the ports had an impact on GDP.

“South Africa continues to lose the rail market share to the road, with Transnet Freight Rail (TFR) volumes falling short of targeted volumes. For bulk commodities that cannot switch from road to rail, lower rail volumes have translated into lower exports.

“Furthermore, South Africa’s port performance is poor by international benchmarks, both in terms of efficiency and competitiveness. The most recent annual results confirm this trend in declining performance, with freight rail operations hampered by decreased locomotive availability, systemic underinvestment resulting in increased maintenance backlogs and derailments, and finally, incidents of crippling theft and vandalism. Port operations saw improvements, mainly in auxiliary services.

“Gain Group estimates that the economic loss due to Transnet inefficiencies at around R1 billion this year, implying a projected loss of R353 billion for 2023,” reads the report.

The report said a number of initiatives have been undertaken to reform the sector.

One of the immediate priorities of the Freight Logistics Roadmap, which was approved by Cabinet last week, was to improve the performance of Transnet.

In addition, according to the report, the Department of Transport was working on a plan regarding the devolution of passenger rail functions.

This work will be completed by the end of 2024.

The other reform that has been undertaken by government is to allow third-party access to the rail network.

Government has said this will be implemented next year.

Transnet will also work with international partners to operate its terminals. This will improve efficiencies at the port in Durban.

The establishment of an interim infrastructure manager and the adoption of the Economic Regulation of Transport Bill by the National Council of Provinces last week were key reforms in the rail sector, as this will open the rail network to the private sector.

“The establishment of an independent transport economic regulator is also progressing: the Economic Regulator on Transport Bill has been passed in the National Council of Provinces, and the Bill is expected to be signed into law in early 2024. Both of these key reforms are aimed at facilitating competition in the sector and will allow for open access to the freight rail network by private rail operators,“ read the report.

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