Transnet: Private rail operators poised to reshape SA’s freight network

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JEREMY MAGGS: South Africa is trying to fundamentally remake its freight rail system, repairing an ageing network while opening the tracks to private operators and private investment.

At the centre of that reform is [the] Transnet Rail Infrastructure Manager or Trim and Nkululeko Gobhozi is Trim’s chief engineer of technology management and also the newly elected chair of the International Heavy Haul Association (IHHA).

So let’s get into the weeds of this debate and a very important job. Nkululeko, welcome to you.

Is Trim genuinely capable of rebuilding South Africa’s rail network while at the same time opening it up to private competition? There must be a lot of logistical conflict, surely, in that exercise?

NKULULEKO GOBHOZI: One can confidently say we are more than capable, and we are executing on that mandate. It’s just a matter of meeting the timelines that we have committed to do, which we are very confident we should be able to.

JEREMY MAGGS: How much of the problem is simply the physical condition of the infrastructure after years of underinvestment and neglect? Is that the biggest issue that you’re dealing with right now?

NKULULEKO GOBHOZI: Sure, one could say that. However, the reason for it I would not necessarily limit to years of maybe underinvestment. There are several external factors that have not always been the case. Those factors, I think, have exacerbated what we are seeing as the effect in operational efficiency.

Just to mention one, it is sabotage, because I think if you just put it as theft and vandalism, one does not appreciate the gravity of what we are faced with.

I’d say the sabotage of railway infrastructure has played a massive, massive, massive role in that.

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It undermines the efforts for us to revitalise the network in the timelines that we have committed. But moreover, it just makes it worse in areas where we did not prioritise the recovery programmes on.

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So sure, there are areas where we are recovering and, covering the backlog, if I may, of the underinvestment in maintenance, but there is a significant amount of theft and vandalism and sabotage of rail infrastructure that we are looking at new innovative strategies to address.

I can’t share the detail of a lot of those, but that has certainly undermined a lot of the work that we are trying to do. And with industry support, Team SA, we are identifying new opportunities to address that.

JEREMY MAGGS: Nkululeko, all predicated, of course, on whether you have enough money to rehabilitate and maintain the network at the pace that the economy requires.

NKULULEKO GOBHOZI: Sure. I think it’s a good problem to have that we haven’t had before, where we have access to funding that demands our execution within a specific timeline.

For a while, that has been the challenge that Transnet has been faced with in trying to get access to funding.

But now I think with the vertical separation of the ODs (operating divisions), there’s a lot of interest in funding the capital investment in infrastructure.

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And with that, there are opportunities that we are exploring internally and inviting industry to participate in the execution within the timelines that we’ve committed to.

It’s not only now important to our immediate shareholders, but to the stakeholders that are also providing that funding.

So we are introducing new mechanisms to support in the execution of the programmes.

That bit we should be approaching the market, or communicating that approach to the market to then on board that support in the manner that we are looking to get that support.

JEREMY MAGGS: And in that respect, 11 private train operators have already cleared the initial hurdle for network access, which is good news. What has got to happen, though, before that translates into significantly more freight actually moving by rail?

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NKULULEKO GOBHOZI: The process is largely governed by the Railway Safety Regulator (RSR) permits, and as Trim there is obviously the technical support in ensuring that the rolling stock that is introduced onto our network complies with the infrastructure requirements, and that work is underway.

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There is a lot actually, that has already taken place and there’s a lot of continuing support, engineering support, to enable the operators to expedite their own commitments.

So the RSR being the primary owner, I would say, of those standards or permit issuing is in the forefront, and then all stakeholders, us and the TOCs (train operating companies) are supporting in the enablement of that in the short term.

So that work is happening.

Once that is done, there’s obviously interface agreements happening between Trim, as the infrastructure manager, and those TOCs, and that work through our commercial frameworks that is being expedited as well.

As it stands, we actually have weekly – it seems like it’s daily – engagement with the TOCs to ensure that we handle whatever challenges they might have in coming on board as soon as possible.

JEREMY MAGGS: But it is a fine balancing act, because putting additional operators onto a constrained network does risk surely creating congestion rather than efficiency, unless the infrastructure improves first.

NKULULEKO GOBHOZI: Yes. One could look at it that way. However, it would be a one-dimensional view in that some of the constraints, at least in meeting the volume targets as a country, are not limited.

If one looks at the state of the entire country network, it is not the entire country network that has experienced some of those constraints.

Sure, one could say in specific corridors there is that constraint infrastructure capability.

However, in some of the instances, it is also on the rolling stock where the opportunity for the additional TOCs come into play in that where the constraints would have been because of funding or availability of rolling stock, then the additional TOCs are well primed to be able to increase the availability of in-country rolling stock and train capability to meet the additional targets.

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I think there is about 20 million tonnes earmarked in the short term that should be brought in by the additional TOCs.

So notwithstanding the ability of the infrastructure to support that additional capacity, there is definitely an opportunity for that additional capacity on its own to perhaps go beyond some of the constraints that there may have been with the operating company or the TFR (Transnet Freight Rail) leg of the business.

JEREMY MAGGS: Nkululeko, just a final question and a quick answer, please. You’re also looking for private partners to revive neglected branch lines on the so-called B network. If some of those lines haven’t been commercially viable for years, why will private capital make them viable now?

NKULULEKO GOBHOZI: Well, one would have to look at the mandate of Transnet essentially in why if one says not necessarily viable.

One would imagine that possibly there is a different value proposition that private sector is able to apply on those specific lines that would not necessarily have been aligned with the strategic view of what Transnet is trying to achieve or aligned with the stakeholders.

So those become, I will provide an example, tourism is a big sector. It might be tourism, small scale passenger commute effectively on those lines, and many other non-core business pursuits by Transnet which could be of value to PSP (private sector participation).

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So that’s just an example and we are seeing a lot of those opportunities play out, some have already been exploited.

Western Cape is doing quite a brilliant job in bringing in tourism in some of those lines. So there are further opportunities like that that are worth exploring.

JEREMY MAGGS: Nkululeko Gobhozi, thank you very much indeed, you are chief engineer of technology management and the newly elected chair of the International Heavy Haul Association, from a Trim, Transnet Rail Infrastructure Manager. I do appreciate your time.

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