Private Rail Operators Set to Revolutionize South Africa’s Freight Network with Transnet

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JEREMY MAGGS: South Africa is in the process of fundamentally overhauling its freight rail system, working to repair an aging network while also opening it up to private operators and investments.

At the heart of this transformation is the Transnet Rail Infrastructure Manager (Trim), led by Nkululeko Gobhozi, the chief engineer of technology management at Trim and the newly elected chair of the International Heavy Haul Association (IHHA).

Let’s delve into this significant discussion and the critical role at hand. Welcome, Nkululeko.

Is Trim genuinely equipped to rebuild South Africa’s rail infrastructure while simultaneously opening it up to private competition? It seems there could be substantial logistical challenges involved in that endeavor?

NKULULEKO GOBHOZI: We can confidently state that we are more than capable, and we are making progress on that mandate. It’s about adhering to the timelines we have set, which we are optimistic about meeting.

JEREMY MAGGS: How much of this issue stems from the actual condition of the infrastructure after years of neglect and underinvestment? Is this the primary challenge you face currently?

NKULULEKO GOBHOZI: That’s certainly one perspective. However, I wouldn’t limit the reasons solely to years of underinvestment. There are several external factors that haven’t always played in our favor. These factors, I believe, have intensified what we observe as diminished operational efficiency.

For example, sabotage is a major concern; simply labeling it as theft or vandalism does not adequately convey the seriousness of the situation.

Indeed, sabotage of railway infrastructure has had a massive impact.

This undermines our efforts to revitalize the network within the commitments we’ve made. Moreover, it exacerbates issues in areas where recovery programs have not been prioritized.

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There are indeed areas where we are making headway, addressing the backlog of maintenance underfunding, but we also face significant theft, vandalism, and sabotage of rail infrastructure, which we are developing innovative strategies to tackle.

While I cannot share the details of many of these strategies, it is clear that they have hindered a substantial portion of our efforts. With the support of the industry, Team SA is exploring new opportunities to address these challenges.

JEREMY MAGGS: Nkululeko, all of this relies, of course, on whether you have sufficient funding to rehabilitate and maintain the network at a pace that meets the economy’s needs.

NKULULEKO GOBHOZI: Absolutely. It’s actually a positive challenge we haven’t had before, where we have access to funding that requires us to execute within a specific timeline.

For a long time, Transnet has struggled to secure funding.

However, now with the vertical separation of the operating divisions, there’s significant interest in funding capital investments in infrastructure.

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With this, we are identifying opportunities internally and inviting the industry to participate in executing the commitments we made.

It’s not only crucial for our immediate shareholders, but also for the stakeholders who are supporting that funding.

We are introducing new mechanisms to assist in executing the programs.

This is something we plan to communicate to the market to onboard the necessary support for our initiatives.

JEREMY MAGGS: In this regard, 11 private train operators have successfully completed the initial requirements for network access, which is promising. However, what steps must be taken for this to translate into a significant increase in freight movement by rail?

NKULULEKO GOBHOZI: The process is primarily governed by the permits issued by the Railway Safety Regulator (RSR), and Trim is providing technical support to ensure that the rolling stock introduced to our network meets infrastructure requirements, a process that is currently underway.

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A lot has already been accomplished, and we are continuously providing support and engineering assistance to help operators expedite their commitments.

The RSR is the primary authority for these standards and permit issuance, and we, along with the train operating companies (TOCs), are working collaboratively to facilitate this process in the short term.

This work is ongoing.

Once that is complete, we will finalize interface agreements between Trim, as the infrastructure manager, and those TOCs, which is also progressing through our commercial frameworks.

As it stands, we are engaging weekly—almost daily—with the TOCs to address any challenges they may be facing to ensure they can come on board as swiftly as possible.

JEREMY MAGGS: But isn’t this a delicate balancing act? Adding more operators to an already constrained network could risk creating congestion rather than efficiency unless the infrastructure is improved beforehand.

NKULULEKO GOBHOZI: Yes, one could interpret it that way. However, such a view could be overly simplistic, as some of the constraints in meeting national volume targets are not solely infrastructural.

Not every part of the national network has experienced these constraints.

While certain corridors may face infrastructure limitations, in other cases, the challenge lies with rolling stock, where the arrival of additional TOCs can be advantageous. Constraints related to funding or rolling stock availability can be alleviated by these new operators, increasing the availability of in-country rolling stock and train capacity to meet expanding targets.

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There is about 20 million tonnes that are expected to be brought in the short term by the additional TOCs.

Thus, regardless of whether the infrastructure can support this extra capacity, there is definitely potential for that added capacity to exceed some of the limitations that may have affected Transnet Freight Rail.

JEREMY MAGGS: Lastly, Nkululeko, you’re also on the lookout for private partners to help revitalize neglected branch lines in the so-called B network. If some of these lines have not been commercially viable for years, why would private investment make them viable now?

NKULULEKO GOBHOZI: This is where it’s important to consider Transnet’s mandate. While some lines may be perceived as unviable, private entities may provide a different value proposition that aligns better with their interests than what Transnet aims to achieve.

For instance, tourism represents a significant opportunity. There could be potential for small passenger commutes or other non-core pursuits by Transnet that private sector participation could capitalize on.

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This is just one example, and we are beginning to see various opportunities materialize. Some have already been realized, particularly in the Western Cape which is effectively promoting tourism on some lines. So further opportunities like this are definitely worth exploring.

JEREMY MAGGS: Nkululeko Gobhozi, thank you very much for your time. You are the chief engineer of technology management and the newly elected chair of the International Heavy Haul Association at Trim, Transnet Rail Infrastructure Manager.