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African Rail Industry calls for speedy third-party operator access into TFR network

African Rail Industry calls for speedy third-party operator access into TFR network

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The African Rail Industry Association (ARIA) has called for the speedy implementation of third-party operator access into Transnet Freight and Rail (TFR) network infrastructure in a bid to generate more revenue for the fiscus.

ARIA has been expressing serious concerns regarding the restrictive terms and conditions Transnet has imposed on the use of the national rail network by private third-party freight operators.

The association represents original equipment manufacturers, rail operators and rail services companies in the rail sector and associated industries.

ARIA CEO Mesela Nhlapo said yesterday that there was a massive need for private sector investment into the general freight network in light of a backlog of maintenance.

Nhlapo said South Africa was at the verge of economic collapse and intervention was no longer an option, but a necessity as Transnet collapse would result in an economic collapse.

She said that Transnet’s volumes have dropped by 24% in just five years due to operational inefficiencies, impacting negatively on the private sector and the economy.

Nhlapo highlighted how sectors with intensive reliance on transport have started to suffer and on the export side, saying there was reputation harm for South African companies that rely on rail.

“Rail is a network industry. Where countries have efficient rail and ports, they have a competitive advantage, and the economy benefits greatly. If you have an inefficient network industry, it directly undermines upstream growth,” Nhlapo said.

“There will be no private sector investment in either rail or the upstream economy if there is no proper third-party access as it offers no long-term prospects for potential investors.

“Transnet’s slow, but imminent collapse will have a massive impact on the South African economy. It is time that Transnet considers concessioning out the core network to the private sector.”

In his recent Medium-Term Budget Policy Statement, Finance Minister Enoch Godongwana indicated that requests for proposals had been issued for third-party access to the freight rail network and private-sector partnerships.

However, ARIA said Transnet had not played a fair game in implementing third-party access and was not being transparent about the situation they find themselves in.

“When there was information sharing regarding third-party access bids, (Transnet) set certain requirements saying if you want to participate you have to say yes to all,” Nhlapo said.

“Companies participated initially under duress. For you to get more information you gave to agree, if you don’t agree you get disqualified immediately. I think that in of itself shows a serious matter because it’s almost a dictatorship type of (arrangement).”

The 2017 National Rail Policy (NRP 2017) has set out a policy direction for the adjustment of institutional arrangements to promote investment in the national railway.

It further wants to position rail as the backbone of the country’s freight logistics and passenger mobility systems by 2050.

Transnet has previously said that controlled and mandated third-party operator access to TFR’s rail network infrastructure will contribute to the improvement of route density, increase railway capacity, aid in providing the funding required to increase investment in maintenance, reduce the cost of logistics for the South African economy.

Nhlapo yesterday continued to criticise Transnet for underspending on maintenance of the rail infrastructure by at least R27 billion over the last decade.

“In the 2021/22 financial year, the company revalued its property portfolio by R11bn, which resulted in an R5bn net profit for the year. If it was not for this adjustment, Transnet would have reported a loss of R6bn,” she said.

“Transnet has asked its customers to pay 30 days early, and requested to postpone payment to suppliers so that the company’s cash position would look better at its half-year results.”

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