MTBPS23 – Finally grasping the R400bn a year Transnet nettle

By Alec Hogg*

Six months ago it was Eskom that most troubled behatted finance minister Enoch Godongwana on his big public day. That problem certainly hasn’t gone away, but a more pressing priority right now is the other economically destructive state entity, logistics monopoly Transnet. 

Treasury estimates that the cost of rail inefficiencies last year was a staggering R411bn – with the loss of coal and iron ore exports alone wiping 1.3 percentage points off South Africa’s current account on the balance of payments. Had Transnet been able to deliver, this ready-to-export coal; and iron ore would have turned the current account balance into a surplus from the reported deficit. 

The deterioration of Transnet’s freight services is starkly illustrated in Treasury’s image below which tracks volumes moved since 2018 – reflecting a depressing slide in every one of those five years. 

Treasury says this collapse is due to “operational failures; increased theft and vandalism; reduced locomotive availability; and the poor condition of infrastructure resulting from underinvestment.” 

A National Logistics Crisis Committee has been established and charged with restructuring Transnet and implementing reforms to “create an efficient, competitive and modern freight logistics system.” This will be integrated with interventions already underway within Transnet that include rehabilitating the rail network; digitization; and improving security.

In admission that Transnet is too big to run efficiently, Treasury says the Freight subsidiary has taken the first step to separate its operations and infrastructure management functions and that when done, will facilitate competition. A Transport Economic Regulator will be established early next year to “ensure fair access and transparent pricing on the rail network.”

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