Mark Evans, partner at management consulting firm Oliver Wyman, said state-owned freight company Transnet’s network statement offers private companies an opportunity to play a leading role in the recovery of the national rail sector and infrastructure, thereby stimulating economic activity and improving operational efficiency after a decade of stagnation.
The Network Statement is founded on private sector participation, a model that allows the private sector to invest in or operate certain assets and gives it the opportunity to contribute “meaningfully” to the recovery of the rail sector.
Evans points out that while South Africa’s total rail traffic has fallen by nearly 7% since 2019, total mining production has fallen by only 1.4% over the same period, indicating the rail system is struggling to meet demand. “Main lines are affected by external factors such as theft and vandalism, which are further exacerbated by irregular maintenance and equipment, especially the lack of locomotives.”
He added that while port terminals are performing better than railways, they face similar problems with aging infrastructure and equipment hampering efficiency and causing delays for ships and trains waiting to be loaded and unloaded.
Transnet’s financial challenges further constrain its ability to invest in its infrastructure and execute its transformation plans.
Private sector participation will therefore be key to restructuring institutions to better support South Africa’s economic growth.
But he emphasizes that unlike public-private partnerships (PPPs) in the energy sector, where the state plays the role of investor or purchaser of private services, Transnet’s approach is firmly focused on private sector participation and creating space for private sector investment and contribution to rail and port networks.
Mr Evans added that revitalizing the rail network could reduce dependence on road freight transport. This will not only help companies reduce costs and spend less capital on fuel, contributing to the integrity of the country’s national highways, but will also reduce truck-related incidents and accidents.
Transnet’s approach also encourages the mining industry to be proactive in investing in and operating parts of the rail sector, as mines rely heavily on rail to move raw and processed materials.
Citing data from the Minerals Council of South Africa, Evans noted that from 2021 to 2023, South Africa lost an estimated R98 billion in coal and iron ore exports due to freight and logistics constraints.
However, “positive changes in the rail sector” mean there are many new opportunities for mining companies. “They now need to consider the appropriate level of participation in railway revival. That applies both to the financial contribution and operational involvement required to achieve the desired outcome. Participation can be in the form of individuals or forums, in the interest of the railway and the industry,” he says.
He added that mining companies could start affecting ancillary rail services. Increased investment may impact critical operations or the decision to become an end-to-end provider. “The more a mine is involved, the easier it is to mitigate the risks of underperforming networks. This deep involvement requires expertise and significant investment.”
Evans sounded cautiously optimistic, highlighting that PPPs have proven to be highly successful in South Africa for decades, citing more than 35 large-scale projects worth more than R90 billion.
For example, PPP projects are the largest in the transport sector, with spending on initiatives such as the Gautrain high-speed rail link estimated at R65 billion to R70 billion.
Additionally, a recent partnership with Transnet demonstrated the feasibility of further public-private collaboration. Mr Evans cited a five-year contract with chemical giant Sasol to deliver ammonia to customers, with Sasol funding the state-owned company’s ammonia maintenance. This shows that partnering with private organizations can help strengthen operational maintenance.
“Overall, private sector participation has the potential to revitalize South Africa’s rail transport sector and drive economic growth. With investment and stability in the public sector, along with a supportive legal framework, effective governance and operating model, the rewards can be significant,” concludes Evans.
