Private trains prepare for Transnet rail network as monopoly nears end

Transnet’s monopoly on freight rail is set to end before 2026 closes. Private sector companies will start bringing their locomotives and heavy-haul wagons onto the rail network over the coming months to operate lines independently.

This is a timeline offered by Moshe Motlohi, CEO of Transnet Rail Infrastructure Manager (Trim), an office responsible for repairing Transnet’s underperforming core rail network – spanning 20 953km – and opening it to private sector operators for the first time to improve efficiencies.

After closing applications for private sector players to express interest at the end of February 2025, Motlohi’s office selected 11 companies to be awarded rail slots across Transnet’s network – on a conditional basis.

It’s on a conditional basis because the selected companies still have to pass tests and assessments with SA’s Rail Safety Regulator, ensuring that their sourced rolling stocks are configured to, among other things, Transnet’s rail infrastructure standards, and for safety permits to be awarded.

In an interview with Moneyweb, Motlohi – a logistics veteran with two decades of experience – said there are two companies whose locomotives and wagons are being assessed, and they are “almost done with that process”.

“Hence why we have been saying that towards the end of this calendar year, there are two operators that are going to run test trains on the rail network, and move trains on the system for the first time.”

These companies are expected to run short distances, and only one or two trips a day – thus not fully utilising their awarded rail slots, something Motlohi expects to be built over time.

He anticipates a third company being brought onto the rail network before the end of February 2027.

Phases to rail reforms

Transnet’s rail network is important for South Africa’s economy as it is responsible for railing most of the iron ore and coal the country produces and exports globally.

When Transnet isn’t operating properly, South Africa’s exports come to a standstill.

And it hasn’t been operating properly for years; the volume of cargo it carries has collapsed by more than a third over the past five years due to mismanagement, theft and vandalism.

It is now embracing the private sector, asking rail operators to independently run trains on its network, while also pouring money into upgrading the network.

Phase 1 of the rail reform initiative entails the allocation of 2.1 megatonnes (Mt) of rail capacity to private sector parties on five of Transnet’s six rail corridors.

The north rail corridor, which runs between Ermelo in Mpumalanga and Richards Bay in KwaZulu-Natal, is excluded because there is largely a lack of rail slot capacity in this corridor.

This corridor is Transnet’s most problematic (it faces incidents of cable theft and vandalism), and is strategic for South Africa as it is responsible for bulk commodities (particularly coal exports).

Motlohi said upcoming phases of the reform initiative will involve the expansion of rail slot availability on existing corridors with timelines yet to be announced. Access will be increased further to possibly include the north rail corridor.

R70bn in rail investments needed

Motlohi sees partnering with the private sector as the best way to fix Transnet’s dysfunctional rail infrastructure and make it reliable to shift cargo back from road to rail.

His office estimates that investments worth R70 billion over the next five years are required to fix the rail network.

This is money that neither Transnet nor Trim has, but Motlohi sees three fund-raising ways.

First, Trim would chip in its own money. How it works is that Trim will generate revenue from private rail operators, which will pay Trim access fees, or tariffs, to operate on its rail network.

Second, Motlohi has not ruled out financial support from the government, through its restructured Budget Facility for Infrastructure (BFI), run by National Treasury. The BFI provides funding for specific infrastructure projects under strict conditions, including receiving co-funding from the private sector.

Third, Trim, working with transaction advisors, wants to independently raise debt in capital markets – something Motlohi said will be done “responsibly and within financial means”.

Transport Minister Barbara Creecy has set a volume target of 250Mt for Transnet’s rail network by 2030, from 167.9Mt currently.

The last time volumes exceeded the 200Mt mark was in 2017.

If funding is secured, Motlohi expects “aggressive” improvements to the rail network to follow, which he believes could help achieve Creecy’s volume target.

This article was republished from Moneyweb. Read the original here.