The government has said that a transformation of the country’s rail is urgently needed if South Africa wants to stand a chance of being an attractive investment destination \u2013 with rail inefficiencies souring investment appetite and costing the economy billions.<\/p>\n\n\n\n
The South African government will need substantial investment to recapacite the country’s rail networks and spark economic recovery\u2014but it cannot foot the bill on its own.<\/p>\n\n\n\n
Like the crisis seen in electricity, the government is looking to the private sector for help and is thus looking to capitalise on various policy reforms.<\/p>\n\n\n\n
“To drive inclusive growth, we need an efficient freight rail network… we will continue with reforms to transform South Africa\u2019s freight logistics system,” said President Cyril Ramaphosa at the Opening of Parliament on 18 July.<\/p>\n\n\n\n
The reform plans are encapsulated in a 124-page\u00a0Roadmap for the Freight Logistics System in South Africa<\/em>, which sets out timelines for everything from setting up an independent rail regulator to allowing private companies to access rail lines and offering rights to operate rail routes to private companies.<\/p>\n\n\n\n These moves have been welcomed by many in the sector, including James Holley, CEO of Africa’s largest private rail operator, Traxtion.<\/p>\n\n\n\n Holley said that South Africa has seen “giant leaps in the right direction when it comes to the implementation of government’s rail reform agenda.”<\/p>\n\n\n\n \u201cI believe when this is rolled out, we’re going to see a boom in the rail industry itself \u2013 but to me, the primary driver of urgency is the levering impact it will have on growth in the upstream economy,” the CEO told the Business Times.<\/a><\/p>\n\n\n\n “[Rail inefficiencies] are having a bigger impact on our economy than the power blackouts had over the last number of years,” he added.<\/p>\n\n\n\n The call for reform<\/strong><\/p>\n\n\n\n South Africa has the most extensive rail infrastructure in Africa, which has long been controlled by a government monopoly.<\/p>\n\n\n\n It is a key means of transporting commodities; however, since 2017, exports have consistently dropped due to operational deficiencies and underinvestment in railway infrastructure.<\/p>\n\n\n\n The reasons vary, but they result from years of compounding mismanagement, underinvestment, theft and vandalism of infrastructure, and corruption\u2014among other factors.<\/p>\n\n\n\n According to National Treasury estimates, these inefficiencies cost the South African economy R411 billion in 2022, with rail (both freight and passenger) declines remaining a severe constraint in domestic and regional trade.<\/p>\n\n\n\n At the beginning of this year, the Department of Transport’s (DoT’s) deputy director-general, Rirhandzu Mashava, said that South Africa’s railway has been unable to handle increasing cargo movement demand, resulting in expensive transport costs for businesses. <\/p>\n\n\n\n According to Mashava, around a third of long-distance freight has moved from rail to roads within five years, with businesses increasingly relying on trucks to transport their cargo nationwide. <\/p>\n\n\n\n Currently, 87% of freight is moved by truck, causing increased congestion and road infrastructure damage – costing the economy an estimated R1 billion a day, said the DoT deputy director-general.<\/p>\n\n\n\n