Transport Minister Barbara Creecy has underlined the importance of the National Treasury’s Budget Facility for Infrastructure in helping Transnet to fund the near-term rail and port investments needed to meet a yearly 250-million-ton freight rail target by 2030. This, in light of an expectation that private sector participation (PSP) initiatives across the freight logistics system are likely to take another two years to advance to financial close let alone enter into commercial operation.

Speaking on a platform hosted by PSG, Creecy expressed her happiness at the more than 160 formal responses to a recent request for information on possible PSP projects across rail corridors and the ports system hitherto monopolised by Transnet.

A total of 51 responses were received in relation to infrastructure investments on the iron-ore and manganese corridor, 48 for the coal and chrome corridor, and 63 responses were received in relation to the container and automotive intermodal corridor.

She said her department’s PSP unit was currently combing through the responses, which will be used to shape the commercial request for proposals (RFPs), which are scheduled to be released before the end of 2025.

Various models would be assessed, including concessions, build-operate-and-transfer projects and public–private partnerships, and Creecy expressed optimism in government’s ability to convert the prevailing market appetite into viable projects.

The fact that South Africa was a late mover when it came to rail and port reform also meant that her department was actively drawing lessons from the successes and failures in other countries as it sought to finance domestic PSPs that were not too onerous on the State but were still attractive to private investors.

While seeking to strike that balance, Creecy confirmed that attention was still being given to embedding maintenance, transformation and industrialisation requirements into the RFPs, as well as to ensuring ongoing interoperability across the networks.

Efforts were also being made to build an adjudication system that was able to cope with assessing what could be complex technical and financial bids while avoiding a repeat of the legal delays that had arisen with Transnet’s appointment of a preferred partner for the Durban Container Terminal Pier 2.

SHORT-TERM FUNDING

However, there was also an urgent need to increase volumes across the rail and port system as it currently stood, both through opening the rail system to third-party operators and by improving the condition of the existing infrastructure.

Creecy expressed optimism that Train Operating Companies, or TOCs, would begin entering the system now that the Transnet Rail Infrastructure Manager was in place and the Network Statement published.

However, there was also an urgent need to invest in the rail infrastructure and signalling systems to facilitate the entry of third-party TOCs and additional funding sources were, thus, required.

Part of this funding could arise through co-funding projects with existing customers and work was under way on finalising a legal instrument for such partnerships.

In addition, Transnet had participated in the last two BFI bid windows, which were now being run quarterly by the National Treasury.

For the 2025 Budget cycle, the BFI has approved nine projects with a total value of R55.5-billion, of which R15.3-billion will be funded using BFI funding, and Finance Minister Enoch Godongwana indicated earlier this year that the Cape Town Container Terminal Expansion Phase 2B was one of the successful projects.

“We understand that bringing in third parties to invest in the infrastructure is going to take time.

“If we issue the calls for proposals at the end of the year, it will take us two years to reach financial close, and that's why this interim request to the BFI is so important,” Creecy explained, indicating that Transnet had set a 180-million-ton rail target for 2025/26, up from 161-million tons last financial year.

“I'm not sure whether we're going to get there, but I think it's very good to have ambitious targets, because if there isn't ambition, we're not going to move the system.”

In addition, a R51-billion guarantee facility had been approved for Transnet to enable it to cover debt redemptions of R99.6-billion over the coming five years and government will make details known of the additional support to the State-owned enterprise next months.

The embattled utility has been trading with the support of a R47-billion guarantee facility, which was approved in December 2023.

Meanwhile, Creecy confirmed that a Rail Bill was being prepared for introduction to Parliament to provide the legislative framework for the reforms under way, which were currently being enabled by the National Rail Policy and the Freight Logistics Roadmap.

“Legislation is always important, because then it gives legal certainty to the direction within which one would be moving; obviously more definite legal certainty than just a policy that has been adopted by Cabinet and could be changed by a future Cabinet,” she said.