Boosting local rail infrastructure through government and private-sector collaboration – in the form of public–private partnerships (PPPs) – while harnessing complementary assistance from international investors “is of utmost importance”, says financial services provider Standard Bank corporate and investment banking CEO Luvuyo Masinda.

The Standard Bank group can assist by leveraging its network and access to international, credible sources of capital to help fund large-scale infrastructure projects.

“There is clear and anecdotal evidence of investor appetite for South Africa’s government-led reforms, particularly in the rail sector,” Masinda notes, adding that “a working rail system is critical to . . . achiev[e] a sustained economic growth rate”.

Rolling stock manufacturer Alstom Southern Africa MD Tristan le Masne believes that funding can be made “almost immediately tangible through the appeal of PPPs”, and various sources of funding will be represented, such as commercial banks, development finance institutions, export credit agencies and infrastructure investment funds.

Masinda and Le Masne believe that “extensive” attention should be directed toward the entire rail system, as the lack of repair and maintenance plaguing the sector require “substantial strategic investment”.

Rail Projects in Focus

Masinda notes that the container corridor, between Durban and Johannesburg, is an example of a section of the rail system which requires an investment of about R40-billion for rolling stock, infrastructure development and maintenance. This rail corridor is key for the manufacturing and agriculture sectors, and its rejuvenation would facilitate economic activity in both industries.

Further, the Northern Corridor, which transports coal to Richard’s Bay, requires investment by government and other PPP entities, with about R14-billion required for rolling stock repair, and between R10-billion and R20-billion for maintenance.

Other important projects include maintaining the Gautrain system, manufacturing 600-passenger trains for the Passenger Rail Agency of South Africa at the Gibela Rail joint venture, manufacturing 240 electric locomotives in Durban, KwaZulu-Natal, and the repair and rehabilitation of Chinese locomotives for Transnet Freight Rail.

Le Masne believes that PPPs are an important source of funding, as they promote collaboration and value-add from all stakeholders in projects, which, in turn, also ensures a stable business environment and “long-term bond” among project participants.

“Government can structure projects that are financially and commercially attractive, with balanced risk sharing and appropriate security packages, and [it] has done this successfully with the Gautrain project and other infrastructure projects,” he points out.

Rail Revitalisation Policies

Masinda highlights several policies that have been established by government to enhance rail infrastructure to reinvigorate the rail sector and boost economic development.

For example, the new National Rail Policy (NRP) opens the rail network to third-party investments, which enables the private sector to contribute to the revitalisation of the rail sector, owing to significant structural reforms.

Additionally, focal reform initiatives, such as the “vertical separation” of State-owned freight company Transnet’s infrastructure assets and its rail operations through the Transnet Rail Infrastructure Manager, Interim Rail Economic Regulator Capacity and the Transport Economic Regulator, also align with the NRP, and promote inclusivity.

These policies will ensure a clear framework to attract capital, says Masinda, adding that Transnet and the private sector ought to be treated “fairly” when it comes to negotiating third-party access.

“Equally encouraging is the intention to establish a payment service provider unit outside of Transnet – to be housed within the Development Bank of Southern Africa – which will issue bids and requests for proposals, evaluate responses in a transparent process and ensure that risks are appropriately managed in a programmatic fashion.”

Alstom and Standard Bank, with their respective years of expertise in the South African rail sector, can enhance collaborations and partnerships between various entities that have the knowledge, skills and capital to assist in rejuvenating the local rail system and infrastructure.

“Given our deep relationships with the key freight operators and government, Standard Bank is able to play a meaningful role in partnering [with] Alstom through the South African rail reform journey,” enthuses Masinda.