South Africa's transport infrastructure, particularly its rail and logistics systems, are under severe strain, raising critical concerns about the nation's economic growth and employment prospects. BDO Director for Strategic Development and Advisory Christelle Grohmann recently facilitated a webinar with some of the country’s leading experts representing both the private and public sector on this topic and shares insights gained from this discussion.

With six of the eight work streams of the National Logistics Crisis Committee (NLCC) now being fully operational, and the remaining two to transition from Operation Vulindlela, South African President Cyril Ramaphosa has said that meaningful progress has been made since the start of the initiative to accelerate progress across the priority focal areas of energy, transport and logistics to deliver meaningful economic growth. 

Although this progress is positive, it is important to remember that transport is not just a case of ‘build it and they will come’ or ‘build it and they will use it’. What we are talking about here is moving markets, about the economy, and about the communities that need to live from these economies; so, if we get it wrong in the transport industry it affects every single person's livelihood in this country.

The South African economy depends on around 60% of GDP generation on imports and exports. A massive proportion of that - up to 95% - is trade in products and goods. We rely heavily on import and export trade but because most of the economic activity is in Gauteng, and our transport infrastructure – particularly rail and ports – is ineffective, we are essentially a landlocked country. Our different modalities in the transport pipeline – road, rail, ocean freight – must find a way to operate together to fully address the market’s needs. The only way to do this is to ensure that all the linkages across those modalities are well maintained, a challenge that we have not historically managed efficiently.

So how do we transform this moving forward? It relies heavily on the network infrastructure being repaired and restored. Conversation around planning and overhauling are all good and well, but intentional action now needs to be taken. And this is where the private sector can, and has been waiting for years to, step in and contribute to national upgrades. Unfortunately, red-tape and bureaucracy challenges are causing a major bottleneck for any type of progression. 

So what role can the private sector play? There are many steps needed to get transport infrastructure back on track, and most of these need to be done in tandem. While infrastructure will remain in state control there must still be an open access system which means non-discriminatory access that includes asymmetrical information sharing, non-discriminatory pricing and collaboration to pick up inefficiencies. If the private sector can be brought in to an operational space, even if that means competition with Transnet, then this participation can drive pricing down which will have long-term benefits across the board.

The NLCC recognises there is a national crisis and that working with the private sector is necessary to implement urgent interventions. This will require a two-pronged approach. In the immediate term a turnaround on operational performance is required and the long-term reform that is required for both rail and ports is creating a competitive space for all stakeholders to play in. A strategy that is currently being discussed is to create vertical separation by leaving infrastructure management with public sector entities such as Transnet, but then opening the operational space to the private sector so that those who do not have the capital for infrastructure can still have access to rolling stock and compete in an active market.

A significant amount of work has been done on the separation process resulting in commitment to vertical integration. A detailed roadmap on timeframes in terms of critical reform to allow for private sector participation in the operations of both road and rail has been shared with stakeholders who have agreed that it aligns with their strategies. The NLCC is also working on various work streams that also include this separation strategy and how to implement it successfully. 

Addressing South Africa's rail and transport crisis demands comprehensive policy interventions, as well as a commitment from the public and private sector to find innovative and collaborative ways to work much more closely together from an infrastructure point of view. The partnership between the public and private sectors is pivotal in resolving South Africa's transport crisis so that the necessary transformation can be fully realised and we can grow our economy in a meaningful way. 

The panel discussion was facilitated by Christelle Grohmann, in conversation with Rudi Dicks, Head of the Project Management Office in the Private Office of the South African President; Pulane Tshabalala Kingston, CEO of voestalpine VAE South Africa; Dr Juanita Maree, CEO of the Southern Africa Association of Freight Forwarders; and Henk Langenhoven, Chief Economist at Minerals Council South Africa. Scan the QR code to access the full webinar.