State-owned freight company Transnet’s Network Statement offers private-sector players the opportunity to take the leading role in recovering the national rail sector and infrastructure, thereby stimulating economic activity and improving operational efficiency, after a decade of stagnation, says management consulting firm Oliver Wyman partner Mark Evans.

The Network Statement is founded on the basis of private-sector participation – a model that allows the private sector to invest in or operate certain assets, affording them the opportunity to “meaningfully” contribute to the restoration of the rail sector.

Evans notes that South Africa’s total rail volumes have dropped nearly 7% since 2019, while total mining production only decreased by 1.4% during the same period, indicating that the system is struggling to meet demand. “Key lines have been impacted by external factors such as theft and vandalism, further exacerbated by irregular maintenance and equipment shortages, specifically locomotives.”

He adds that, while port terminals have performed better than railways, they face similar issues, as ageing infrastructure and equipment hinder efficiency, resulting in delays for ships and trains waiting to be loaded and offloaded.

Financial challenges at Transnet further constrain its ability to invest in infrastructure and carry out its transformation plans.

Consequently, private-sector participation will be key to rebuilding the entity so that it can better support South Africa’s economic growth.

However, he stresses that unlike public-private partnerships (PPPs) in the energy sector – where the State takes on the role of investor or buyer of private services – Transnet’s approach is firmly focused on private-sector participation and creating space for private-sector investment in, and contributions to, the rail and port networks.

Evans adds that the revitalisation of the rail network can reduce the reliance on road freight transport. This will reduce costs for companies which will be able to spend less capital on fuel and contribute to the preservation of the country’s national roads, as well as reduce truck-related incidents and accidents.

Transnet’s approach also urges the mining industry to be proactive in investing in, and operating parts of, the rail sector, as mines depend heavily on rail to move raw and processed materials.

Evans cites Minerals Council South Africa data, noting that, between 2021 and 2023, South Africa lost out on an estimated R98-billion in coal and iron-ore exports, owing to freight and logistical constraints.

However, the “positive shifts in the rail sector” mean that mining companies have a pool of emerging opportunities. “They must now consider an appropriate level of participation in the rail revival, which applies to both financial contributions and operational involvement needed to achieve the desired results. Participation can come in the form of individuals or forums for the good of the corridor or industry,” he says.

He adds that mining companies can start affecting ancillary railway services; with increasing investment, they can impact critical operations or decide to become an end-to-end provider. “The more involved mines get, the easier it becomes to mitigate risk from an underperforming network. This deeper involvement will require specialist expertise and large-scale investment.”

Evans seems cautiously optimistic, stressing that PPPs have, for decades, proven to be highly successful in South Africa, citing more than 35 large-scale projects worth more than R90-billion.

For instance, the transport sector has seen the largest PPP projects, accounting for an estimated R65-billion to R70-billion in spending on initiatives like the Gautrain Rapid Rail Link.

Moreover, recent partner-ships with Transnet have demonstrated the feasibility of further public-private collaboration. Evans cites a five-year agreement with chemicals giant Sasol to deliver ammonia to customers, with Sasol funding that fleet’s maintenance for the State-owned enterprise. This demonstrates that partnering with private entities can help bolster operational upkeep.

“Overall, private-sector participation has the potential to revitalise South Africa’s rail transportation sector and boost economic growth. With a supportive legal framework, effective governance, and operational models, along with public sector investment and stability, the payoff could be significant,” Evans concludes.