- The White Paper on National Rail Policy was released on Wednesday with a host of plans for the country's freight and passenger rail network.
- The white paper envisages improved state-owned freight and passenger rail operators through increased scope for private participation.
- It prioritises strategic investment in rail development by establishing local factories to achieve 65% local content in the building of new trains.
If the government has its way, the Passenger Rail Agency of South Africa (Prasa) and Transnet are likely to have competitors in the passenger and freight rail markets, with a resulting improvement in the efficiencies of the entities.
The Department of Transport released the draft White Paper on National Rail Policy on Wednesday evening, two days after an event on Monday, during which Transport Minister Fikile Mbalula had originally aimed to launch the paper.
The white paper envisages improved state-owned freight and passenger rail operators through increased scope for competition, solutions to infrastructure vandalism and capitalised maintenance.
The draft policy comes at a time when the government's two biggest rail operators are reeling from years of financial, operational and governance troubles.
Transnet registered its first loss in years last year and the entity's rail performance is in freefall. Prasa still battles with leadership instability as it heads to court to fight for the removal of its axed group CEO Zolani Matthews.
Cabinet approved the latest draft of the white paper in March. The last iteration of the policy to be released by the government came out in 2017.
READ | Will Transnet be the next Eskom? Industry warns rail is in free fall in SA
One problem the white paper identifies is dwindling funding for the government's freight rail operator, which has been further constrained by Transnet's recent underperformance, causing the entity to "restrict service output" to "maximise its financial performance".
"Both freight and passenger rail markets are monopolistic. Furthermore, funding for both sub-models is inadequate. This has resulted in investment funding for freight rail being limited to what Transnet can leverage from its balance sheet which is not sufficient for its present needs," the white paper said.
It added the rail industry in South Africa, while well-established, had a low market share at 20% for passenger rail and less than 10% for general freight.
"Government appreciates that, although private sector participation appears to be a ready funding source, the modalities of realising that potential are complex and delicate. It is against that backdrop that the Department of Transport will spearhead the development of private sector participation framework for the rail industry.
"This framework will aim to guide the collaboration between the major state-owned companies and private sector companies to deliver new economic infrastructure projects in order to augment the current level on infrastructure projects," the white paper said.
It added the government would commit to concession passenger rail lines in support of its strategic objectives to move passengers from road to rail.
"This must be implemented in consultation with the state-owned entities which own rail infrastructure. Prasa must develop skills to attract and manage sophisticated funding vehicles. Where municipalities, provinces or Prasa identify improvement or extension, they should consider private sector participation as a possible funding vehicle" the paper said.
It added that rail stock investment in South Africa should be in line with the country's strategic investment of developing the rail sector by establishing local factories to achieve 65% local production in the building of new trains.
The paper said provincial governments would develop business cases for the deployment of regional rapid transit to "maximise connectivity between urban, regional high-speed rail systems, airports and catchment areas".
In the meantime, it added Prasa was expected to extend its network of corridors to areas like Pinaarspoort, Leralla, Naledi, Mabopane, Saulsville, and Daveyton by May 2023.
To protect rail infrastructure, the white paper said the Department of Transport and Department of Public Enterprises would develop a rail sector security strategy and plan. The Rail Sector Regulator will develop and maintain a central security risk register to track threats.
Last week in Parliament, Public Enterprises Minister Pravin Gordhan called on the sale of scrap metal to be banned temporarily to reduce incentive for rail infrastructure vandalism and theft.
The white paper said security related incidents increased by 8% overall between the 2018/19 and 2020/21 financial years, with cases of theft and vandalism increasing since the advent of the Covid-19 pandemic in 2020 for both Transnet and Prasa.
READ | Farce majeure: Are billions in potential damages behind Transnet Rail's coal contracts fiasco?
Fikile Mbalula said during an event to release the policy on Monday the government intended to "place rail on a sound footing to play a meaningful role as the backbone of a seamlessly integrated transport value chain".
"The white paper introduces secondary interventions that will give effect to institutional reposition and allow for on-rail competition. This will then open up the rail market to other operators to compete and improve operational efficiency that is needed to improve service."
He added these interventions aimed to reposition freight and passenger rail to become more competitive by resultant improvement in efficiencies from allowing market operators in.
The minister said the White Paper on National Rail Policy had short-, medium- and long-term policy reforms.These included accounting separation of Transnet Freight Rail's Infrastructure Manager and Train Operator, the introduction of the National Rail Bill, introduction of third-party access, concessioning of branch lines, finalisation of the National Rail Master Plan and finalisation of the Commuter Rail Devolution Strategy.
Get the biggest business stories emailed to you every weekday.
Go to the Fin24 front page.