South Africa’s freight rail sector is set to attract ‘billions of rands’ in investments following Transnet’s announcement on Friday regarding the sale of slots to third-party operators.
This is according to the African Rail Industry Association (Aria).
Aria says the decision – which will promote the increased use of rail for the transportation of freight – will unlock significant benefits for the broader economy and stimulate the country’s job creation efforts.
James Holley, CEO of private pan-African rail operator Traxtion, says the South African government’s decision to proceed with its long-mooted plans has already created a “storm of interest” from international locomotive and rolling stock manufacturers and investors.
He says this interest will be further increased by the recent signing of the Luxembourg Rail Protocol by Transport Minister Fikile Mbalula, a move which is set to provide private finance for rolling stock as well as flexible rolling stock procurement strategies.
“The freight rail sector is a key enabler of the economy, and by providing the confidence that investors need, we’re going to see significant inflows into the rail sector, but perhaps more importantly, the upstream economy,” says Holley.
Key container corridors
Following President Ramaphosa’s announcement of third-party access in his State of the Nation Address in February, the country’s state rail company Transnet announced during a briefing on Friday that it would make six slots available to third parties in the container corridor between Durban in KwaZulu-Natal and City Deep in Gauteng, and a further 10 slots between Johannesburg in Gauteng and East London and Nelson Mandela Bay in the Eastern Cape from April.
According to Transnet, the two corridors are key for South Africa’s main growth sectors, notably the manufacturing, automotive and agricultural sectors.
The country’s main container corridor links the Port of Durban to the Gauteng economic hub through an extensive rail network of roughly 714km.
“The railway connection between Transnet’s container terminals in the Port of Durban and Transnet’s inland terminals in City Deep, Kascon, Pretcon, Kaalfontein, and several accredited private sidings in Gauteng, are crucial to expanding the custom bonded facilities network beyond the port,” the group said.
“This is critical to supply chain efficiencies and reducing congestion in the Port of Durban.
“The south corridor provides a strategic route between Gauteng and the ports of East London and indirectly Port Elizabeth, that can be customised and configured to suit the unique requirements of the rapidly expanding agricultural and automotive sectors,” it added.
Transnet says the system will operate by means of slots – temporary occupation of sections of the network to enable end-to-end passage of a train – with Transnet Freight Rail retaining ownership of the network.
Listen to Moneyweb editor Ryk van Niekerk’s interview with Traxtion CEO James Holley:
Palesa Mofokeng is a Moneyweb intern.