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Phillips says Transnet not yet on track to meet 193Mt rail ‘stretch target’

A Transnet Freight Rail train on the Sishen-Saldanha iron-ore corridor

A Transnet Freight Rail train on the Sishen-Saldanha iron-ore corridor

2nd October 2024

By: Terence Creamer

Creamer Media Editor

     

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Meeting the 193-million-ton rail stretch target set under the newly launched second phase of the partnership between business and government would require a significant amount of work and collaboration, Transnet CEO Michelle Phillips has acknowledged.

Speaking at the Joburg Indaba a day after the target was unveiled as part of a package of targets designed to lift South Africa’s growth to 3% in 2025 following more than a decade of sub-1.5% growth, Phillips said Transnet was not yet on track to meet the target.

“As we speak, we are behind, so there's a lot of work to catch up,” she said, having announced earlier in the year that Transnet would be seeking to improve on its official 170-million tons target for the 2024/25 financial year.

Meeting even the 170-million tons would represent an improvement on the 152-million tons railed in 2023/24, and be a marked recovery from the volume collapse to149-million-tons in 2022/23.

However, it was still well below the record 226-million tons railed in 2017/18, as well as contracted volumes, particularly with miners. It also fell well short of the 250-milion-ton target set by Transport Minister Barbara Creecy.

Phillips, however, noted that the group had also been well below target at the same time last year, when all indications were that volumes could dip below the 149-million-ton level, and when there was serious congestion across key ports.

“We could have easily been 10-million tons worse off last year, but we ended up with about 3-million tons better,” she explained, attributing at least part of the improvement to the collaborative efforts of participants in the National Logistics Crisis Committee.

Phillips also stressed that neither Transnet nor government, its sole shareholder, had the balance sheets to support the investments required to improve and expand the rail and port systems and reported that Transnet had, thus, welcomed the reforms under way to facilitate private-sector participation.

“We've embraced the reforms, and we are working towards those on a daily basis,” she said, highlighting the vertical separation of Transnet Freight Rail into a train operations business and an infrastructure manager, alongside the corporatisation of the Transnet National Ports Authority, which would be finalised by April.

Opening the rail network to third-party operators required the finalisation of a Network Statement, including a tariff methodology, that would meet the financial needs of the network owner and private train operators.

While defending the need for cost-reflective tariffs, Phillips said it was up to the Interim Rail Economic Regulator Capacity to determine the methodology and arrive at a balanced tariff outcome.

She also reported that, in light of its financial constraints, the State-owned company was aiming to release a number of transactions into the market, but would do so only once the enabling processes, rules and structure were in place.

These transactions ranged from the disposal of noncore assets and the possible concession of rail and port infrastructure, to opening the rail network to third-party operations, entering into partnerships on the heavy-haul corridors, as well as implementing maintenance joint ventures and management contracts.

“There's a lot of work that's going on. And Transnet, as you've known it, is not going to be the same Transnet in the next few years.”

Speaking on the same platform, Kumba Iron Ore CEO Mpumi Zikalala acknowledged the progress being made, but also called for greater implementation urgency.

“We are now in a space where we know the challenges . . .  and we've got plans.

“What matters the most now is speed, because what moves the dial is not talk, it's speed . . . [and] ensuring that we drive for progress instead of seeking perfection,” Zikalala said.

Edited by Creamer Media Reporter

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