Cabinet approves plan to break Transnet’s monopoly and promote competition in SA’s logistics network

The Cabinet has approved a plan that seeks to break Transnet’s monopoly in South Africa’s logistics system and promote competition by increasing the private sector’s participation in the running of the country’s rail network and ports.

At its meeting on Friday, 8 December, the Cabinet approved the Freight Logistics Roadmap, which is a plan drafted by the Presidency and organised business, with help from logistics experts. The plan can now move towards implementation — a crucial step in attempting to reverse the dysfunction of the railways and ports in the hands of Transnet.

During a media briefing on Monday about decisions taken by Cabinet, Minister in the Presidency Khumbudzo Ntshavheni said the immediate priority, through approving the logistics plan, would be to stabilise and improve the operational performance of the logistics network. 

The network’s dysfunction is harming SA’s economy and constraining exports. The dysfunction is estimated to have cost the economy at least R500-billion since 2010 and worsened SA’s fiscal crisis, which is pushing the government to consider raising taxes and cutting expenditure.

Most of the reform proposals included in the Freight Logistics Roadmap are not new, as they complement policy initiatives already approved by the Cabinet.

However, there is now a sense of urgency and greater support for the roadmap in government circles, including the Treasury, the Department of Transport and the Department of Public Enterprises.

Unlike others before it, the latest logistics roadmap sets out timelines for everything, including allowing private ­sector companies access to railway lines, setting up an independent manager of the rail network, rightsizing the network by closing down unprofitable lines and giving private operators concessions on ports and rail routes.

Ports and the rail network are considered to be national assets and are natural monopolies that cannot be duplicated. Transnet owns the infrastructure and determines who uses it. The Presidency’s fix-it plan finds this to be a problem because it has, “to a large extent prevented competitive forces from reaching these markets”.

Transnet will join forces with the private sector to invest in locomotives to address shortages. A state-owned leasing company will be set up to make a fleet of locomotives available to private sector players.

The private sector will be allowed to run port corridors under long leases.

The plan still sees Transnet as playing a central role in the ports and rail network. “Transnet will act in a manner that enables globally competitive supply chains, facilitates industrialisation, and crowds in [encourages] private resources,” the 124-page plan reads.

Transnet has its own turnaround plan, recently unveiled by the board, that focuses on reforming the company’s operational, financial and strategic affairs. 

Read more in Daily Maverick: Transnet’s turnaround plan is premised on securing a R100bn ‘capital injection’ from government

Transnet’s plan is separate from the Freight Logistics Roadmap. But the Presidency’s Ntshavheni said the roadmap would be implemented in conjunction with Transnet’s turnaround plan.

There is broad acceptance that, if implemented, the roadmap won’t immediately yield a turnaround because the railways and ports are far gone. There might be a turnaround in the next five to 10 years. But the immediate benefit will be seeing confidence returning around the logistics network, a business source who is close to the Presidency told Daily Maverick. DM