[Letter] Cash injections won’t save Transnet

Over many decades, and under all different governments, Transnet and previous iterations thereof have enjoyed owning and running rail infrastructure and trains without competition. With the request for information published on March 23 by the department of transport SA could now truly be on the way towards public and private competition in the country’s railway corridors.

Transnet’s own financial and operational situation is dire. Holley estimates about R200bn is needed to revamp SA’s rail network, and that Transnet needs about R75bn worth of new trains to reach its 2030 goal of annually moving 250-million tonnes. Given the broader government’s own fiscal headaches, a lot of, if not most, of that investment will need to come from the private sector.

Should the current overtures towards reform and bringing the private sector into rail effectively amount to only cash injections into Transnet by the private sector, the country’s railway network will continue to wither away. Should the policies and regulations in place that protect Transnet from market forces not also be speedily reformed, the excitement expressed by Holley and others will be short-lived.

Bringing in private sector investment in rail is good. But even with bouts of activity and sugar-high investments, not allowing the private sector to also actually own rail infrastructure will still see the country’s overall rail tonnage performance continue to decline (especially as other regional players such as Namibia and Mozambique take the business left on the table by an incapable Transnet).

Emerging economies that persist with vertically integrated monopolies, such as Transnet, will fall behind and find their economies more exposed to global headwinds.

Letter originally appeared here.