Derived from David Taylor’s article which first appeared in Railways Africa Magazine. Third party access describes a relationship where private sector freight and passenger transport entities procure, deploy and operate their own rolling stock on state-owned rail infrastructure, while paying access fees to the infrastructure owner. The infrastructure owner, in turn, ensures that the quality and condition of the infrastructure is maintained to a standard that is deemed safe for operating. The South African rail industry has seen a prolonged period of decline, culminating in Transnet signalling force majeure — the validity of which is questionable — on its long-term coal contracts on one of its most profitable lines and its self-proclaimed core competency. Transnet blames cable theft and legal issues around procurement contracts which are beyond its reasonable control. However, these are symptomatic of much larger issues. The SOE is faced with major issues such a lack of direct leadership and a major skills shortage as people take voluntary severance packages. Furthermore, there is a shortage of serviceable rolling stock after irregular contracts with original equipment manufacturers (OEMs) were cancelled, resulting in a dearth of available locomotives and non-existent service available to the market. When service is received, it is often sporadic and far below the level required. Finally, many of the transport contracts negotiated lack any recourse for poor, or non-performance. Rail-friendly freight is often high bulk, low value, long-distance cargo which needs consistent and reliable service that should easily be provided by rail on a secure, long term contract. An unpredictable and unreliable rail service quickly shifts freight to our overburdened road network where reliability and consistency can more easily be managed by stakeholders. Third party access should allow members of the private sector to assume control of several issues identified above. This would not only signal a return to favour of South Africa’s rail network and reduce South Africa’s logistics costs which reinforce upstream economies, but it would boost revenue for Transnet in the form of access fees, raise maintenance revenue for Transnet Engineering servicing a broader range of rolling stock, and increase volumes for Transnet Ports and Terminals. The healthy competition created would also raise service levels experienced by freight owners in South Africa which in turn would give rail the edge in procuring logistics solutions. In light of the above, Transnet’s acceptance of the President Cyril Ramaphosa’s directive of third party access was seen as an acceptance of growth and change. A move to favour progress and collaboration by working towards the creation of an efficient rail network to reinstate the backbone of our economy, for the benefit of job-creating industry and ultimately the citizens of our country. Unfortunately, what one sees is ultimately not what one gets. On the 8th of April 2022, Transnet Freight Rail stated their position on third party access. Its position falls somewhat short, however, of presenting access as an answer to our country’s rail inadequacies. Instead of embracing its potential, Transnet has taken a defensive stance, guarding its deteriorating turf, mitigating the risk of competition, enforcing anti-competitive policies, and refusing a collaborative approach to our rail network issues. The National Rail Policy due to be gazetted by the Department of Transport creates space for third party access on our networks in a competitive, inclusive and open manner, defining an environment that can offer access in a mutually beneficial relationship. Transnet’s departure from this policy will, at best, result in an expensive revision of its position and procedures. At worst it will undermine and potentially even kill the initiative of Third Party Access. Below, I discuss a few important points where there seems to be a misalignment of Transnet’s third party access and the National Rail Policy. VoetstootsAfter years of degradation and neglect, SA’s rail network is currently in a state that, for the most part, cannot be operated safely. During the state-imposed lockdown, rail operations ceased, creating an environment where infrastructure theft and vandalism were allowed to destroy many parts of the network. Transnet, the network’s custodian, has stated that certain routes will be made available in their current state and that private sector will need to invest in the infrastructure to operate it. While some pragmatism is required in accepting that the infrastructure is not in the condition that it should be, any investment by the private sector or non-government stakeholders should be accommodated with a structured reduction in access fees to compensate for this investment. Grandfather RightsTransnet’s self-imposed grandfather rights hold that they have a right to retain the slots that they currently are running. This is a potentially anti-competitive move that undermines the nature of third party access. If Transnet Freight Rail can provide a service at a level that allows it to continue or even promote its service, by all means that freight is secured, and the slot is retained. If TFR cannot provide the service, however, then it should not retain the slot if it has neither the traffic nor capability to use it. There is thus zero incentive for Transnet to increase the level of service awarded to its customers. The sale of slots should be subject to operators undergoing compliance screening processes, showing they are operationally capable, possessing the rolling stock needed to operate the slot, having approval from the Rail Safety Regulator and having a contract to move appropriate freight. Transparency on Access FeesIt was clear during Transnet’s information session that slots would be sold at a rate that ensures the continued competitive position of Transnet Freight Rail. In other words, the rates would effectively impose a level of inefficiency on every single operator that applies to operate, because Transnet cannot create efficiencies in its own operations. This undermines the competitive nature of third party access. Transnet should embrace the efficiencies that third party access can bring to the rail network and possibly even learn from them. TFR is an operator in its own right and even after third party access starts, it will still be a viable option for freight shippers. TFR should leverage this favourable position and embrace competition instead of kneecapping non-state participants. This also applies to Transnet’s rule that new entrants must join bargaining councils. Passing on increased labour costs to customers is not sustainable. Rail, as a transport mode, cannot raise costs with impunity. We are still competing against other modes which have strong competitive advantages. Timelines and ProceduresTo offer any kind of operational efficiency on the slots offered for sale would need at least three wagonsets. The estimated investment cost in rolling stock alone would run between R500m and R600m for an efficient service. As most rolling stock is highly capital intensive, manufacturers do not keep inventory, instead rolling stock is made to order with the lead time of around 18 months for a new locomotive. Rolling stock, by nature, has an operational life expectancy of between 30 and 50 years. The 24-month access period for Transnet’s slot offering is grossly inadequate to achieve any kind of return on this massive investment and it would be very difficult for the private sector to justify it. Other open access regimes across the world offer periods of 10-15 years (without contractual default by the operator) with periodic reviews and options to renew, which is far more investor-friendly and encourages operators to invest in quality rolling stock that will offer the best reliability over a longer period. Furthermore, Transnet expects the operator to commence their operation within three months of access being granted – an impossibility. Should this not be adequately managed, we risk becoming an international dumping ground for end-of-life rolling stock. Our bleeding rail system comes at great financial cost to the country, but the economic cost is even greater Transnet’s first public foray into third party access revealed its defensive position as it safeguards its dwindling market share which, at best, will likely to be lost to competing transport modes such as road. A worse scenario has those businesses that depend on rail solutions will close. Timber, a high bulk industry that moves just under 4 million tons per year on rail, is one sector under threat. If Transnet sheds more market share in timber, many players in the industry will become unviable, resulting in the closure of some of SA’s largest rural employers who are already incredibly scarce. Our bleeding rail system comes at great financial cost to the country, but the economic cost is even greater. Conversely, there is a potentially an incredible financial and economic boon on the back of a viable and competitive rail network. Decreased logistics costs lead to more viable industries, boost economic activity and create more jobs. Rail is ultimately an enabler of an economy, and it is time other operators were able to prove this to Transnet. Investors are waiting on the sidelines, and operators ready and willing to commence with these initiatives, under mutually beneficial conditions. Furthermore, we have the capacity on our network - yes, the speeds may be slower than before due to track condition, however, most rail freight favours consistency over speed, this consistency is achievable. If we consider the the Container Corridor, which runs between Johannesburg and Durban, 70% of these slots are currently available (TFR are operating 30%). This capacity is perfectly placed to service the Agri industry’s flow between Bethlehem and Durban. In 2006, 36.3% of South Africa’s Maize and Wheat was transported on our roads, this has declined to the latest figure of 6.8% in 2021. In the years 2020 and 2021, more wheat and maize was transported on conveyor belt than freight rail. Likewise, 40% of our Barley, Oats and Soybeans enjoyed a rail service in 2011, 2021’s data is down to 7.8%. Our infrastructure has 70% capacity available to the market to reverse this modal shift. Finally, while the National Rail Policy is a shining beacon in the political storm that is our rail industry, we need to understand how rail fits into our domestic and international transport mix. A market rarely exists at the railhead. Our exports also need to remain internationally competitive. It is vital to understand how rail fits into the bigger logistics picture. The logistics mix must promote rail’s competencies as it does with other modes.
Rail reform needs to happen alongside road and port reform to ensure that the market leverages these competencies in creating logistics solutions. Decades of viewing road and rail in their own silos have resulted in truck axle loads growing too heavy for the country’s road infrastructure to handle. Above-inflation increases in rail rates and decreasing per-ton road rates have allowed road solutions to punch above their weight – this needs to be addressed for us to have a proper conversation about rail’s role in South Africa’s international competitiveness. As my mother would have said when offered something priced out of viability “at that price, it’s not for sale”. The first — sideways — step toward private operation has been taken. The next step is not, as Transnet anticipates, negotiations with operators but should rather be a realignment of its position with the National Rail Policy. I look forward to the Department of Transport’s Policy Launch, so that we can have meaningful conversations with current and future operators about how we can move our country forward, together. "We are promoting greater private sector participation in rail, including through granting third- party access to the core rail network and the revitalisation of branch lines. We will establish a single economic regulator in transport as a matter of urgency to promote competition and efficiency." - President Cyril Ramaphosa Open Access is seen as an international ideal for most, but not all rail networks around the world. This structure can be an efficient setup as the freight tonnage is driven through efficiencies of the private sector, the State maintains control of the infrastructure of strategic importance, and (especially in South Africa where the word ‘privatization’ is quite taboo), nothing is strictly privatized. Up until now, both passenger and freight rail have been monopolized in South Africa under the State-Owned Entity Transnet SOC. This environment has seen road usage flourish at the expense of rail, which has declined to 12% market share in 2019. Transnet, recently mired in maladministration and corruption, presides over Africa’s largest rail network, by far, with some world-class route densities and legacy infrastructure. Although there are variances, the basic, simplified relationships allowing third-party access are as follows: the State owns and maintains rail infrastructure in a network and act in a similar manner as a landlord. Through an independent Transport Regulator, Operators apply to access and cross the infrastructure with their own rolling stock carrying their own, or their clients freight. This ‘access’ permission comes at a fee, which is accrued through a number of difference structures, the most common being a ‘wheelage rate’ where the operator will pay an accepted, market related rate which is calculated as a price per ton-kilometer for freight, i.e. a rand value for moving one ton of freight over one kilometer. This revenue will then be paid to the infrastructure owner/manager to be used to renew existing track, and extend existing services and networks. Reactions to the recent announcement have been varied. The rail sector rejoices, a sentiment not necessarily shared amongst all stakeholders. In a recent debate between the Chief Executive of the RailRoad Association, Ms. Mesela Nhlapo and Jack Mazibuko, the Secretary General of the South African Transport and Allied Workers Union (SATAWU), Mazibuko expressed concern of entities profiteering on rail, which is used as a means of transport by economically disadvantaged South Africa’s as their daily commute. Whilst Mr. Mazibuko is correct in his sentiment that private companies are primarily driven by shareholder value, this will translate into a the imperative of a going concern in an open market, where commuters and freight owners reward operators with their business. If an operation cannot offer a certain accepted level of service, the operators either improve their offering or cease to exist. In contrast, a government entity will continue with their taxman-funded bare minimum – with very little utility transferred to the community at large, and little ramification for non-delivery. The impact of the recent announcement on Private Operators addresses a major barrier to entry, identified by Jamie Holley in his recent address at the African Rail 2020 virtual conference titled “Overcoming barriers of entry preventing emergence of new entrants” namely Regulated Restriction on access to the core infrastructure. Allowing access will encourage private operators to address opportunities in the freight and passenger markets, committing capital and investment into moveable assets to be deployed on South Africa’s infrastructure, translating to an increase in service levels offered to passengers and freight-owners, as well offering an alternative revenue stream to South Africa’s State-Owned rail infrastructure owner. An exceptional example of this is Traxtion Sheltam’s recent commitment of R1bn in investment third party access pending entering into agreement with the State. In most cases, freight is generally considered more profitable for a rail entity to operate compared to a passenger service, as the distances are generally long, volumes are high and time (therefore speed) is not an imperative. Should a private operator want to enter into the passenger space, alternative costing models will need to be considered. In Europe, these perceived ‘unprofitable’ (but socially important) routes are identified by the Regulator, and offered in an open market as a Public Service Obligation (PSO) contract. In this arrangement, the government commits to subsidize an operation to a certain level, and, at the same time, implement onerous penalties should certain benchmarks not be achieved (currently PRASA is heavily subsidized without the penalties). If an operator meets these benchmarks the contract is seen as a success, furthermore the contracts are set up in a way that should the operators exceed these basic benchmarks, there is significant upside, encouraging an exemplary service. Exactly how South Africa negotiates third-party passenger transport is not yet clear. Finally, with a more vibrant rail sector, the rail industry is a fantastic employer and skills developer. Furthermore, an increase in the level of service offered to freight owners leads to a decrease in logistics costs, not only increasing existing margins on products and services but increasing the viability of markets, industries, and opportunities. The rail sector is therefore a driver of both primary and secondary jobs. As a cornerstone of an Economic Recovery Plan, revitalizing the rail sector has the ability of a knock on, multiplier effect. Including the private rail in South Africa’s transport mix, not only aligns South Africa with International Best Practice, but encourages investment in a sector that greatly benefits the South African economy as a whole. This is a great opportunity for South Africa to roll up her sleeves and get to work. For a moment, let us give our imagination carte blanche to dream of a South Africa not shackled to an economy bought to her knees, a South Africa that kept it’s brains, businesses and relating tax dollars where they want to belong, at home. A South Africa where a natural answer to the question of something like Hyperloop would be ‘tell me more’, rather than the thoughts that I am sure most of you are thinking now. Furthermore, let’s dream that COVID-19 was contained in Wuhan. So what is Hyperloop? Spacex and Tesla (both deriving from South African-born Elon Musk) first used the term Hyperloop to describe their open-source vacuum-train concept in 2012. This concept focused on reducing as much friction and resistance on a vehicle as possible, combining the principles of magnetic levitation and propulsion with the optimal environment of little-to-no air resistance – a vacuum chamber. The chamber’s close-to-vacuum state is maintained by large air pumps removing air from within the chamber, mimicking conditions of an aircraft at 20,000 ft, allowing the vehicle to move at blistering speeds using relatively little energy. The vacuum chamber in question would be in the form of a single-direction tube connecting origin and destination nodes, like two cities. Inside the tube there would be a vehicle resembling the sleek fuselage of an aircraft suspended by the mechanism of magnetic levitation. Once an airtight seal is formed, the vehicle has the ability to travel to theoretical speeds of up to 1,300 kph using its maglev principles. To put this in perspective, the cruising speed of a Boeing 737-800 is 583 kilometers per hour. All this relying on a purely electrical energy source, which can be virtually emission-free using renewable sources. This infrastructure can be suspended above ground level, at ground level or placed at a subterranean level. It all sounds quite sci-fi, however, the technology is very real, and progressing as we speak. After Musk’s fateful announcement of his new idea of mass transit, companies across the globe have responded to the call to develop the technology, and the results are fantastic. Hardt Hyperloop of the Netherlands have developed Europe’s first test track offering a tantalizing proof-of-concept. Another win for Hardt is the development of their proprietary track-changing technology which promotes multiple origin-destination pairs across a network, similar to a railway network. Hardt are in the process of developing the European Hyperloop Center (EHC) in the Dutch province of Groningen, which aims to bring developers from across the world to advance the technology – and ensure a commonality across suppliers. The EHC will feature a 2.6 km test track, offering Europe the first opportunity to test the technology at high speeds. Hardt is just one company of a handful that are working tirelessly at becoming the World’s First commercially viable Hyperloop system, with peers including Richard Branson’s Virgin One and Musk’s own The Boring Company in the race. The market that Hyperloop will pack the most powerful punch will be at distances that are long enough to be cumbersome for High Speed Rail, yet short enough to be relatively inefficient for commercial flights. This is known as the Sweet Spot, which is pegged at between 500 to 1,750 kilometers in distance, which is a convenient sweet spot to have on the European Continent. Applying that sweet spot to South Africa, and we see a very promising opportunity. The red-eye between Cape Town and Johannesburg is an all-too-familiar drudgery that is increasingly part of the South African job description. Furthermore, with OR Tambo being South Africa’s regional and international hub, most flights out of the country will be from OR Tambo. This has resulted in the CPT-JHB segment often included in the top 10 busiest air routes globally, with pre-pandemic numbers averaging 521 commercial flights per week, that’s a staggering 27,092 commercial flights per year. Imagine a world where this travel was facilitated through renewable energy, rather than fossil fuels. Furthermore, the timing consideration includes the trip to the airport, mandatory security checks, ticketing, baggage declaration (if any), boarding, taxying before you are wheels-up. Either side of the journey, this makes the entire exercise a 5-hour process – going to Johannesburg for a meeting is quite a day. Considering the infrastructure footprint of a Hyperloop system being a lot smaller than an airlink, a terminus can be located within the confinements of a city, in the middle of a Central Business District meaning you exit the station and walk to your meeting – this alone is enough to invoke my ‘tell me more’ response. These convenience peg the Johannesburg - Cape Town Hyperloop commute to be an hour and a half, door to door. Let us awake from our dream of a Utopian South Africa. Our National Policy on Transport White Paper has made reference to the construction of a high-performance national standard-gauge rail (SGR) network replacing our Cape-Gauge infrastructure. This is in line with the African Union’s Railway Masterplan stating that any new rail infrastructure must be SGR infrastructure, leading to many African countries including Ethiopia, Kenya, Tanzania, Morocco and our Gautrain to adopt this high tech, high speed platform. The rationale behind the expense is to offer an alternative to the inefficient and overused air travel. High speed rail, operating at optimal levels offers possibly 300 kph over long distance. High Speed SGR infrastructure costs around $26m/km, with the Californian High Speed Rail line costing $40m/km. Initial costing estimates from the Boring Company have put the construction of a Hyperloop network being $10.6m/km (this excludes the costs of purchasing land as well as the vehicles itself, as the SGR rail infrastructure would incur these costs as well). Granted, these are expected to be revised upwards as the technology progresses, with estimate coming in at 4x The Boring Company’s estimates, however, as with all technology, prices decrease over time. The operational and maintenance costs are drastically lower than rail infrastructure, as there are no critical moving parts, with electricity usage being a mere 38 Wh/passenger/km at 700kph. This can only leave a taste of possibility.
The current COVID-19 pandemic and the associated economic fallout, combined with a decimated fiscus and the emergence from The Lost Decade means that South Africa’s infrastructure aspirations are all but shelved for the medium term, however, this allows time for further development of Hyperloop technology, maybe even accepted as a viable form of transport. Governments across the world are using the COVID-19 pandemic as a chance to relook at industries across the board, with the ‘Great Reset’ offering the opportunity to nudge certain industries in a different direction, perhaps this is a good time to table the Hyperloop discussion. When we do emerge from our tribulations, we may have the option of a breakfast meeting in Cape Town, lunch in Johannesburg and then back at the coast in time for a glass of the Cape’s delights to wash the sun down. In the international arena, the buzz word ‘mobility’ conjures images of high-tech mass-rapid-transit systems in international cities, linked with entrepreneurial, tech driven start-ups such as e-hailing companies, micro solutions like e-scooters and share bike programs linking efficient, high speed rail and air solutions modernized to meet our contemporary transport needs. In South Africa, ‘mobility’ denotes the urban transport imperative that is integral to our economic activity, an informal modality all but void of innovation, propped up and supported by our often ominous Minibus taxi industry. The South African transport sector is dominated by the Minibus Taxi, an often colourful 14-16 seater minivan, loved and hated by those who both use them and share the roads with them. Necessitated out of the Government’s rigid, expensive and time-consuming public transport system, these taxis operated illegally from 1977 until they were formally legalized in 1987, carrying passengers from outlying areas dedicated by the Apartheid Government’s spatial planning regime, to racially exclusive city centers and economic hubs. A full 26 years since the fall of the Apartheid regime, and minibus taxis are still responsible for the daily movements of 15 million passengers across the nation, covering a staggering 19 billion kilometers per year. South Africa is a country of great distances between economic nodes, distances which are perfectly suited to be address by our rail network. Extending 36 thousand kilometers and making up 75% of Africa’s rail infrastructure, the underutilized infrastructure has long been forgotten in today’s commuter transport mix. This stark disparity is a result of years of neglect in the South African rail industry, with public policy and spending focused on other modes, investment on rail was reliant on the incumbent operator’s inadequate balance sheet. Born out of necessity, the minibus taxi is not without its limitations. Responsible for 10% of South Africa’s road deaths (3 deaths a day), often as a result of poor or non-existent vehicle maintenance, lack of driving ability, or outright negligence. Due to the nature of the industry, drivers are encouraged to take advantage of demand, attempting to fit as many trips as possible during peak times, as well as squeeze as many fare-paying passengers into the vehicle as possible. One recent incident involved a 14-seater minibus in the province of Limpopo caught with transporting 58 children during a local school run. The emergence of politicised taxi associations and lobby groups, this industry has the power to grind South Africa to a standstill should they deem it necessary, which they often do. Due to the above-mentioned redundant long-distance public transport systems, the taxi industry is able to punch above its weight, offering provincial, long distance commuters a nimble solution to their transport needs, a sector which should be serviced by our rail network. Applying our unique transport system to international mobility trends, we see an interesting convergence. Global cities are focusing policy frameworks and public mandates on reducing emissions are congestion standards by reducing the amount of vehicles on their roads, with goals such as the Mayor of London’s transport strategy, aiming for 80% of all trips in London completed by bicycle, walking or public transport by 2041. Cities are encouraging modality shift (people replacing their cars) through the use of densifying their transit modes with the use of innovative tech driven solutions. Uber’s Chief Executive, Travis Kalanick famously said that his solution would lead to a decrease in congestion in our cities, however the Wall Street Journal has pointed out that their ride hailing solutions have made congestion worse. Although e-hailing may have increased congestion, they have paved the way for entrepreneurial entities to innovate. Applying the e-hailing solution to systems designed to efficiently increase mobility such as privatized mass transport, you have an ideal that many global cities currently seek. One such solution is ViaVan, a partnership between an American Mobility-As-A-Service (MAAS) company, Via, and Mercedes Benz Vans which uses their proprietary algorithm to aggregate demand on particular routes, promoting a densification of passengers who require a vaguely similar origin/destination trip to share a vehicle. They do this by taking the riders needs into account, creating a virtual bus stop or pick up point, and pooling their riders to achieve efficiencies not yet seen in our major tech-driven mobility start-ups. This solution emulates South Africa’s Minibus Taxi method of operation, except instead of contested routes and taxi associations, algorithms and big data run the aggregation.
The South African minibus taxi industry leaves a lot to be desired, however, is the world catching up to us? Competencies and efficiencies shown in the South African environment are now applied in cities across the world, conversely, the space for innovation in our own nodes and links is immense. We need to change our perception of the minibus taxi being a competing mode, and rather apply it with its competitive characteristics in mind, a cog in the system rather than a system on its own. Tanzania, Kenya and Uganda have all embarked on refurbishing their colonial era, meter-gauge rail infrastructure in order to ensure continued rail services, despite embarking on billion-dollar Standard Gauge rail projects. The East African Rail Masterplan was set up by the African Union in the late 2000's as a roadmap, if you will, for the continued investment in rail in East Africa. This document pointed to a new Standard Gauge rail line to circle Lake Victoria, providing high speed, electrified rail services to the countries of Kenya, Uganda, Rwanda, Democratic Republic of Congo, Burundi and Tanzania. Move forward twelve years, we can definitely say that progress has been made toward this goal, with the recent announcement that the first phase of the Tanzanian Standard Gauge Network will shortly commence it's first trial, the Kenyan Standard Gauge project already a few years into it's lifespan, and other networks such as the Ethio-Djibouti Standard Gauge line fully operational. These are incredible milestones, but is it feasible? The 1900's in East Africa saw an era of exploration, pioneering infrastructure expansion, and its fair share of turmoil. German East Africa laid the first rail tracks, a meter-gauge line running from Tanga to Moshi (the Usambara line), followed in 1905 by the Central Corridor from Dar es Salaam reaching Kigoma on Lake Tanganyika, opening up the lake regions to international trade. British rule saw the extension of the Meter-Gauge rail to Mwanza on Lake Victoria, and linking the Central Corridor to the Usambara Line in Tanga, with plans to extend down to Lake Malawi halted due to World War 1. The British also established the Ugandan Rail line, which extended through to Uganda through the Rift Valley Rail Link from the port of Mombassa, Kenya. Where most rail infrastructure is built to connect cities, Africa's colonial infrastructure connected the mineral rich hinterland to markets, exporting both freight and, unfortunately, human traffic. With the exception of the Cape-Gauge TAZARA line, East Africa saw virtually zero expansion of investment on rail transport post independence. The lack of interest and investment led to a slow and quiet decline in the rail infrastructure leading to freight owners favouring the overburdened and underdeveloped road network for access to market. Entering the 21st Century, East Africa owned an extensive collection of rail networks, all with rated capacities vastly exceeding their usages. Poor management, rolling stock and maintenance led to an inefficient service that could not compete with road alternatives. The Standard-Gauge imperative in Africa's modern day infrastructure plan comes from an ideal standardisation across the continent, avoiding break-in-gauge issues as seen today. Europe is seeking a similar ideal with their interoperability standards described in their policy-defining Railway Packages, meaning that rolling stock would be interoperable across the entire rail network in the European Economic Zone. Africa's ambitions are similarly aligned, with cross acceptance once part of daily operations, crossing the lakes on train ferry's, to modern day acceptance agreements across Southern Africa's Cape Gauge networks. However, these standardisation goals are achieved at incredible cost to the host countries, with Tanzania's recent 300km standard gauge system costing around $1,9bn, considering that a further 2,200km needs to be completed. Tanzania has been lauded throughout the East African community in their ability to complete this rail project at a much lower cost per kilometer compared to their Kenyan counterparts, who have built their standard gauge network up to Nairobi from Mombasa, yet have failed to raise funds to complete the construction to Naivasha. Most of the freight that moves through the Port of Mombassa is destined to countries beyond Kenya's borders, this equates to a line that does not yet make financial sense, if one was to solely rely on rail, a costly transshipment would need to take place in Nairobi, once again placing freight on existing, colonial era infrastructure. Until Tanzania's line is completed, the same rings true. This conundrum has created an imperative to once again pay attention to East Africa's colonial era infrastructure, to ensure that it sees the region through the construction of a network worthy of full replacement, which can, and will take decades. Tanzania, with the help from the World Bank has embarked on a refurbishment process for the meter gauge network which is needed now more than ever, the success of which can be the basis of future funding for standard-gauge development. Kenya has secured funding from China to refurbish her link to Uganda, and Uganda, with dreams of Standard Gauge suspended, has embarked on a refurbishment of existing infrastructure.
East Africa's drive for progress has forced her to rediscover one of forgotten treasures, allowing the testament of human ingenuity that is the meter-gauge network to once again shine as the regional star it once was. David Taylor is the South African based CEO and founder of Kifaru Rail Limited, a Private Operator in East Africa focussing on freight transport. David also consults on infrastructure projects within Southern and Eastern Africa.
Is there space for privatisation in today's conversation around strategic State assets in South Africa? If you are kept up to date with current affairs, and the goings-on in our Parliament, politically most certainly not, however, economically, most certainly yes. However, there are a few fundamental aspects that need to be considered for Private Operation to succeed. The National Treasury of South Africa recently published the discussion document "Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa" where the suggestion was made to increase competition and private sector participation in the Rail Sector in order to increase service delivery and investment without having an impact on the state balance sheet, by allowing third-party access to our rail infrastructure. This could bring South African Rail Policy in line with many international key players. Recently the European Commission approved a set 6 of six legislative texts called the Fourth Railway Package, which is designed to promote the European Rail Network as one network, where effectively you can board a privately owned train in Portugal and disembark in Ukraine or Russia. Closer to home, Private Access has been welcomed in Mozambique, with mining houses utilising State infrastructure in their pit-to-port operations, returning with supplies. In South Eastern Africa, the Tazara line operating between Kapiri Mposhi in Zambia and the port of Dar es Salaam, Tanzania is running a pilot program with a South African private rail operator Calabash Freight. "This could bring South African Rail Policy in line with many international key players." Private Operation in the Rail Sector comes in the form of two options, namely: Open Access agreements allowing private rolling stock operators to ply the permanent way; and Public Service Obligations (PSO's) where there is a tender issued and awarded to exclusively cover a certain service or line. Open Access agreements differ to PSO's in such that a Private Operator might identify an under-serviced segment in the market, then apply to service said segment with their own rolling stock, applying for slots in the rail schedule in lieu of track access charges paid to the track owner. Any profit or loss is part of the business and is taken on by the Operator. Whereas for a PSO, the emphasis is placed on the service itself rather than the business case, the service may not be a profitable one, however there is a public obligation to keep the service running, this model is therefore often supported by the government in the form of subsidies should the operator incur any losses. A PSO contract comes with heavy penalties if services are not kept to a strict criteria, however, if the service is run correctly, a large part of the financial risk is taken out of the project due to the government support. In the case of the European Rail arena, there are Private Operators in the form of young, entrepreneurial firms taking advantage of under-serviced segments across the region. These firms are taking a proactive approach to tackling many of the fundamental issues that come with rail transport, all in the name of increasing ridership. For example, the first and last mile of most rail journeys, especially passenger movements, comes with its own challenges. These entrepreneurial firms are tackling these challenges with innovative, often tech-driven solutions, such as pre-booked electrified scooters, door-to-door shuttles, partnering with metro systems, bike rental, car-sharing systems, and local bus operators. These kinds of enterprises drive innovation, cut costs and change industries. These entities are moving beyond their own borders and regions, offering an environmental (and arguably more comfortable) solution to air travel. Successful Operators such as Leo Express are operating cross-border services between Czech Republic and Poland offering competitive, convenient door-to-door services. The Czech Republic has seen an increase of 53% in rail users since introducing Private Operators in 2011. The German State-Owned Deutsche Bahn is operating services between the Czech Republic and Germany, as well as Germany and France, with cross-acceptance of rolling stock between nations a day-to-day activity. There are, of course, challenges in achieving this, ranging from homologation issues of the rolling stock to the languages spoken by the train drivers and acceptance of services across regulators, however, the intention is obvious and bold steps are being made. "Private Operation will encourage freight to move from the congested road network to our capable rail infrastructure, where it should be." In the case of South Africa, we move less than 30% of our freight on rail, compared to 70% in other countries. We have 36,000 kilometers of rail network, making up 75% of Africa's total rail infrastructure - a number which is declining as our neighbours start ramping up their infrastructure spend in recognition of the strategic importance of a well-run rail industry. We have numerous locomotive and wagon fabrication facilities beyond the state-owned Transnet Engineering (TE), these fabrication facilities are focussing on markets beyond our borders, and into the continent. It is clear, that, as for a business case, there are many under-serviced segments in the South African arena. Private Operation will not lead to the redundancy of Transnet, who will continue with their coal, manganese, chrome freight and passenger movements, Private Operation will encourage freight to move from the congested road network to our capable rail infrastructure, where it should be. Furthermore, the introduction of competition would place downward pressure on transport costs, which will likely lead to more prospects becoming viable upstream, whereas the current transport systems are prohibitively expensive. Finally, introducing entrepreneurship into the rail sector will positively affect the job market. Indeed, allowing third-party access to a rail network is complex, however, should it be ignored? We have vast expanses of land, with existing, under-utilized infrastructure to service markets across our country and our region. We have the passengers and freight to move, the rolling stock to move them, the infrastructure to move them on, and the markets to service, however, up until now, we have not had the political will. We can hope that the Treasury's discussion document starts a discussion to change this. The Government of Tanzania has secured funding for the Standard Gauge Rail Line to run from Dar es Salaam to Kigali, Rwanda and Musongati, Burundi.
Tanzanian State owned Rail House, RAHCO, have staged releases for expressions of interest for key projects in the near future, relating to the World Bank's TIRP project, as well as the highly anticipated Standard Gauge Project.
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