South Africa wants to hand over operation of railways and ports to companies after $27 billion impact

by MMC
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(Bloomberg) — South Africa’s presidency has a plan to reverse the collapse of a state-run port and freight rail sector that has cost the economy at least $26.7 billion since 2010: placing most of the responsibility for repairs on the private sector. sector.

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The plan is summarized in a 124-page roadmap for South Africa’s freight logistics system seen by Bloomberg. It sets deadlines for everything from creating an independent port and rail regulator, allowing private companies access to rail lines, and offering private companies the rights to operate ports and rail lines.

Even lucrative coal and iron ore export rail lines – whose poor operation is significantly reducing exports for companies such as Anglo American Plc and Glencore Plc – could be exploited by the private sector, according to the report’s authors. This suggestion has long been disputed by state-owned logistics company Transnet SOC Ltd.

The plan is the latest evidence that South Africa’s ruling African National Congress has been forced to renege on one of its core principles, namely that state-owned enterprises and investment will be the engines of economic growth, and that it instead relies on the private sector to stop the decline of services. Private companies are also investing in electricity and water supplies, which were once the near-exclusive jurisdiction of the South African state.

There is an urgent need for South Africa to take action to repair its failing logistics system. Volumes transported on the coal rail line to the Richards Bay export terminal are at their lowest level since 1993, iron ore ramps are at their lowest level in a decade and general freight volumes declined further, the report’s authors wrote. South Africa’s container ports are the least efficient in Africa, they said.

“The inability to export goods by rail constitutes the most serious constraint to economic growth after the electricity supply deficit and requires urgent intervention,” the authors said. “Since 2010, South Africa has lost an estimated $26.7 billion in iron ore and coal exports. »

Plunging volumes

In the five years before the last year of operation, the amount of goods transported by the entirely state-run freight rail system plunged from 226 million tons to around 150 million tons, forcing much of the freight national to use roads where heavy goods vehicles congest traffic. and damage infrastructure.

The poor performance, blamed on a shortage of locomotives and cable theft, led pressure groups representing miners and businesses in the key port city of Durban to demand the departure of Transnet management. In the past two weeks, the company’s CEO and head of the company’s rail freight division have resigned.

Port performance has been equally poor, with container shipments now diverted to Luanda in Angola and Maputo in Mozambique, the authors said.

The plan, the development of which was overseen by the presidency, will be implemented by the Department of Public Enterprises, which oversees Transnet, the Department of Transport and the National Treasury.

Vincent Magwenya, President Cyril Ramaphosa’s spokesman, declined to comment on the plan, which has been circulated to business and labor leaders and has not yet been made public. The Department of Public Enterprises did not respond to inquiries made outside of normal business hours.

The plan also includes the creation of a railway infrastructure manager and a rolling stock rental company, which will be a joint venture with a private company.

Yet while the plan calls for a major overhaul of the freight sector, similar proposals have been put forward to improve the country’s dysfunctional work permit regime and to end the country’s persistent power cuts, but they do not have made little progress.

Transnet will be transformed into a holding company with various subsidiaries in which stakes can be sold to private companies, the report’s authors say. The state will retain majority control of its infrastructure activities, they said.

(Updates with port details in ninth paragraph.)

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