As readers will likely be aware, road transport has steadily taken over from rail transport in South Africa over the past 20 years. The transport of bulk agricultural products like grains, sugar cane and forestry are well suited to rail whilst our integrated rail and port infrastructure was designed to move containers (including those containing agricultural products) directly from hubs within growing areas into the port and ready for export. Unfortunately, reliability issues in the past have led to companies switching to road transport, thereby prioritising reliability over costs. Rail has an inherent cost benefit over road for long-haul transport but reliability is paramount for perishable products. This trend is not good for the country at large as it leads to increased costs in the value chain and put significant pressure on our road system. 

Since the current trend is not sustainable, the Presidency convened a core group of experts under the banner of Operation Vulindlela to reverse the trend. The teams’ proposals were captured in the Freight Logistics Roadmap adopted by Cabinet towards the end of 2023. The roadmap recommended a fundamental shift towards an open, competitive system between different train operating companies (TOCs). To facilitate this, a number of building blocks were put in place during 2024, including the: 

• ‘unbundling’ of Transnet Freight Rail into an Infrastructure Manager (TRIM), Operating Company (TFROC) and the Rolling Stock Leasing Company (ROSCO);
• The creation of an Interim Economic Regulator (IRAC) via the Economic Regulation of Transport Act; and
• The Network Statement Gazetted on the 19th of December 2024.

The Network Statement sets out the process, conditions and fees that any Train Operating Companies (including Transnet) must adhere to in order to operate on South Africa’s rail network. This is truly a significant step. Of all the building blocks put in place, the Network Statement is arguably the most important factor that will determine whether private sector operators invest in rail transport or not. Afterall, cost is king and the network statement determines the cost.

In March 2024, the first draft of the Network Statement was released for public comments but stakeholders raised serious concerns about the affordability of its proposed rate. The initial proposal was premised on Transnet Infrastructure Manager’s regulated asset base and the funds required to maintain it. This funding (approximately R260 billion), would be raised via a fixed fee of 19.70 cents per gross tonne / kilometre. Electricity use was also factored into this fee. Many experts in the field believed that this would be unaffordable most inputs during the public consultation phase centred on the access fee.

The revised Network Statement follows a different methodology. Firstly, electricity is billed to Train Operating Companies according to consumption and a fee is payable for the use of common facilities such as rail yards. This is far more rational as refrigerated cargo has different requirements to dry cargo and many, independent train operating countries may well chose to make use of Diesel locomotives to cut out the risk of cable theft. A differentiated tariff will then also be applied per rail corridor, per commodity. The differentiated fee factors in a floor price, namely the minimum revenue required by the Infrastructure Manager to maintain the corridor, and a ceiling price based on the corridor’s regulated asset price. A differentiated fee is then applied per commodity between the floor price and the ceiling price.  

The fee is also comprised of two elements; namely a train/kilometre fee and a gross tonne / kilometre. The rationale for this split is as follows: A gross tonne / kilometre fee is needed as heavier loads place a greater strain on the network. Hence, just like a toll gate, heavier trains must pay a higher fee. However, the a per-kilometre fee is also needed as any train, irrespective of their weight, will take up a slot on the corridor during which no other train can run. In other words, you pay a fee for occupying the space plus a fee for the weight that the train is carrying. In other words, a train filled with cargo will pay a higher gross tonne per kilometre fee than an empty train running on its return run. However, they both need to pay the same train per kilometre fee because and empty or a full train both take up space on the network. These fees also differ between corridors based on the number of slots that it can take accommodate. To use an example, a bidirectional corridor would attract a lower train per kilometre fee as trains can run in both directions. However, on a single track with limited room to allow oncoming traffic to pass, the train per kilometre fee could be higher as a single track can accommodate less slots. 

Finally, the fees differ dramatically between commodities. Iron ore and manganese attract the highest fees with a rate of 650c per train Km and a GTK of 3.42c. Bulk agricultural commodities like grain carriers will only pay R30 per train KM and a GTK of 6.97 cents. General cargo (which presumably includes containerised agricultural goods such as fruit, wine, lucerne etc.) will pay R30 train Km and 9.50c GTK. 

In a welcome turn of events, these fees seem to be lower than the original proposals which will incentivise a return to rail for agricultural goods. The extent to which slot allocations and the designed capacity of the network in different growing areas can accommodate seasonal remain to be seen, but the differentiated tariffs for agriculture certainly shows a clear intent from the regulator to get agricultural commodities back onto rail. 

By Agbiz CEO Theo Boshoff for Farmers Weekly