- Transnet plans to reduce the 20,000 km freight rail network it operates by at least 35% as it focuses on delivering more cost-effective freight loads.
- Transnet’s new strategy would make more locomotives available to move coal on its Northern Corridor route.
- Some 164 locomotives from one of Transnet’s fleets were out of service this year, 23% more than the previous year, due to lack of spare parts.
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Transnet plans to reduce the 20,000 km freight rail network it operates by at least 35% as it focuses on delivering more cost-effective freight loads.
Transnet, which also operates the country’s main ports and pipelines, has been hampered by shortages of locomotive parts, theft of cables used to run its electric trains and inefficiencies that have arisen because it is a monopoly. The problems have affected the main line that carries coal from mines in the eastern province of Mpumalanga to the port.
“At this point, we can’t justify operating something that actually makes us lose and that’s why there’s this review of certain flows through the network,” Portia Derby, chief executive of Transnet, said in an interview in Cape Town this week. .
South Africa’s freight rail system and ports were established after the discovery of diamonds in 1867, with the assets eventually being incorporated into Transnet, according to the company’s website. Like Eskom, it has periodically had excess capacity and has become a price taker over time, Derby said.
Transnet’s rail fares are based on weight, which means it generates less revenue from transporting loads of lighter products, such as lumber or sugar, than from transporting coal or ore, but that doesn’t reduce the number of trains and maintenance required. The government will make a final decision on the closure or outsourcing of lines.
“We can operate more effectively with a slightly smaller network,” said Andrew Shaw, Transnet’s director of strategy and planning. “It still serves the economic interest of the country and still allows for additional operators.”
If implemented, Transnet’s new strategy would make more locomotives available to move coal on its Northern Corridor route. Disruptions to the line caused exports from the Richards Bay coal terminal on the east coast to fall to a three-decade low in 2022. The pace of deliveries has slowed further since the start of the year, according to two people familiar with the line. with the information, who spoke on condition of anonymity.
Derby declined to comment on how much coal has been delivered, but said 164 locomotives in one of its fleets were out of service during the current fiscal year, up 23% from the previous year, due to a lack of spare parts.
“That can’t get better until we solve the problem with the Chinese,” he said, adding that solving the train shortage was Transnet’s top priority.
Last month, the company said reluctance by a local unit of supplier China Railway Rolling Stock Corp. to engage with tax authorities and the Reserve Bank of South Africa was delaying finalization of a deal that would unlock delivery of the parts. . It has subsequently issued a request for proposals to other manufacturers to fix the idle trains.
In January, Transnet launched a new $6 billion bond sale program in its first foray into international capital markets in more than a decade. Moody’s Investors Service raised the outlook on all of the company’s debt to stable from negative after it successfully priced an initial $1 billion five-year bond.
Raising the new debt “buys us five years of peace and quiet, at least in that dimension,” Derby said. “It doesn’t take away from the fact that financial pressures, the need to generate income from our operations and therefore stopping loss streams is absolutely crucial for us to start putting some of our old debt to sleep.”
