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November 2008

Rail in South Africa 2008

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Rail in South Africa 2008Contents November 2008

Rail in Africa 1

Brief history of rail transport in South Africa 3

South Africa’s rail environment 5

The rail versus road debate 5

Structure of South Africa’s rail sector 8

South Africa’s freight system 8

Rail freight transport 10

Rail passenger transport 12

Main participants 13

Transnet 13

South African Rail Commuter Corporation 20

Gauteng Management Agency 24

Sources 26

The material contained in this report was compiled by Sheila Barradas and the Research Unit of Creamer Media (Pty) Ltd, based in Johannesburg, South Africa. To contact Creamer Media call +27 11 622 3744 or email [email protected].


Rail in South Africa November 2008

Abbreviations

ac – alternating current

Capex – capital expenditure

CSIR – Council for Scientific and Industrial Research

dc – alternating current

ETC – estimated total cost

FLI – Freight Logistics International

GFB – general freight business

GPG – Gauteng provincial government

GVM – gross vehicle mass

IJVs – International Joint Ventures

KBE – Khayelitsha Business Express

KIO – Kumba Iron Ore

NDoT – National Department of Transport

NFLS – National Freight Logistics Strategy

OECD – Organisation for Economic Cooperation and Development

OEMs – original equipment mananufacturers

RER – Rail Economic Regulator

RFA – Road Freight Association

SAICE – South African Institute of Civil Engineers

SAR&H – South African Railways and Harbours

SATS – South African Transports Services

SARCC – South African Rail Commuter Corporation

SBE – Soweto Business Express

TBE – Tshwane Business Express

TFR – Transnet Freight Rail

TRE – Transnet Rail Engineering


Rail in South Africa 2008 November 2008

1

Rail in AfricaAn efficient transport system is an economic necessity in a nation. Higher rates of economic growth warrant stronger, more reliable and efficient transport systems. For long-distance bulk surface haulage, railways have proven to be the first choice of most countries world-wide. Rail is economical, reasonably fast, reliable and environment-friendly.

Railways in Africa, however, have been on the decline over the past 30 years.

The provision of quality infrastructure is a necessary el-ement of any strategy for economic integration and sus-tainable development in Africa. Transport infrastructure and especially railway infrastructure, has special sig-nificance in the continent’s multimodal transport chain.

Africa’s railway network comprises an estimated 83 000 km. This is about one-third of the length of the rail-way network of the European Union. About 20 872 km of the African railway network is located in South Af-rica, while only three other countries on the continent have more than 5 000 km of railway network, namely Sudan (5 987 km), the Democratic Republic of Congo (5 138 km) and Egypt (5 063 km).

Large parts of the African railway network are substand-ard, owing to a lack of investment and maintenance. Many of the publically owned railways are in deep fi-nancial trouble, and are deficit-ridden, under-funded and plagued by low productivity. In some countries, the railway infrastructure is essentially nonexistent – dam-aged and abandoned following years of conflict and

civil war. As a result of these circumstances, Africa’s railway network is struggling to meet growing demand and keep up with technological change, facing compe-tition from other modes of transport and competing for finance with other important public concerns.

Africa has sustained a strong economic performance since 2003. In 2007, it achieved a 5,8% growth rate and the United Nations expects this upward trend to continue in 2008, with growth of above 6% anticipat-ed. With the continent’s economy expected to expand, huge railway infrastructure investments are going to be necessary to meet the possible demand for transport and to compensate for the many years of under invest-ment.

Railway transport remains the best-suited mode for hauling large volumes over medium- and long-distanc-es. It is particularly well-adapted to freight transport, to-and-from landlocked countries in Africa.

In its 2004-2007 Strategic Plan, the Commission of the African Union acknowledged the key role of infrastruc-ture in the economic and social development of Africa, and the need for reliable and affordable services, par-ticularly in the transport sector.

The programme of priority activities originating from the Strategic Plan and aimed at “linking Africa” translates this resolve into specific actions. It is in this framework that the African Union Commission organised the First Conference of African Ministers responsible for the rail-way subsector in April 2006, in Brazzaville, Congo, to

Railway transport remains the best-suited mode for hauling large volumes over medium- and long-distances. It is particularly well-adapted to freight transport, to-and-from landlocked countries in Africa.

In its 2004-2007 Strategic Plan, the Commission of the African Union acknowledged the key role of infrastructure in the economic and social development of Africa, and the need for reliable and affordable services, particularly in the transport sector.

The programme of priority activities originating from the Strategic Plan and aimed at “linking Africa” translates this resolve into specific actions. It is in this framework that the African Union Commission organised the First Conference of African Ministers responsible for the railway subsector in April 2006, in Brazzaville, Congo, to consider the actions needed to revitalise railway transport. To that end, the Ministers adopted a declaration together with an action plan for strengthening the African railway system. These documents were endorsed by the Conference of Heads of State and governments at the July 2006 Summit meeting in Banjul, Gambia.

Within the context of the implementation of the Brazzaville declaration and action plan, the issue of interconnection and interoperability of the different railway systems in Africa forms the genuine cornerstone of this plan, as it enables greater territorial coverage and a veritable railway services network.



2

consider the actions needed to revitalise railway trans-port. To that end, the Ministers adopted a declaration together with an action plan for strengthening the Afri-can railway system. These documents were endorsed by the Conference of Heads of State and governments at the July 2006 Summit meeting in Banjul, Gambia.

Within the context of the implementation of the Braz-zaville declaration and action plan, the issue of inter-connection and interoperability of the different railway

systems in Africa forms the genuine cornerstone of this plan, as it enables greater territorial coverage and a veritable railway services network.

Internationally, the development of sophisticated inter-modal freight systems has proven the long-term value of cooperation between the different modes of trans-port. The transport industry has been at the forefront in motivating technological development. Increasing-ly, and with enlightened management, both road and rail operators can provide improved service delivery at more cost-effective prices to individuals and countries.

Thus, railways in Africa and South Africa have an op-portunity to contribute to the growth of the region and the continent.

If Africa’s railway network is to be developed according to projected economic growth, more than 130 000 km will have to be constructed by 2025.



3

Brief history of rail transport in South Africa

The South African railway system dates back to the late 1850s when rail transport was first proposed for the harbours in the Cape and Natal.

The establishment of the Natal Railway Company in 1859, laid the foundation for passenger commuter serv-ices in South Africa, with the opening of a 3,2-km stretch of railway line between Market Square and the Cus-toms Point in Durban. The Cape followed three years later with the 92-km Cape Town – Wellington section.

The discovery of diamonds, in Kimberley, in 1867, gave momentum to the planning and construction of the rail-way system and as a result of the high cost and the sig-nificance of the railway system, the South African gov-ernment took over all rail initiatives, including the two privately pioneered railway systems in the Cape and Natal, which became State property in 1872 and 1877 respectively.

No sooner had the government railways been estab-lished and a massive push towards the development of the railway system to Kimberley been initiated, than reports confirmed that extensive gold deposits had been discovered in the Transvaal Republic. Within a very short period of time the centre of economic power shifted from the colonial south to the republican north. As a result, rail developed rapidly, resulting in more than 11 000 km of track being laid countrywide for both commuter and freight use by 1910.

In that same year the Union of South Africa was achieved and with it the resolution that the country’s railways and harbours should be used to unify and develop South Africa’s economy. This resulted in the establishment of the South African Railways and Harbours (SAR&H), in 1916, as an arm of the State, responsible for the admin-istration of all ports, harbours and railways. This was ratified through the South African Act (Act of Union), which effectively placed the railways under the direct control of Parliament.

Extensive industrial and commercial development, in and around cities, as a result of the diamond and gold discoveries, presented attractive job opportunities and led to an influx of people in urban areas. This gave the

incentive for the first efficient train services. Even with tight budgets, rail lines were extended and longer train sets were used to meet the growing demand by work-ers for commuter train services.

In 1961, the Union of South Africa ceased being a part of the British Empire when it became the Republic of South Africa. At this point, urbanisation was taking place at a faster pace than the railways could comfort-ably handle, leading to a government decision to re-structure the SAR&H along defined business lines in or-der to evolve from a State-owned corporation towards privatisation. Fundamental to this process, was a trans-formation in the name and image of the SAR&H, which would reflect its new mission as a State business enter-prise. In April 1981, the railway, harbour, road transport, aviation and pipeline operations became known as the South African Transport Services (SATS). Simultaneous-ly, the venture was restructured into units and divisions, with a strong emphasis on localised management.

By the end of the 1980s, the goal of managing SATS as a private body was within reach, and on April 1, 1990, after 80 years of government and parliamen-tary control, the Legal Succession to the South Afri-can Transport Services Act transformed SATS from a government department into a public company called Transnet, in which the government was, and remains, the sole shareholder.

Since its formation in 1990, Transnet has been weighed down by inefficiencies, low margins, investment back-logs, aged assets and infrastructure, as well as the maintenance costs of underutilised rail networks and port infrastructure. The crisis came to a head in 2004, when the organisation reported a R6,3-billion loss fol-lowing an ill-conceived hedge by South African Airways, and after newly-appointed CEO Maria Ramos decided to expose key financial weaknesses that previous lead-ership had put down to accounting anomalies.

Ramos received a clear mandate from government as to the strategic direction that the corporation should take, which enabled her to introduce a four-point turnaround strategy built on the desire to redirect the business, re-structure the balance sheet, introduce strict govern-ance and improve risk-management processes. This turnaround strategy is now largely completed and the company is poised to move from its turnaround strat-egy towards a growth strategy. Growth targets have

The first railway line in South Africa was laid along the Bluff in Durban, and the carriages were hauled by oxen rather than steam locomotives.



4

been set for the next five years, focused on expanding volumes, improving customer service, creating capac-ity and optimising financial and capital management.

At the time of Transnet’s establishment, it shed its rail commuter services division, and the South African Rail Commuter Corporation (SARCC) was formed, as an agency of the National Department of Transport (NDoT), to assume responsibility for these commuter rail serv-ices throughout South Africa.

In 2004, government embarked on a major transfor-mation strategy for the rail commuter business, with a Cabinet decision to eradicate the fragmentation of the institutional framework that governs SARCC, Metrorail (previously a business unit of Transnet), and Shosholo-za Meyl (also a business unit of Transnet), through the consolidation of these three services to provide a streamlined all-inclusive rail commuter and long-dis-

tance passenger service, reporting to the NDoT. In 2006, Metrorail was consolidated into the SARCC, with Shosholoza Meyl following early in 2008.

In 2006, government approved a turnaround strategy for passenger rail to be implemented over three phases.

Even with the turnaround strategies being implemented, South Africa faces a big challenge in wooing custom-ers back to using rail. Railways have become increas-ingly discredited as an effective mode of transport, as a result of poor service delivery in the past. At the same time, increased road transport, while providing a more consumer-friendly service, has been a factor in road congestion and has raised safety and cost issues.

There is generally consensus that rail and road must work more closely to contribute to the further develop-ment of the country.



5

South Africa’s rail environmentThe South African rail sector has an extensive freight network, a dedicated metropolitan commuter network, and a mainline intercity commuter network. These net-works are plagued by capacity problems, ageing infra-structure and fierce competition from the road trans-port sector.

South Africa’s current rail system is 20 872 km in length, although only some 10 000 km of the total system are currently in operation. Some 1 250 km of the 10 000 km carry no traffic, 5 750 km carry low traffic, and 3 110 km carry light traffic, while some parts of the network have been closed, and stations, as well as railtracks, have been vandalised.

During 2007, more than 650-million tons of freight was transported by road, compared with 180-million tons of freight by rail. Repeated exemptions, as well as a relaxation of some regulations on road transport, has led to road haulage replacing rail as the dominant form of freight transport. This shift has taken place in the absence of a coor-dinated national transport policy, and the pendulum, which for many years favoured the State-operated rail-way, has now swung in favour of the private road op-erators.

Source: Siyabonga Gama’s presentation at Africa Rail 2008

The rail versus road debate

For 80 years, a government department controlled South Africa’s railways. When private road operators began to compete with rail transport during the 1920s, government enacted the first restrictive legislation in an effort to protect its rail investments and the jobs that had been created in the rail sector. The Motor Carri-er Transportation Act of 1930 restricted the operational freedom of all road freight, except that used by farmers, local authorities and government departments. Permits for isolated categories, such as perishable goods could be obtained, but the Act, rigidly enforced by railway in-spectors, ensured that most land freight was conduct-ed by rail.

Even with legislation in place to protect the rail sec-tor, data from the then Central Statistical Service shows that the 40 years between 1957 and 1997 saw road freight grow sevenfold, while growth in general rail freight was negligible.

In 1988, government began to phase out the restric-tive permit system that road freighters had to operate under, with the intention of replacing the permits with a road quality transport system, that would cover opera-tor registration, vehicle inspection, driver licensing and operational control. This new system was never im-plemented effectively, however, and a situation evolved whereby entry into the trucking market by new haul-ers became much easier. Established truckers, which had been afforded protection under the permit system, found that the proliferation of new freight companies under the new system was eroding their profit margins, and they began to lobby government to increase the gross vehicle mass (GVM) limit in order to reduce their unit costs.

The lobbying was successful, and the GVM has been incrementally increased to the current 56 t with an ad-ditional 5% tolerance. This is higher than GVM limits in all other countries of the Southern African Develop-ment Community (SADC) – where Malawi, Zambia and Zimbabwe have a 55 t limit; Tanzania has a 52 t limit; Botswana, Lesotho and Swaziland have a 50,2 t lim-it; and the maximum permissible load in Angola and Mozambique is 38 t – and is among the highest in the world. In the US, GVM levels are 38 t.

South Africa’s current rail system is 20 872 km in length, although only some 10 000 km of the total system are currently in operation. Some 1 250 km of the 10 000 km carry no traffic, 5 750 km carry low traffic, and 3 110 km carry light traffic, while some parts of the network have been closed, and stations, as well as railtracks, have been vandalised.

Rail’s market share in decline

60

70

80

90

100

110

120

130

140

150

160

1991

1993

1997

2003

Ind

ex 1

991=

100

Total GDP Transportable GDPRoad ton Rail tonRail ton excl export coal & ore

Wid

enin

g g

ap



6

In spite of South Africa’s GVM limit now being double the 28 t that was allowed prior to 1988, illegal overload-ing by road haulers in South Africa is rampant, owing to the massive additional profits that can be earned, even if overloading is only slight. The probability of being caught, as a result of ineffective policing of this prac-tice, is unlikely.

Road has an additional competitive advantage over rail, in that road freight companies do not carry direct cost responsibilities for highway maintenance and construc-tion, whereas the rail freight operator, Transnet Freight Rail (TFR) (previously Spoornet), is responsible for the development and maintenance of the infrastructure that it uses to conduct its operations. Further, truck-ing companies do not pay for the road damage caused when their vehicles are involved in accidents, while the rail operator is required to repair damaged tracks.

A study undertaken by the Council for Scientific and In-dustrial Research (CSIR) has indicated that overloaded and unroadworthy vehicles cause 60% of road dam-age, and clear evidence exists that the contribution of the road freight industry to the national fiscus is no-where near the amount needed to repair the damage

inflicted by this sector.

The high GVM threshold, together with the overload-ing that takes place, has had the effect of making road transport costs in South Africa low in comparison to rail transport costs. The result is that the country’s vast rail infrastructure is underutilised.

Although the road versus rail debate poses a chal-lenge across industries, examining the change in mar-ket share of selected industries on the major corridors and routes between 2003 and 2005 gives insight to the challenges facing rail transport going forward, as the annual State of Logistics survey for South Africa 2007 shows.

The transportation of bulk mining commodities, namely iron-ore, manganese and coal, is largely conducted by rail, owing to the suitability of the product for rail trans-port, but also as a result of the dedicated infrastructure offered to these products, through ring-fencing and the prioritisation of rolling stock allocation. Between 2003 and 2005, rail lost market share in the automo-tive (15%), cement (7%), coal (11%), fertiliser (9%) and grain industries (28%), but gained market share in the

Source: CSIR

Total tons transported on South Africa corridors for selected industries



7

chemicals (9%), steel (44%) and timber (35) industries.

This being said, positive and interactive rail and road transport policy can play a significant role in the future development of South Africa’s rail environment.

The Road Freight Association (RFA) contends that road freight has captured the majority of the market, be-cause it delivers where rail cannot, so there is no com-petition. According to the RFA, rail has lost out not only in South Africa, but everywhere in the world to road, or any other mode of transport that is faster, on time, and travels from door to door. It argues that rail should concentrate on what it does best, namely transporting large bulk over a set route.

Nevertheless, the NDoT has begun a process of revers-ing the shift from road to rail, particularly of cargoes that should be transported by rail. The department has drawn up a number of national strategies to transfer some freight volumes from road to rail, and to reduce high road-maintenance costs from large freight vol-umes. These strategies include the National Freight Lo-gistics Strategy (NFLS), a memorandum of understand-ing between the departments of Transport and Public Enterprises, the establishment of the Rail Economic Regulator, and the National Passenger Rail Plan.

National Freight Logistics Strategy

The NFLS serves as the NDoT’s guideline to plan and invest in freight in South Africa. The strategy is also in-tended to ensure economic efficiency and sustainabil-ity of small towns and rural communities while enhanc-ing freight logistics systems and operations. The NFLS will be used to lead investment in infrastructure, to en-sure the efficient movement of goods, and to increase rail volumes compared with road. The freight strategy has also identified a number of projects, to tackle re-form in the rail sector in order to achieve vertical sepa-ration of infrastructure and operations, multiple public and private commercial operators, open access to sec-ondary networks, and ensure mandatory access on pri-

mary networks.

Memorandum of understanding between the NDoT and the Department of Public Enterprises

A memorandum of understanding between the NDoT and the Department of Public Enterprises (DPE) has been signed regarding the transfer of three clusters of rail lines – tourism rail lines, branch lines and no-service rail lines – from the DPE to the NDoT. Should the goals of this agreement be achieved, greater use is likely to be made of rail freight services, shifting volumes from the road network.

Rail Economic Regulator

The NDoT is also in the process of establishing a Rail Economic Regulator (RER), which will help government to deal with the inability of railways to respond to im-mediate consumer demand. The RER will also estab-lish appropriate institutional and regulatory structures to prevent pricing abuse in captive markets, ensure fair conditions for intermodal and intra-modal competition, and will also create an environment for private sector participation in the rail sector. A draft RER framework has been completed and key stakeholders will be ap-proached for consultations during the course of the year.

National Passenger Rail Plan

The National Passenger Rail Plan, which was approved by Cabinet in November 2006, aims to secure the fu-ture of commuter rail by applying the priority corridor strategy to the rail network throughout the country. The intention is to extend the rail service to areas not previ-ously covered and to improve the efficiency of the ex-isting passenger rail lines on both short-and-long dis-tance services.



8

Structure of South Africa’s rail sectorThe Organisation for Economic Cooperation and Devel-opment (OECD), in an economic assessment of South Africa released in July 2008, portrays South Africa’s railway sector as one characterised by a dominance of State ownership and a monolithic structure.

TFR, the largest division of Transnet, controls almost the country’s entire rail infrastructure, and is the main operator of freight and passenger services. The few private companies operating in the sector serve local markets and do not compete with TFR. Simultaneous-ly, intermodal competition, particularly within the liber-alised road sector, is strong.

The railway sector has no economic regulator. Tariffs are set by TFR and approved by Transnet. The OECD report shows that there is some evidence that average freight tariffs are substantially higher in South Africa than in many industrialised and developing countries. In 2005, freight tariffs a ton a kilometre, at purchasing power parity exchange rates, were twice as high as in Russia, and almost three times as high as in the US and Canada. This applies to most goods, with the excep-tion of iron-ore, which in South Africa has a lower tariff than, for example, the US.

Despite this relatively high level of tariffs, Transnet deferred spending on maintenance and replace-ment of the system’s assets, which led to a pro-gressive decline in the quality of infrastructure and aging of the rolling stock. The resultant poor reliabil-ity of the rail system has contributed to the shift in market share from rail to road. Frequent train de-lays and cancellations have prompted customers to switch to road haulage, especially for the transportation of high-value goods, and when timing is important. This shift has put severe pressure on the road network.

Even with the demand for freight haulage being high, the rail sector’s development has been slow over the past decade. Rail freight traffic increased by less than 14% over the period from 1995 to 2005, while in many other emerging economies, such as China, India, Russia, rail freight traffic grew by about 50% during this period.

Likewise, passenger rail traffic is at a low level and has been gradually waning. The lack of dependable pas-senger services, especially on suburban routes makes travelling difficult and is regarded as one of the hur-dles to effective job hunting. Current strategies to en-hance passenger services in anticipation of the 2010

FIFA World Cup include building rail links between ma-jor towns and airports, such as the Gautrain rapid-rail link between Johannesburg and Pretoria. This, howev-er, will not resolve the problem related to the lack of reli-able passenger transport for everyday commuters, as it is argued that the Gautrain will benefit mostly business travellers and tourists.

South Africa’s freight system

The freight system in South Africa, and the subregion, consists of an assortment of networks that provide services that range in quality from excellent to poor, de-pending on the infrastructure and the operations, and the specific modal challenges in that area. Even with the slow development of rail sector the NDoT says that growth of freight traffic has surpassed most of the 20-year growth forecasts made by its Moving South Afri-ca project, at least 14 years before expected. This has placed increasing pressure on infrastructure and oper-ations to deliver standard services, while the system is being adapted to the growth and level of demand.

In a presentation in May 2008, Transnet indicated that the South African freight system is performing relatively well, but that the system must confront many challeng-es, which include large infrastructure backlogs across all modes. Skills shortages and a lack of intermodal planning were also listed as challenges to resolve.

Transnet estimates that total freight demand will dou-ble, or triple, in the next 20 years, but that integrated and coordinated action is necessary for this to take place.

Source: Transnet

Total freight demand will double (or triple) in the next twenty years

0

500

1000

1500

2000

2500

2006 2011 2016 2021 2026

mill

ion

tons

Likely growth High growth



9

This will include implementing a high-performance rail corridor backbone for the country that will alleviate cor-ridor congestion and provide the capacity to meet the long-term demand for freight in the economy.

Even at current levels, there is considerable opportu-nity for gaining market share in a number of product categories, corridors and ports. The commodities of-fering significant growth potential include domestic coal, manganese, containers, automotive and industri-al, iron-ore and export coal.

Much effort has been put into improving the competi-tiveness of Transnet’s service over the past three years in these important market segments. For example, the company is in the process of rolling out a new port-to-rail service for handling and moving containers, which will address the challenges of congestion, reliabili-ty and high costs of containerised freight on the main transport corridors. The automotive sector, one of the biggest contributors to container volumes, will be a key beneficiary of the new service, which will result in a sig-nificant boost to the competitiveness of the sector.

The corridors with prospects for growth include: Rich-ards Bay, Sishen – Saldanha, Cape, SentraHub and Na-tal; and the ports of Richards Bay, Durban, Cape Town and Saldanha.

Further, Transnet has said that integrated service strat-egies need to be formulated and implemented for key customer segments, to realise the synergies of the port, rail and pipeline nodes. The company has also stressed that the connectivity of the South African freight system with the regional freight system should be enhanced.

However, government needs to undertake a tremen-dous amount of work on the transport systems, as facil-ities are not adequately provided for freight operators at harbours, loading stations or along transport corridors.

The NDoT’s Strategic Plan 2006 – 2009 indicates that the rate of investment in freight infrastructure has not kept pace with growth in the South African economy. This has resulted in constrained projections for future growth and service delivery. The NFLS is a response to the freight system’s failure to fulfill the demand for cargo movement at prices, levels of service, quality of service, and levels of reliability in a way that supports national development strategies.

Source: Transnet

On its own, container freight in South Africa has grown by an average rate of 12% a year over the past five years, and this solid performance is expected to continue over the next five years.

Fourteen corridors defined

Springfontein

Klerksdorp

Estcourt

Bethlehem

Volksrust

MakwassieOrkney

Welverdiend

Theunisen

Richmond

Uitenhage

Thabazimbi

WitbankRayton

Port Shepstone

Oudtshoorn

Postmasburg

Bethal

Roossenekal

Polokwane

Cato Ridge

Touwsrivier

Naboomspruit

Sishen

Saldanha

Cape Town

East London

Port ElizabethMosselbaai

Bredasdorp

Bitterfontein

Kraaifontein

Knysna

Patensie

Klipplaat

Rosmead

New Brighton Port Alfred

Somerset East

Noupoort

De Aar

Prieska

Upington

Kakamas

Worcester

Hutchinson

Beaufort West

Belmont

Hotazel

Warrenton

Pudimoe

Mafikeng

Coligny

Bloemfontein

Aliwal North

Dreunberg

Koffiefontein

Stormberg

Barkly East

Blaney

Umtata

Fort Beaufort

Maseru

Sasolburg

Lichtenburg

Harrismith

Bergville

Harding

Durban

Underberg Stanger

Richards Bay

Vryheid

Ladysmith

Graskop

MachadodorpBelfast Komatipoort

Phalaborwa

Messina

Louis TrichardtSoekmekaar

Nylstroom

Pretoria

Ellisras

Northam

EmpangeniKimberley

Copperton

Beit Bridge

Pietermaritzburg

Nakop

Erts

Rustenburg

Hoedspruit

Glencoe

OgiesKrugersdorp

Golela

Queenstown

KroonstadNewcastle

Sentrarand

Bellville

Liebendal

Kalbaskraal

Boksputs

Calvinia

Vryburg

Ottosdal

VermaasErmelo

Atlantis

GeorgeAvontuur

Sannaspos

Pyramid South

Marble HallPienaarsrivierSteelpoort

Vereeniging

Danskraal

Cedara

Kokstad

Piet Retief

Delmas

Balfour

NelspruitKaapmuiden

Tzaneen

Pretoria-North

PendoringMacmullinsMagaliesburg

Marseilles

Gunhill

Burgersdorp

Sterkstroom

Stutterheim

Maclear

CradockCookhouse

AlicedaleDalJosafat

J’burg

•Current organisational structure;

•Current maintenance depot distribution;

•Current distribution of hub and depot nodes;

•Limited overlap and clear boundaries and ‘gate nodes’;

• Important commodity flows and customer flows (including Growth); and

•Preserve technical and natural geographic boundaries and internodal distances.

Northcor

CapecorSouthcor

NatalcorR.Baycor

N.Westcor

EastcorN.EastcorSishen-SaldanhaSentracor

South East Cor

WestcorFreestate

Namibia

Corridor definition principles



10

The NFLS represents a significant shift from the current freight system. It seeks to build on the world class infra-structure and operations that the country has in some areas of the system, while setting a clear agenda for addressing challenges that restrict other areas of the freight system. It sets the strategic framework for insti-tutional reform and industrial structuring that will guar-antee a more effective freight system that allows bet-ter access to marginalised service providers and cargo owners, while exerting pressure on pricing, transit and handling times. A significant component of the NFLS deals with creating more space for the private sector to play a significant role in all areas of the freight system. Another important aspect of the NFLS is to provide an environment for the introduction of competition to vari-ous components of the freight system that are currently operated as monopolies.

Rail freight transport

The bulk of South Africa’s freight customers are ge-ographically concentrated, needing transport from dense industrial locations. These are fed by compara-tively dense ‘corridors’, namely Gauteng–Durban and Gauteng–Cape Town, with almost 40% of all corridor movement taking place on these two corridors. Rail ac-counts for only 25% of the tonnage moved on the Gau-teng–Durban corridor and for 15% on the Gauteng–Cape Town corridor (2005 data).

There is a significant level of dissatisfaction in the rail freight industry regarding key aspects of the freight system. While freight customers have shown gener-al approval of road freight prices and levels of service, they are significantly less content with general freight prices and service levels for rail transport. The shift to road transport is blamed on the poor reliability of the rail system, as frequent train delays and cancellations have prompted customers to switch to road haulage, especially for the transportation of high-value goods and when timely delivery is important.

The OECD’s report states that the rail freight market is losing market share to road haulage, with more than 80% of the increase in freight traffic between 2003 and 2005 being captured by road. The accuracy of this fig-ure is contested, however, as Statistics South Africa’s records covering freight conveyed by road and rail have not been updated for five years. The latest avail-able information compares figures for 2003 with those of 2002.

The railway sector, according to the OECD’s report, is characterised by a dominance of State ownership and monolithic structuring. TFR, the largest division of Transnet, controls almost all the South African rail in-frastructure, and is the country’s primary operator of freight and passenger services. The report says that the few private companies operating in the sector serve lo-cal markets and do not compete with the division. As

Source: Transnet

The four port and five land corridors on which Transnet’s activities are focused

Corridor Rail volume handled**

Mt handled FY07

RBayCor

Sishen-Saldanha

CapeCor

Sentra hub

NatCor

Freestate

EastCor

NorthCor

NWestCor

SouthCor

WestCor

NEastCor

SEastCor

NamibiaCor

0.7

4.1

3.7

4.2

9.0

95.5

39.6

18.8

40.1

17.2

15.1

17.1

13.2

~0

Port volume Mt, FY07

2

10

61

10

40

83 (Richards Bay)

(Saldanha)

(Cape Town)

(Durban***)

(Port Elizabeth*)

(East London)



11

a result, Transnet’s monopoly position may have lim-ited the parastatal’s response to the competitive pres-sure from road haulage, as profits generated in the ex-port commodity lines and other businesses, to some extent, permit continued underperformance of the gen-eral freight business (GFB).

Even where rail could play a role in the freight sector, the vicelike grip of Transnet has ensured that it never will. The RFA has suggested that government privatise the branch lines, or similar systems, and allow freight companies to run these.

Rail infrastructure in South Africa can be divided into four categories, namely heavy-haul freight, general freight main lines, light traffic density and agricultural branch lines, and suburban passenger lines.

Heavy-haul freight lines

South Africa has two heavy-haul freight lines, owned by TFR. These are generally known as the iron-ore line, which runs from Sishen to the port of Saldanha Bay, and the coal line, which runs from Broodsnyerplaas (Witbank) to the port of Richards Bay.

Over the next five years, TFR plans to invest R9,4-bil-lion (including the capitalisation of borrowing costs) in upgrading these lines to convey higher tonnages. Cur-rently, an expansion project of the Sishen–Saldanha line is under way to accommodate the transport of higher tonnages of iron-ore.

In the 2006 South African Institution for Civil Engineer-ing (SAICE) infrastructure report card, these heavy-haul freight lines received a B (good) grade. SAICE also stated that the iron-ore and coal lines are world class, well-maintained and profitable, and where demand is approaching capacity, upgrading is programmed.

Because these lines generate a fair amount of revenue, sufficient funds have been available to maintain a high standard of infrastructure, ensuring that the conditions and complexity of the heavy-haul lines compare fa-vourably in a global context.

General freight lines

Although this category of freight lines, concerned with the transport of general agricultural and industrial freight, is currently breaking even financially, higher vol-umes of traffic are predicted for the lines.

This means that extensive rehabilitation and upgrad-ing of infrastructure is needed to carry heavier or longer trains, as well as upgrades of rolling stock (locomotives and wagons) to increase the throughput. The challeng-es facing these upgrades include declining infrastruc-ture conditions, resulting from a lack of capital input, and the reduction in the skills base attributed to chang-ing business models.

The general freight line infrastructure received a C (fair) grading on the SAICE report card, which stated that upgrades are urgently required, but that improvement is expected as Transnet profitability improves.

TFR will invest R29-billion (including the capitalisation of borrowing costs) in the general freight network over the next five years to improve infrastructure conditions.

Light traffic density and agricultural branch lines

The low income generated on these lines has resulted in extreme deterioration, and the infrastructure is main-tained only to the minimum safety and environmental compliance standards. Running speeds have been sig-nificantly lowered in order to mitigate safety risks.

These lines are not seen as a core part of TFR’s busi-ness and it has been proposed that the company either sell, grant concessions or uplift these lines. Many lines are not currently in use, and various private companies, including large timber concerns, have made proposals to take them over. The demise of this extensive net-work has been attributed to attitudes, during the 1980s and 1990s, to traffic potential and profitability. This has-tened the shift of freight from rail to road. This category of low-volume, low-priority freight lines received an E (very poor) grade on the SAICE report card.

Passenger lines

Passenger rail lines, which are under the jurisdiction of

South Africa runs the world’s largest and heaviest train on the 860-km Sishen–Saldanha line. In 1989, a world record was set on the line when a train comprising 660 wagons plus tank and caboose and 16 locomotives was operated. It was 7,3-km long.



12

the SARCC, received a D+ (poor) grade in the SAICE report. Nevertheless, refurbishment is under way, and there are hopes for improvement with the transfer of Metrorail from the DPE to the NDoT.

The SAICE report contends that commuter lines have gradually deteriorated and suffer from an indifferent maintenance focus owing to dual usage and shared re-sponsibilities in the past. The diminishing skills base, poor rolling stock handling and condition, as well as lim-ited funding in the past have all contributed to the decline in infrastructure conditions and increased safety risks.

The report adds that high levels of theft and vandal-ism also negatively affect services on these lines, with many commuters fearful of the crime risks associated with travelling by train.

Rail passenger transport

Rail transportation has an important role to play in South Africa’s endeavours to improve its public trans-port system.

While rail transport was the norm for passenger travel

in South Africa well into the 1960s, it has become in-creasingly discredited as an effective transport mode. According to the Development Bank of Southern Af-rica, the commuter rail system has been declining for years, with services becoming increasingly unreliable. This has made rail less competitive against other trans-port modes and, owing to changing land-use patterns, less-favourably situated for many of the major move-ment flows within cities.

The South African government appears to understand the value of rail infrastructure, its service potential and the contribution that well managed and efficient rail op-erations can make to the country, and has increased funding for passenger rail transport services to the tune of R18-billion over the medium-term expenditure framework period. This funding is fundamental in the turnaround strategy that is being implemented by the SARCC in an effort to effect immediate and significant improvements to rail infrastructure.

The SARCC has stated that its objectives for the turna-round phase are to change significantly the organisa-tion’s approach to service delivery, to stop the decline of passenger numbers, and to turn stakeholder and media opinion from negative or neutral, to positive.



13

TransnetTransnet is a public company with the South African government as its sole shareholder. The group is rec-ognised today as the leading player in the Southern African transport and logistics arena, operating and controlling South Africa’s rail, harbours and pipelines infrastructure.

Currently, the group is transforming itself into a focused freight transport and logistics company.

In 2004, Transnet initiated a far-reaching three-year, four-point turnaround strategy which saw the disposal of all the group’s assets or businesses, which did not form part of, or support, the core strategy of building a world-class freight transport and logistics company. Such assets were either sold to the private sector or transferred back to the South African government.

The approved redirection of the business also involved the re-engineering of the core business units to focus on efficiency, productivity, cost-effectiveness and growth.

The new Transnet is now essentially driven by five op-erating divisions:

•TFR(formerlySpoornet),whichisthefreightraildivi-sion;

•TransnetRailEngineering(TRE)(formerlyTranswerk)which is the rolling stock maintenance business;

•TransnetNationalPortsAuthority(formerlytheNPA)which fulfils the landlord function for South Africa’s port system;

•TransnetPortTerminals(formerlySapo)whichman-ages port and cargo terminal operations in the na-tion’s leading ports; and

•TransnetPipelines (formerlyPetronet)which is thefuel and gas pipeline business, pumping and man-aging the storage of petroleum and gas products through its network of high-pressure, long-distance pipelines.

With the turnaround strategy now completed, Transnet is poised to enter a ‘growth phase’, despite a material slowdown in the domestic economy and in freight-vol-ume growth. The new growth strategy will focus on accelerating profitable and sustainable volume growth, improved service delivery to customers and long-term financial

Source: Transnet

The four pillars of Transnet’s turnaround strategy

9

To establish a focused and integrated freigh t logistics business (Ports, Rail and Pipelines)

Productivity and efficiency improvement through re-engineering programme (Vulindlela)

Reorient company towards its customers

Restructure and redefine role of Corporate Head office to lead and support the turnaround

Investment plan to address backlog and create capacity

Business

Re-engineering

Strategic Balance

Sheet

Management

Dispose of non-core assets to release cash locked up

Improve the returns on assets (>WACC)

Optimise cash flow and cash management

Strategic asset/liability management to improve gearing

Corporate

Governance &

Risk Management

To enhance internal control environment

Improved risk management with focus on safety

Corporate governance and establish a compact with Shareholder on service delivery

Human Capital

Transforming culture and behaviour of staff to support new strategy

Identifying and managing critical skills and refocus training

Training and to establish accountability at all levels in the company

Establish sound union relationships to assist with transformation of company



14

performance. The following four pillars underpin the strategy: • Capitaloptimisationandfinancialmanagement;• Humanresources;• Riskmanagementwithanemphasisonsafetyand

effective governance; and• Re-engineering, integration, productivity and effi-

ciency.

The growth strategy will be built on a so-called ‘net-work business model’, which will seek to further inte-grate the group’s rail, port and pipeline units in a bid to

offer an ‘end-to-end’ solution that enables it to capture both freight growth and market share.However, given the slowdown of the world and domes-tic economy, a big thrust will be on increasing market share. The State-owned enterprise plans to be espe-cially aggressive in seeking to displace surface cargo from road haulers, which currently dominate the gen-eral freight segment of the market.

In freight, the group hopes to raise its volumes from 181-million tons to over 238-million tons by 2012/13, implying a yearly growth average of 5,6% or 31,5%

Source: Transnet corporate profile 2008/9

In 2007, Transnet concluded its structural transformation from a diversified group into a focused and integrated freight trans-port company, as envisioned in the company’s four-point turnaround strategy. This prompted the company to rethink the Transnet brand, its relationship with the subbrands and the appropriate architecture to give content to the philosophy of “One Company, One Vision”.

To confirm this realignment, Transnet rebranded from a multibrand organisation to a single, overarching “monolithic” Transnet brand, aligning its corporate identity with its business strategy.

The rejuvenation of the brand is designed to optimise the equity embedded in the Transnet brand, so as to communicate with brevity the revitalised company, its new corporate structure, its people and emerging service culture. Following the monolithic brand route recommended by research, Transnet did away with the old semiautonomous and frag-mented structure. This was replaced with a single, integrated structure with a new payoff line “delivering on our commitment to you”.

Transnet rebranding

Source: Transnet

Four-point growth strategy

Reengineering –integration, productivityand e�ciency

Priority corridors

Integrated commercialmanagement

Cross-divisionaloperational integration

E�cient assetutilisation

Planned maintenance inall operating divisions

Cost-e�ectiveprocurement

Shared services

Safety, risk ande�ective governance

Complying to thehighest standards ofcorporate governance

Enterprise riskmanagement (ERM)

Enterprise performancemanagement (EPM)

Human capital strategy

Accelerateimplementation ofhuman capital strategy

Talent managementincluding critical skills

Remuneration based onperformance againststrategic outcomes

Values and culture

Employment equity

Capital optimisation and�nancial management

Integrated capital,operations and �nancialcustomer planning

Focused investment forgrowth

Capital portfoliooptimisation

Strategic asset/liabilitymanagement

Funding strategy



15

over the five-year period in which the growth strategy will be implemented. To achieve this, the GFB will have to grow at 6,5% a year, while iron-ore volumes will need to rise by 7,3% and coal by 3,6% yearly.

In addition to Transnet’s growth strategy, the compa-ny is undertaking a five-year, R80,3-billion investment programme (R84,1-billion, including the capitalisation

of borrowing costs). The investment will be spent on replacing and expanding the company’s ports, pipe-line and rail freight assets. The bulk of the investment will be directed at expanding and creating new capac-ity ahead of demand, for its customers.

The investment programme directly supports the growth strategy and is structured to position Transnet

Source: Transnet

Source: Transnet

Transnet structure

Transnet Company

Operating Divsions

RAIL

Freight Rail

Rail Engineering

PORTS

NationalPorts

Authority

Port Terminals

PIPELINE

Pipelines

. Autopax

. Shosholoza Meyl

. Luxrail

. arivia.kom

. SA Express

Discontinued business

SPECIAL UNITS

Transnet Property

Transnet Projects

Corporate Centre

Growth targets set for rail for the next five years

238181

2007/08 2012/13

31,5%Freight Rail(Volume Mt)

• 5.6% Annual growth

• Ore 7.3%

• Coal 3.6%

• GFB 6.5%

Average growth per year



16

as a network business to operate in an integrated man-ner through priority freight and logistics corridors.

On Transnet’s freight rail business the company intends to spend a total of R40,3-billion (R40,8-billion, including the capitalisation of borrowing costs) over the next five years, including a R38-billion investment in TFR and a R2,3-billion investment in TRE.

Transnet Freight Rail

TFR (formerly Spoornet) is the largest division of Tran-snet, housing the State’s rail assets and maintaining an extensive rail network across South Africa, connect-ing with other rail networks in the sub-Saharan region. TFR’s rail infrastructure represents about 80% of Afri-ca’s total. The operating division is focused on trans-porting bulk and containerised freight. Its business lines include GFB Commercial, the Coal Line, the Iron

Ore Line, the Blue Train and Shosholoza Meyl. During the financial year to March 31, 2008, the division trans-ported 179,9-million tons of freight for export and do-mestic customers.

Nature of business and market position

At TFR, Transnet’s turnaround strategy has required radical change aimed at cost reduction; discontinu-ance of nonvalue adding processes; better asset use; enhancing operational processes; improving produc-tivity, so as to improve credibility with customers; pro-moting better predictability of service; and entrenching new business processes to make the division a sched-uled railway.

Initially, Transnet was confronted with ageing locomo-tives and rolling stock, with an average age from 30 to 40 years, together with a history of poor maintenance. This predictably led to poor asset deployment and de-creasing levels of availability and reliability.

Inve

stm

ent p

lan

for

each

ope

ratin

g di

-vi

sion

Transnet Freight Rail R38-billion

R80

,3-b

illio

nTRE R2,3-billion

Transnet National Ports Authority R16,4-billion

Transnet Port Terminals R9,6-billion

Transnet Pipelines R11,9-billion

Specialist units R2,1-billion

Source: Transnet annual report 2008

TFR – key performance indicators

2007 actual 2008 target 2008 actual Performance 2009 target % change versus actual

Financial

Revenue R million 14 574 16 643 16 598 Not achieved 18 310 10,3

Earnings before interest, taxes, depreciation and amortisation

R million 3 522 4 104 5 151 Exceeded 5 008 (2,8)

Infrastructure

Capex R million 7 402 7 878 9 308 Exceeded 9 789 5,2

Efficiency

Tonnages coal Million tons 67,0 72,0 63,5 Not achieved 69,0 8,7

Tonnages iron-ore Million tons 30,0 35,0 31,9 Not achieved 38,0 19,1

Tonnages GFB Million tons 84,3 85,9 84,5 Not achieved 86,3 2,1

Net tons a kilometre – iron-ore Mil TonKm* 26 331 30 837 28 057 Not achieved 33 829 20,6

Net tons a kilometre - coal Mil TonKm* 38 309 40 395 36 383 Not achieved 38 719 6,4

Net tons a kilometre – GFB Mil TonKm* 43 390 44 659 44 244 Not achieved 45 806 3,5

Source: Transnet annual report 2008* Million tons a kilometre



17

TFR has reduced the number of locomotives in opera-tion from 2 315 in 2005, to 2 119 in the financial year to March 2008, while maintaining or improving the vol-ume of freight transported by the railway. During this time, the number of wagons in use has been reduced from an average of 82 000 to an average of 77 000, while maintenance of the fleet has been significantly improved.

Consequently, TFR has recorded significant success-es in its operational processes. In the year to March 31, 2008, the division’s revenue rose to R16,6-billion from R14,6-billion in 2007; operating profit increased to R3-billion from R2,2-billion; and capital expenditure (capex) grew from R7,4-billion to R9,3-billion.

GFB Commercial

TFR’s most notable success has been the halt in the long-running decline of the GFB and positioning it for growth. For the first time in over a decade, an increase has been reported in volumes railed on the GFB. Ow-ing to the success of the re-engineering measures, the GFB is now moving an additional 35% containers – one of the areas with significant scope for growth. In total, 84,5-million tons worth of cargo was transported on the GFB in the year to March 31, 2008, representing an im-provement from 84,3-million tons in 2007, and a 3,5% increase in net ton kilometres – a measure of activity improvement.

Despite the worldwide economic slowdown, TFR is seeking to increase its share of transportable gross do-mestic product. Growth opportunities exist in the coal, iron-ore, steel, magnetite, manganese, cement, fer-rochrome, lime and limestone, grain, fuel, rock phos-phate, chemicals, automotive and internodal sectors. TFR expects that the current boom in commodities will increase export demand for coal, iron-ore and man-ganese, and contribute to the partial insulation of the country against a global economic slowdown.

The company will therefore continue to invest in specif-ic categories of rolling stock and infrastructure over the next five years to support the forecast volume growth of identified commodities.

Capital projects

Two hundred and twelve diesel locomotives were ap-proved for the GFB in 2006, the estimated total cost (ETC) of which is expected to be about R6,14-billion.The current average age of the existing fleet is around 32 years compared with a benchmark of 12 years. In-troducing new locomotives to the fleet will improve re-liability, reduce maintenance costs and reduce safety incidents on the line, as well as catering for the antici-pated increase in volumes on the GFB lines.

The tender process is under way for the acquisition of the locomotives with an option to increase to 400 loco-motives, if supported by a sound business case.

Further, TFR is expected to take delivery of 50 EMD diesel electric rebuild locomotives at an ETC of R887-million. This project entails the purchasing of relatively new second-hand locomotives from EMD for operation on TFR’s GFB lines. The improvement in fuel consump-tion, the savings on maintenance and the flexibility of using these locomotives over the whole network are some of the advantages expected to be derived from this project. TRE has been contracted as the local as-sembler of the locomotives and will also provide sup-port for assessing the suitability of the locomotives and effecting adjustments where considered necessary. The first locomotive was delivered in July 2008, and the process is expected to be completed by May 2009.

Coal line

TFR’s 580-km dedicated coal line is focused on the transportation of coal and coal-related products from some 44 mines in Mpumulanga, to the Richards Bay Coal Terminal, in KwaZulu-Natal, from where the coal is then exported.

In the financial year to March 2008, the volumes railed on the coal line, at 63,5-million tons, were some 5,2% lower than the 2007 figure of 67-million tons, owing to customer production issues and operational problems at TFR, including derailments and cable theft.

Some 30% of TFR’s core network carries 95% of freight volumes.

The double coal line is bidirectionally signalled and fully electrified. Two 100-wagon trains are coupled to form a single 200-wagon train at Ermelo, typically using CCL-type wagons. These trains stretch 2,5-km long and are loaded to 20 800 t. Open-topped wagons are used for large-volume siding-to-siding consignments, while open-topped containers are used for smaller door-to-door consignments.

TFR moves 17% of the nation’s freight a year, including 100% of export coal and 100% of export iron-ore



18

Capital projects

The current R3,86-billion coal export line expansion project, including rail capacity improvements on the coal line and the provision of additional coal berths at the port of Richards Bay, will increase the export capac-ity of the coal line to 81-million tons a year by 2011/12. The project will also provide the platform for further ex-pansionary programmes should future exports exceed planned capacity.

Feasibility studies are currently being undertaken, with the assistance of the industry, regarding the further ex-pansion of export capacity to 91-million tons a year.

Additional locomotives are needed to make provision for the increased volumes expected on the coal line. The coal line makes use of direct current (dc) and alter-nating current (ac). While dc traction is used to Ermelo, from Ermelo to Richards Bay ac is used. To this end, TFR has ordered 110 dual-voltage locomotives at an ETC of R3,4-billion. The new locomotives have the ad-vantage of flexibility in that they are able to easily cross both sections, as opposed to the current time-consum-ing system of changing locomotive types at the Ermelo changeover yard.

The aim of the project is to provide sufficient tractive capacity to cater for the increase in volumes, improve reliability and availability of the locomotive fleet, free up locomotives to be used in Transnet’s GFB and reduce maintenance and fuel costs.

Delivery of the first six locomotives is expected by No-vember 2008, with further batches of six locomotives being delivered every four months thereafter.

Iron-ore line

TFR’s 861-km iron-ore line is the only rail line of its kind in Southern Africa. It is a core business line that runs from the Northern Cape along the West Coast. The service operates with unique rolling stock designed specifically to meet customer needs.

The iron-ore line transported 31,9-million tons in the fi-nancial year to March 2008, reflecting an improvement of 6,3% on the previous year’s figure of 30-million tons, but fell far short of the contracted target volume of 35-million tons a year, owing to product shortage related to nonavailability of product from Kumba Iron Ore (KIO).

Capital projects

Due to a number of years of increasing demand for ba-sic commodities worldwide, Kumba and Assmang in-creased their production capacities, resulting in an in-crease in the volumes to be transported to Saldanha for export. As a result, in 2005, the Transnet board ap-proved the expansion of the iron-ore export channel to 41-million tons a year, at an ETC of R4-billion. Then, in 2006, at the request of KIO and Assmang, Transnet ap-proved plans to further increase the capacity of the iron-ore export channel, to 47-million tons a year, through integrated transport and port investments to the val-ue of R2,8-billion. The project entails the acquisition of rolling stock; alterations to crossing loops and the con-struction of a new loop; upgrades to rolling stock work-shops; and power supply upgrades. Contractual nego-tiations for the expansion are near finalisation.

During February 2008, Transnet approved the expan-sion of the channel to 60-million tons a year, pending the outcome of commercial contractual negotiations with the industry, as well as obtaining the appropriate environmental approvals. Further, studies are under way to determine the feasibility of increasing capacity of the corridor to an estimated 90-million tons a year.

Forty-four 15E new locomotives have been ordered for the iron-ore line. These are currently under manu-facture. Six are expected to be delivered by March 31, 2009, 26 by November 2009, and the last 12 are sched-uled to be delivered in March 2010.

Transnet Rail Engineering

TRE comprises eight product-focused business units, which provide services ranging from refurbishment, conversion and upgrade, to the manufacturing of rail-related rolling stock mainly for the SARCC.

TRE functions mainly as TFR’s internal support unit.

The capacity of TFR’s coal and iron-ore lines has been re-engineered upwards without increasing rolling stock requirements. In 2005, TFR could only manage to transport a maximum of 1,1-million tons of coal a week. In December 2007, a new record was set at 1,4-million tons a week. Similarly, a new record, at 733 000 yt/w, was set for the transportation of iron-ore in 2008, up from 525 000 t/w at the beginning of 2005. Even so, performance of the export lines has been disappointing.

The iron-ore line includes 82 bridges, the longest of which is over 1 000 m, and travels for 106 km along the Atlantic coastline, from which its path was sculpted.



19

The unit’s success is best measured in terms of pro-ductivity, as well as its contribution to the efficiency of Transnet. The division has made an important contri-bution to TFR’s success in the past year, by improving fleet reliability and availability.

In 2008, locomotive availability improved by 2% on the coal line, 1% on the iron-ore line, and 3% for GFB, with faults for every one-million kilometres travelled reduced by 38%, 22% and 25% respectively. Meanwhile, wag-on availability (active fleet) has improved by 2% on the coal line, 1% on the ore line, and 4% for GFB, with faults for every one-million kilometres travelled reduced by 71%, 95% and 21% respectively.

TRE also grew its revenue from R7,31-billion in 2007, to R8,16-billion in the year to March 2008; operating profit increased from R974-million to R1, 06-billion; and capex rose from R623-million to R764-million.

While TFR remains TRE’s main client, TRE has built sig-nificant external revenue. For example, in the year to March 31, 2008, the division’s external revenue increased 75,1% to R1,1-billion, based primarily on the growth in demand for coach refurbishment by the SARCC.

TRE has entered into joint ventures and strategic alli-ances with a number of original equipment manufac-turers (OEMs) internationally to transfer skills and tech-nology, and to facilitate the sharing of ideas across continents. Moving forward, TRE is expected to place further emphasis on establishing strategic alliances with OEMs and suppliers to become a world-class pro-

vider of rail manufacturing and maintenance services.

Transnet’s involvement in Africa

and the rest of the world

TFR plans to be a global leader in operations on the 1 000-mm and 1 067-mm (narrow gauge) rail networks of the world, especially in Africa.

Further, through its railway operations, TFR hopes to become a significant global player in the provision of freight logistics solutions to its customers on the Afri-can continent and beyond. The International Joint Ven-tures (IJVs) business is TFR’s vehicle for achieving this and other objectives outside the company’s normal ar-eas of activity. IJV is responsible for all TFR activities outside South Africa, as well as for all noncore activities and joint ventures within South Africa.

Transnet also has a 32% shareholding in Comazar, which operates railways in Africa. The company owns stock in, and operates several privately held railways, including Camrail, in Cameroon; Madarail, in Madagas-car; and Ethiopian Railways. It is also a 10% partner in the Rift Valley Railways Consortium.

Outside Africa, Transnet owns 100% of Freight Logis-tics International (FLI), the holding company for Tran-snet’s investments in South America. FLI holds 100% of Spoornet do Brazil, which owns 1,14% of America Latina Logistica.

Leadership

Siyabonga Gama (TFR CEO)

Annual revenue (TFR)

R30,09-billion (March 2008)R26,90-billion (March 2007)

Earnings

R13,19-billion (March 2008)R11,15-billion (March 2007)

Contact details

Postal addressPrivate Bag X47 Johannesburg 2000South Africa

Telephone+27 11 774 4378

Fax+27 11 774 4432

Websitewww.spoornet.co.za

Transnet



20

South African Rail Commuter CorporationEstablished in April 1990, the SARCC is South Afri-ca’s biggest passenger rail commuter service provider and is an agency of the NDoT. It has custodianship of all commuter rail assets, including infrastructure, roll-ing stock, and land in and around stations. Its whol-ly owned subsidiary, Intersite Property Management Services is responsible for managing SARCC’s entire property portfolio.

Nature of business and market po-sition

The purpose of the SARCC, established under the le-gal succession to the South African Transport Services Act of 1988, is to ensure that commuter rail services are provided in the public interest, and to promote rail as the primary mode of mass commuter transport.

However, the SARCC itself has admitted that South Africa’s commuter rail sector is in a critical condition. The company is operating fewer trains today than it did eight years ago and the number of trip delays and can-cellation ratios is climbing steadily.

The SARCC has indicated that scheduled trains trips have dropped from 793 996 in 1998/9 to 716 446 in 2006/7. It blames the decline on reduced funding and budget availability over time, as well as the availability of rolling stock. This trend is expected to continue in the short term. The difference between trains sched-uled and trains run has progressively increased over the same timeframe, indicating a struggle to meet com-mitments, owing to operating problems.

Further, train delays increased steadily from 68 629 to 93 933 over the same period. Cancellations, however, have risen and fallen, as a result of budget and rolling stock availability. This has resulted in a reduced serv-ice and a downwards adjustment of train timetables, as cancellations dropped, owing to fewer trains required for the new service.

Owing to these constraints, the overall reliability of service did not improve in the past financial year. How-ever, the objective of increasing use by passengers by 3% was surpassed, with an actual use by passengers of 4,1% being achieved.

An analysis of the transport sector by the NDoT shows that passenger journeys for most months in the 2007/8 financial year, were above the 40-million level. In Janu-ary 2008, however, the number of passengers carried fell below 40-million. The cause of this decline is not clear, although the drop could be attributed to the De-cember holidays and to the reduction of trains between

Intersite started as a property division of the SARCC in 1991, and in 1992, was established as a separate corpo-rate entity to manage and develop the property portfolio of the SARCC, which comprises some 374 rail commuter stations, and some 4 200 ha in the major metropolitan ar-eas of Johannesburg, Pretoria, Durban and Cape Town.

Source: SARCC Annual Report 2006/7 Source: SARCC Annual Report 2006/7

Trains scheduled/trains run Trains delays/cancellations run



21

Mabopane and Tshwane, as a result of the burning of some trains on this line in January 2008.

Consolidation

In May 2004, the NDoT announced the consolidation of the SARCC, Metrorail and Shosholoza Meyl. This merger is aimed at enhancing the sustainability of pas-senger rail service delivery, enhancing the performance of passenger rail services in terms of quality and levels of service to passengers; as well as improving the effi-ciency of asset management, oversight by government and accountability to users.

Metrorail was consolidated into SARCC in 2006. The second phase of the consolidation is nearing comple-tion, with the transfer of the long-distance passenger service, Shosholoza Meyl, already under way.

Shosholoza Meyl was, with effect from April 1, 2008, part of the SARCC business. However, Transnet con-tinued to manage and run the business on behalf of the SARCC until September 2008, when the parties were expected to wrap up a sale of a business agreement to allocate assets and the accompanying risks facing Shosholoza Meyl. Parliament was expected to consid-er and pass the Amendments to the Legal Succession

Act in June this year, so that it could create the enabling framework for this important process, and plan all pas-senger rail transport from a single point.

As a result of this consolidation, the new passenger rail entity has developed a turnaround strategy to reposi-tion rail over a long-term period.

The turnaround strategy

The turnaround strategy, which is aimed at reposi-tioning rail over the long term as the heart of public transport, is the culmination of almost three years of concerted effort, involving the SARCC, the NDoT, pro-vincial and local government, consultants and other in-dustry stakeholders.

The strategy is premised on research contained in the National Passenger Rail Plan; the Due Diligence Report, undertaken by the various stakeholders under the lead-ership of the NDoT to determine the operational and capital requirements of the national passenger rail com-pany; as well as the National Household Travel Survey undertaken by the NDoT and Statistics South Africa.

Overall, the strategy seeks to give effect to the require-ments of the National Passenger Rail Plan approved by Cabinet in December 2006.

The turnaround strategy is being implemented over three phases: a stabilisation phase (2007-2010), a recovery phase (2011-2014) and a growth phase (2015-2030).

The first phase will serve to stabilise the rail service, be-fore placing elaborate growth targets on the table. This will entail retaining the number of passengers that the SARCC currently carries each day and improving the rail service to an acceptable level.

There were 2,5-million passenger trips a day in 1990, and at that time Metrorail had a 20% share of the pub-lic transport market, compared with the 15% that it has today. Thus the objective of the recovery phase is to in-crease the rail service’s use by passengers up to, and beyond, the levels that they were in 1990. This will be achieved by offering a reliable, punctual and safe serv-ice.

It is hoped that once the first two phases are imple-mented the company will move into an accelerated growth phase.

Source: National Department of Transport

Shosholoza, meaning to push forward, endeavour or strive, is the name of a popular traditional African song favoured particularly by working men whose work it was to lay railway lines. Imeyili is an old colloquial term used to describe a long-distance train.

Where the name Shosholoza Meyl comes from

Metrorail passenger journeys between April 2007 and February 2008

-

10.0

20.0

30.0

40.0

50.0

60.0

Apr,0

7

May

,07

Jun ,0

7

Jul,0

7

Aug

,07

Sep

,07

Oct,07

Nov,07

Dec,07

Jan,

08

Feb,08

Passen

ger

jou

rneys (

mil

lio

ns)



22

Capital projects

Through the SARCC, the NDoT has committed over R18-billion over the medium-term expenditure frame-work period, to improving the passenger rail system. A significant portion of these funds has already been committed by the SARCC to upgrade almost 2 000 of its 4 600 coaches around the country.

During the 2006/7 financial year, 310 coaches were refurbished. In the 2007/8 financial year, the SARCC has been able to upgrade, and take through its gener-al overhaul programme over 790 coaches, which have since been deployed back into service. A further 700 coaches have been committed for refurbishment in the 2008/9 financial year, at an estimated cost of almost R2-billion. This delivery of coaches is aimed at improv-ing train availability nationally to 96% of the current fleet by 2010. This is imperative, as a key factor in the deterioration of rail services has been underinvestment in rolling stock.

The Tshwane Business Express (TBE) between Tshwane and Johannesburg is yet another milestone in the turn-around of passenger rail, particularly after the Soweto Business Express (SBE) and Khayelitsha Business Ex-press (KBE) services were launched in 2007. All three services form part of the National Passenger Rail Plan and are aimed at middle-class passengers particularly those from townships and previously disadvantaged ar-eas. It is hoped that more efficient and accessible serv-ices such as these will help to build a culture of public transport use, which in recent years has proved une-qual to the task of transporting South African citizens.

The Soweto Business Express

The SBE, which forms part of the National Passenger Rail Plan, was launched in July 2007. Each coach is equipped with Internet points, security personnel, and an attendant to distribute newspapers and dispense drinks. Some 530 passengers can be transported at a time, at a cost of R310 a person a month. The SBE travel time of 45 minutes, starting from Naledi station at 6:00 to Johannesburg, eventually is expected to be reduced to some 25 to 30 minutes. The R2,2-billion eight-coach luxury train, aimed at the middle class, is the first of many such ventures, which are expected to be rolled out throughout the country.

The Khayelitsha Express

In October 2007, the NDoT unveiled the KBE, which is also part of the National Passenger Rail Plan.

The KBE came straight after the SBE, which was launched in July 2007, in Soweto. The Express will travel between origin and destination stations within 38 minutes, reducing the usual travelling time by 30% and will only stop at three stations – Mandalay, Heideveld and Mutual.

The KBE is expected to make a substantial impact on congestion and presents all commuters with a real high-quality travel choice. It is through these initiatives that the SARCC will increase the number of rail passengers from the current levels and reduce trip times, as well as improve the safety and reliability of its service.

The Express consists of six coaches, with a seating ca-pacity of 300 commuters. A monthly ticket costs about R300, a weekly ticket R99, and daily return and single trips cost R25 and R15 respectively.

The Tshwane Business Express

In May 2008, the TBE was launched. The new serv-ice aims to enhance the SARCC’s offerings as part of its passenger rail turnaround strategy. It is hoped that the new train will relieve peak-hour traffic congestion on the N1 and offer relief to cash-strapped motorists, being hard hit by escalating fuel prices.

The TBE train accommodates 530 passengers, and busi-ness commuters can make the most of a range of added services on the train, such as attendants, complemen-tary refreshments and newspapers on board, laptop workstations, and soon Wi-Fi, and enhanced security.

In addition to covered parking facilities at all stopping stations, a free bus shuttle service is also available to take passengers to destinations such as OR Tambo In-ternational Airport, Johannesburg central, and the near-by business suburbs of Parktown and Rosebank.

Currently, the train operates only during peak hours in the morning and afternoon, stopping at Centurion and Kempton Park stations before arriving at its destina-tion. However plans are under way to expand the serv-ice to off-peak hours.

Passengers pay R750 for a month’s travel in the so-called Zone 2, or business class, while Zone 1, or econ-omy travel, costs R550 a month. A one-way trip costs R30 and R20 for single and return trips respectively.



23

Both the Soweto and Tshwane Business Express serv-ices will work in tandem with the Gautrain rapid-rail link, currently under construction.

As a result of the success of Business Express serv-ices, the SARCC is already investigating an additional similar express train service.

Moloto rail corridor project

Another important development is the Cabinet approv-al of the Moloto rail corridor project, which forms part of the Accelerated and Shared Growth Initiative for South Africa. The project will see the establishment of an in-tegrated transport link between Gauteng and Mpuma-langa. The R9,7-billion project will include rail, road and transfer facilities, and is aimed at reducing travel time and road accidents on the corridor and providing af-fordable and safe travel options for commuters.

Bridge City rail link

The R600-million Bridge City rail link, in KwaZulu-Na-tal, will involve laying a 3-km spur from the existing ma-jor passenger line between Umlazi, Durban and Kwa-Mashu and building a station at the proposed Bridge City development.

The rail link, situated in the so-called INK area com-prising Inanda, Ntuzuma and KwaMashu, and some 25 km to the north of Durban’s central business district, provides direct access to the Bridge City development,

a Presidential lead project, which comprises over 700 000 m2 and will include a regional shopping centre, a hospital, a magistrates court, residential units, offices and commercial outlets.

The SARCC has short-listed four consortia and is now evaluating their bids for the detailed design of the Bridge City rail link project.

Recapitalisation

In the medium term, that is, over the next three to five years, the success of the turnaround strategy for rail passenger services will present the country with new difficulties if no urgent steps are taken to recapitalise the current SARCC. The average fleet age of 40 years means that continuing to refurbish without a replace-ment strategy being implemented will have dire con-sequences and could even reverse the gains that have been made through the current turnaround plans. A fur-ther delay will also increase the cost of replacement, which will be much higher than it is today.

In an effort to tackle this challenge, the SARCC has completed the business case for the recapitalisation of Metrorail’s fleet. Once approved by Cabinet, the NDoT and the SARCC, together with other key government departments such as the National Treasury and the Department of Trade and Industry, will be expected to start implementing this strategy. The new rail coaches will put to rest the 3 600 fuel-guzzling, outdated trains on the country’s railroads.

The extension of the rail service to Bridge City has been identified as a priority project in the SARCC’s regional rail plan for eThekwini that supports the eThekwini Transport Authority’s overall public transport strategy for the area. It is expected that the rail- and road-based feeder/dis-tribution services will transport over 40 000 passengers during peak hours once Bridge City is fully developed.

Although there are visible improvements in passenger rail services, there are still many challenges. In the short term, the cost of materials as a key input to the refurbish-ment of coaches has risen quite substantially and, while the SARCC has increased allocations for maintenance by 18% to a record R707-million, the rising cost of mate-rials is proving to be a serious constraint.

Leadership

Tshepo Lucky Montana (CEO)

Contact details

Postal addressPrivate Bag X101Braamfontein 2017South Africa

Telephone+27 11 773 1600

Fax +27 11 774 6299

Websitewww.sarcc.co.za

South African Rail Commuter Corporation



24

Gauteng Management AgencyThe Gautrain rapid-rail link is a project of the Gauteng provincial government (GPG), initiated as one of eleven so-called Blue IQ projects.

The R25,2-billion Gautrain project will entail the devel-opment of a state-of-the-art rapid-rail network. The rail connection comprises two links, namely a link between Tshwane and Johannesburg and a link between OR Tambo International Airport and Sandton. Besides the three anchor stations on these two links, seven other stations will be linked by about 80 km of rail along the proposed route.

The three anchor stations will be located at OR Tambo International Airport, Tshwane, and Johannesburg. The other seven stations will be located at Rosebank, Sandton,

Source: Gauteng Management Agency

Blue IQ is a multibillion rand initiative of the GPG to de-velop economic infrastructure for specific major projects in smart industries, high value-added manufacturing and tourism. It works in partnership with business and gov-ernment departments as a catalyst to promote strategic private sector investment in key growth sectors of the Gauteng economy. The Project is managed as part of the Gauteng Department of Finance and Economic Af-fairs Public Private Partnership Unit.

Gautrain route map



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Marlboro, Midrand, Centurion, Hatfield, and Rhodesfield.

Phase 1 of the Gautrain project is 49% completed, with work on phase 2 at 39%. The Midrand–Sandton–OR Tambo International Airport link of the Gautrain – phase 1 – is scheduled for completion in mid-2010, with the Sandton–Johannesburg, and Midrand–Tshwane links – or phase 2 – to be operational by 2011.

It is reported that the Gauteng government will nego-tiate with the Bombela consortium to accelerate com-pletion of the first phase of the project to May 27, 2010.

This will mean that the link between the OR Tambo Air-port and the flagship Sandton station will be completed in time for the 2010 FIFA World Cup, with the remainder to be wrapped up in 2011.

The Gauteng government has not yet officially asked Bombela to accelerate its programme of construction to May, or negotiated the costs involved in this process.

Travelling at maximum speeds of between 160 km/h and 180 km/h, the Gautrain will reach Tshwane from Johan-nesburg in less than 40 minutes.

The Gauteng Management Agency has reported that the cost of the Gautrain could still be driven up by three factors, namely variation orders (such as an accelerated deadline), if the Gauteng government breaches its con-tract, and if the consumer price index (without mortgage costs) inflation moves above the level as predicted by the Reserve Bank.

Leadership

Jack van der Merwe (CEO)

Contact details

Postal addressPO Box 1266Kelvin2054South Africa

Telephone +27 11 997 8900

Fax +27 11 997 8901/2/3

Websitewww.gautrain.co.za

Gauteng Management Agency

The Gautrain has been structured as a public¬private partnership project. The client is the Gauteng provincial government. The Bombela Concession Company is the private sector partner and comprises Bombardier Trans-portation (25%), Bouygues Travaux Public (25%), Mur-ray & Roberts (25%), and Strategic Partners Group (SPG) (25%) as shareholders.



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SourcesAfrica Rail 2008. Presentation by Siyabonga Gama: Rail revival – the quest for greater rail market share. (June 4, 2008).

Africa Rail 2008. Presentation by Mathetha Mokonyama: Update on the “Luxembourg Protocol” – the race to modern-ise rolling stock in Africa. (June 5, 2008).Africa Rail 2008. Presentation by Howard Rosen: Implementing the next generation of passenger railway – trends, qual-ity and technology. (June 6, 2008).

African Union. Media advisory: professional conference on interconnection, interoperability and complementarity of Af-rican railway systems. (November 2007).

AllAfrica. Transnet’s turnaround. (July 1, 2008).AllAfrica. Transnet says its firmly on growth path. (July 1, 2008).

Business Day. Rail transport ‘could bring down high logistics costs’. (July 28, 2008).Business Report. Commuter rail suffers bleak year as trips fall, delays rise. (November 23, 2007).Business Report. Transnet’s new electric trains need a jump-start. (February 1, 2008).Business report. Transnet set to go for freight. (July 1, 2008).Business Report. Ramos to drive Transnet’s growth plan. (July 28, 2008).Business Report. Transnet ups tempo to win freight traffic. (August 18, 2008).

City of Johannesburg. Luxury trains links Jozi, Tshwane. (May 8, 2008).

CSIR. Annual state of logistics survey for South Africa. (2007/8).

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Engineering News. SA needs to come to terms with rail vs road dilemma. (September 21, 2001).Engineering News. Rail infrastructure receives boost. (April 13, 2007).Engineering News. Passenger-rail chief aims to stabilise service ahead of growth push. (June 15, 2007).Engineering News. Commuter rail body to buy 600 new coaches over 12 years. (July 3, 2007).Engineering News. Luxury Soweto–Joburg train begins operation. (July 3, 2007).Engineering News. Metrorail to spend R23bn over five years. (July 6, 2007).Engineering News. After decades of contraction, SA’s rail company finally sets out its growth stall. (July 18, 2008).Engineering News. Big freight- and passenger-rail investment push spills over into industry. (August 3, 2007).Engineering News. Increased road transportation pressurises local logistics sector. (September 28, 2007).Engineering News. SA: Radebe: Khayelitsha Express launch (31/10/2007). (October 31, 2007).Engineering News. Programme aims to support sustainable rail investment patterns. (November 30, 2007).Engineering News. South Africa features prominently in history of rail transport. (November 23, 2007).Engineering News. Ways must be found for private sector to add value to Africa’s railways – Radebe. (December 7, 2007).Engineering News. Railway tariff increases to push more freight onto roads. (April 11, 2008).Engineering News. SARCC chief says it is investing heavily to improve rail experience. (May 16, 2008).Engineering News. Eastern Cape looking at rail as coal transportation option. (May 23, 2008).Engineering News. Transnet urges SA stakeholder collaboration to accelerate integrated transport. (June 20, 2008).Engineering News. Transnet Freight Rail improving on punctuality. (June 20, 2008).Engineering News. Investment in SA’s freght sector crucial to sustaining growth. (June 20, 2008).Engineering News. Haggling over coal-line expansion continues as railed-volumes slip. (June 30, 2008).Engineering News. Transnet insists it will invest to meet commodity-export demand. (July 11, 2008).Engineering News. Ramos unveils ambitious growth targets for rail, ports and pipelines. (June 30, 2008).



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Engineering News. Transnet may enlarge diesel loco purchase to 400. (August 12, 2008).Engineering News. Rail freight losing share to road haulage. (August 15, 2008).Engineering News. SA: Radebe: Address at the Union Carriage and Wagon Partnership’s (UCWP’s) 10M4 launch (11/09/2008). (September 16, 2008).Engineering News. Four consortia short-listed for KwaZulu-Natal’s Bridge City rail link. (October 10, 2008).

Fin24. End of the line. (February 28, 2008).Fin24. Transnet: R36bn eyebrow raiser. (June 30, 2008).Fin24. 2010 transport plan ‘off track’. (July 3, 2008).

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www.mg.co.zawww.miningweekly.comwww.polity.org.zawww.rra.co.zawww.sarcc.co.zawww.transnet.co.zawww.transport.gov.za

Rail in South Africa 2008 The material contained in this report was compiled by the Research Unit of Creamer Media (Pty) Ltd, based in Johannesburg, South Af-rica. The information contained in this report has been compiled from sources believed to be reliable, but no warranty is made as to the ac-curacy of such information. This document is designed to be used as a source of information for subscribers to Creamer Media’s Research Channel Online and is not to be reproduced or published for any other purpose. The reports draw on information published in Engineering News and Mining Weekly as well as from a range of other sources, and should provide an invaluable, and easy-to-read snapshot of key industrial sectors.

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