South African rail operator Transnet has announced it will focus on more profitable cargo by reducing its 20,000 km network by 35%.
“At this point we can’t justify operating something which actually causes us to make a loss and so that’s why there’s this revision of certain flows across the network,” Transnet CEO, Portia Derby told Bloomberg.
Transnet chief strategy and planning officer, Andrew Shaw, added that a slightly smaller network would allow more operational efficiency. “It still serves the economic interest of the country, and it still allows additional operators,” he said.
As it plans to shift focus, Transnet will issue a Request for Qualification (RFQ) for a 20-year operation and maintenance lease of its container corridor between Johannesburg and Durban. The corridor also includes Durban’s Bayhead Back of Port Terminal as well as the inland freight terminals at City Deep and Kascon in Johannesburg, and at Bayhead in Durban.
Transnet aims to move trucks off the road and achieve better operational reliability and efficiency by involving the private sector, reported the Rail Journal. In addition, the operating lease will give a much-needed investment for the rehabilitation, maintenance and upgrading of the rail network.
However, the final decision for closing routes or offering them to another operator would rest with the government.
The state-owned operator has been dealing with cable theft and a shortage of spare parts for its locomotives. According to Derby, 164 locomotives were out of service during the current financial year, a 23% increase compared to the previous year.
“That can’t improve until we solve the problem with the Chinese,” she said, adding that resolving the train shortage was Transnet’s top priority.
CRRC E-Loco Supply has not repaired at least 161 locomotives that are currently non-operational – causing roughly 50% of revenue losses, says Transnet. Ongoing discussions involving the South African tax authorities and the South African Reserve Bank have not resolved the issue of spare parts. In the meantime, Transnet has issued an open tender for the supply of spare parts to rehabilitate these locomotives as well as others.
Transnet, owned by the South African government, also responsible for rail and ports. In January, it raised a $6 billion bond sale programme, successfully issuing a $1 billion five-year bond at a coupon of 8.25%.
The bonds “buys us five years of peace and quiet,” Derby said. “It doesn’t take away from the fact that the financing pressures, the need to generate revenue from our operations and hence the thing of stopping loss-making flows is absolutely crucial for us to start putting to bed some of our old debt.”
