In an effort to curtail the decline in SA’s freight logistics system, cabinet published the freight logistics roadmap, on 11 December 2023. The document contains the various strategies which the government understands will help to resuscitate bungling divisions in the nation’s freight logistics system. Proposals tabled by the plan include: the introduction of private sector participation, particularly in rail and ports. However, as impressive as the document was, it can still do with additional suggestions, which should enable it to have greater effectiveness.
Introducing a competitor to Transnet Pipelines
The roadmap seems to have left out changes needed to improve the operations of Transnet Pipelines. In the pipelines sector, an analysis will be crucial to determine if the introduction of the private sector will improve performance. For example, an Infrastructure Manager (IM) can be created to oversee the physical infrastructure (pipelines), whilst competing distributors from the private sector are allowed to use the same pipelines in exchange for access fees payable to the IM. This can bolster competition and improve prices and service quality for local consumers of petroleum products (petrol and diesel), whose products are the main line of business for Transnet Pipelines. On the same note, prohibiting cross-subsidies from other divisions of Transnet to the pipelines division, will also be of chief importance, so that the state-owned liquid freight distributor does not enjoy an unfair advantage over private sector competition. Looking back in history (2007), cross-subsidies from other divisions of Transnet are one of the key reasons why Petroline abandoned its Maputo to Gauteng pipeline development. Transnet Pipelines could afford predatory (extremely discounted) pricing due to the cross-subsidy “guarantees” from other profitable divisions of Transnet SOC Ltd. Resultantly, Petroline deserted the project owing to unsustainable pricing which was set to make their services lack market viability.
Vertical separation and efficiency of borders
Regarding vertical separation at the country’s borders, the government can choose to be merely the “landlord”, whilst it invites private sector participants to build infrastructure and compete with each other as they clear freight. For its role as landlord, rent (monthly payments) will be due to the government, as a percentage of the tenants’ revenue or a fixed amount. Government security personnel and auditing systems, will remain at the borders, however, in order to play a crucial oversight role. The competition will lead to the introduction of new infrastructure, technology and investments, across the country’s borders. It can then become possible for new, private-sector-owned bridges, roads and railway lines to be built, thereby permitting more flows of exports and imports, pertaining to the African region.
An efficient national freight logistics system, is characterised by swift clearing of goods at the borders, and at a reasonable cost. When borders clear freight swiftly, that means exporters and importers can get their goods to their intended destination in a shorter time frame, which also provides more profit making opportunities for the businesses. Subsequently, they will end up moving more goods, in line with the faster speeds. Consequently, the higher movement of merchandise equates to growth in GDP and higher revenue for government through taxes and various charges levied on the freight.
The costs charged for each freight truck or train at the border, should also be reasonable, since expensive access fees will discourage the speed of trade, and also economic activity (GDP). Therefore, the Border Management Authority should continually compare the charges levied on trucks and trains crossing the country’s borders, against, what other countries in the region are charging. Slow clearing speeds or high charges will result in the regional freight industry establishing new traffic routes and supply chains which avoid SA.
If possible, all borders need to be upgraded to one-stop border posts. With one-stop borders, both travellers and freight are obliged to have their documents processed in only one, of the two countries at the border. They no longer need to have their documents processed by both countries. This therefore, improves efficiency. Currently, high-level discussions are ongoing to implement the one-stop border systems at Beitbridge border post, which connects to Zimbabwe. It is quite a thing of wonder, that it took so long to have such a progressive initiative implemented.
Transfer of security responsibility to the State
The roadmap emphasized the need to have a rail sector security strategy and a security coordination forum, under the National Joint Operational and Intelligence Structure (NATJOINTS). The rail sector security strategy will incorporate SAPS, SANDF and SSA in its implementation. It is also essential to emphasize that, theft and vandalism of Transnet infrastructure have persisted even in the presence of private security and Transnet security personnel. Looking at the persistence of the criminal activity, which defied private security and Transnet personnel, it is fair to suspect that, the criminals are part of organized crime rings which work in collaboration with rogue employees of the company. If that is the case, it is therefore advisable to understand that the theft and vandalism will not cease unless and until, the rogue staff members in Transnet are convinced that the security responses are now impermeable. In other words, the crime will not stop until the whole railway track (18 907 km) is covered by sufficiently armed and responsive human resources. This would thus require the government to understand that Transnet is not capable of handling such a task or deterring such threats. Additionally, due to Transnet’s importance to the overall economy, the government should therefore treat this as a matter of national security and defend the infrastructure with as much uniformed personnel (SANDF, SAPS, etc), as possible. This would also mean that the cost of securing the infrastructure would be transferred from Transnet to the state (Department of Defence, Police, or other relevant executive branches). If it means assigning 5000 soldiers on the track, then the government should supply such resources. SA cannot afford to have a staggering logistics system much longer. Thus, such interventions have become urgent and offer a chance to salvage Transnet’s impending demise.
Kevin Tutani is a political economy analyst- tutanikevin@gmail.com
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