With approximately 38 000 employees, Transnet Freight Rail is the largest division of Transnet, maintaining a core network of 12 800km and a branch line network of 3 928km across South Africa and meeting the freight transport needs of business.
“The Transnet master plan for developing the freight industry in the country includes addressing the road-rail freight industry imbalance, reducing the cost of logistics, investing to create capacity; job creation and skills development, and the promotion of a complementary port system. We also believe that the development of infrastructure as a catalyst for economic growth and partnering with the private sector will be key components of fulfilling this strategic approach,” says Mboniso Sigonyela, head of corporate communications at Transnet.
Industry focus
The focus areas of the rail division are divided among coal; iron ore and manganese (IOM); mineral mining and chrome (MMC); containers and automotive business (CAB); steel and cement (SAC) and agriculture and bulk liquids (ABL).
From a coal perspective, Transnet Freight Rail has implemented Operation Shongololo to reduce cycle time and to increase the tonnage throughput from mines to the port at Richards Bay. In addition, Eskom’s shift from transporting its coal by rail instead of by road is also driving the focus of the division on an effective coal transport strategy.
“On the IOM side, we are conducting ongoing feasibility studies for the expansion of capacity for the transportation of iron ore on the 861km rail line from Sishen to the Port of Saldanha. Naturally, operational plans will continue for the efficient transportation in long trains of manganese to the ports of Port Elizabeth and Durban,” says Sigonyela.
This is in line with the capacity of the ports until the implementation of the expansion plan for export through the Port of Ngqura, northeast of Port Elizabeth.
At this stage, mineral mining commodities (such as magnetite from the Phalaborwa area and chrome from Steelpoort and Rustenburg) are expected to reflect moderate growth. This has been enabled by the deployment of new and more efficient diesel locomotives.
In addition, containerised commodities continue to reflect growth as a result of initiatives for the mass evacuation of containers from the Port of Durban to the hinterland.
“Transnet Freight Rail is collaborating with the private sector to develop logistics solutions. High fuel costs and environmental issues make the possibility of strategic alliances with logistics companies more feasible than previously.”
On the steel and cement side, Transnet is anticipating more growth in steel imports. It will be providing support for the transportation needs of this industry within its network.
Finally, the ABL business unit is showing significant growth potential. The division has developed a revised strategy to refine operational models matched to the diverse customer and commodity portfolio.
“With this new strategy, we want to contribute to the shift in traffic from road to rail. As such, the Capital Investment Programme will also continue towards the objectives of creating capacity and modernising the rail system,” says Sigonyela.
Expanding infrastructure
In terms of integrating its rail plans to the ports expansion strategy of the country, Transnet has a long-term infrastructure plan that is in the public domain.
“Long-term planning is co-ordinated by the corporate centre, which ensures that the port and rail and pipeline plans are integrated and aligned. Overall, delivering freight reliably is the fundamental imperative of Transnet. To this end, the market demand strategy (MDS) of the organisation is aimed at increasing rail capacity to satisfy latent demand for rail services and on ensuring that port and pipeline capacity remains ahead of demand,” says Sigonyela.
In effect, this means that the strategy will help the division target aggressive growth in investment, volumes, revenue, and profit while making contributions to economic transformation, industrial capability building, skills development, regional integration, energy efficiency and job creation.
The MDS is underpinned by a R312-billion seven-year capital investment plan. Transnet estimates that rail volumes will increase from around the current 210-million tonnes to 344-million tonnes by 2021.
“A switch from road to rail will reduce costs, congestion, and carbon emissions. It will further mitigate the deterioration of the secondary road network. We will be creating capacity to meet growing demand while minimising the cost of doing business.”
He says that Transnet also has regular engagements with its major clients and industry groupings to determine their capacity requirements.
“Commodity strategies are prepared for all the key commodities. We also develop integrated account plans for all key customers across coal, iron ore, manganese, automotive, containers, and dry and liquid bulk.”
For its planned rail expansions into Africa, Transnet is focusing on three corridors: Maputo, North-South, and East-West. It is establishing joint operation centres and inter-rail agreements to improve the efficiency of all three corridors.
“We are planning to increase over-border rail volumes from 7.2-million tonnes to 18.6-million tonnes by 2021. Transnet is working closely with various industry bodies to improve the regulatory environment for over-border trains and we are focusing on exporting and maintaining rolling stock in the region.”
Targeting growth
Given all the potential that exists in the market, Transnet has several targets in place and is doing extensive planning around this. “Intermodal freight is the key growth area. The container and automotive business unit is leading the initiatives in this respect and has grown volumes by 26% in the last year. We are also planning a series of intermodal terminals in Gauteng and expanding intermodal capacity in the ports.”
Transnet has also recently signed a 10-year R24-billion contract with BHP Billiton to transport coal from its Mpumalanga operations to the Richards Bay Coal Terminal. As part of this contract, Transnet is planning to increase the capacity of the coal export channel to an initial 81-million tonnes a year.
“Our strategy for large customers is to enter into long-term contracts with them, because this minimises the commercial risk of our expansion programmes. BHP was the first customer and we expect more to sign up.”
Following the success of the BHP contract, the company has a range of projects, including expanding the iron ore channel, manganese channel, the Waterberg expansion, and the Swazi Rail Link. However, the short-term focus will be on the renewal of the locomotive fleet. As part of this, Transnet has signed a R50-billion agreement with four suppliers to manage this.
The port approach
Transnet sees a lack of quality port infrastructure on the continent as a barrier to intra-regional trade. However, the rapid development of new trans-shipment ports across the continent will result in improved port infrastructure that will stimulate intra-regional trade and benefit the organisation.
“Our master plan for the development of South African ports sees a complementary system being developed that links ports to various rail corridors. Through this, Transnet aims to become the regional container trans-shipment hub for sub-Saharan Africa.”
As part of this strategy, Transnet is working with the Ports Regulator of South Africa on the expansion of the Durban Container Terminal and the development of the Durban Dig-out Port. (The regulatory framework requires the Ports Regulator to grant tariff increases for port infrastructure).
“The capital for the port is funded on the strength of our balance sheet and on the basis of user pay principles. Transnet and the National Ports Authority have balanced its role of facilitating economic growth and its commitment to reducing the cost of doing business in South Africa by carefully undertaking capital investments.”
The development of the Durban Dig-out Port remains the biggest single aspect that is integrated into the port enhancement programme. The phased development of the old Durban international airport site to a deep-water mega container port will result in an estimated annual capacity of 9.6-million containers of twenty foot or equivalent (known in the freighting industry as twenty-foot equivalent units or TEUs) by mid-2040.
Overall, the strategic direction taken by Transnet Freight Rail and its ongoing investment in the development of rail infrastructure, is putting it in a strong position for growth, not only in the short-term but well into the future.