We are not getting rail right in South Africa

Two articles from the FM caught my eye.

The first by David Williams shows that Transnet are just rubbish at providing a good service with their existing infrastructure and core business of freight rail; and the second shows big thinking on a new high speed Durban to Gauteng link.

On the high speed link: its a nice idea but the massive cost (10 x Gautrain as a high level estimate – R250bn) does not justify the benefit. For passengers there is the new R8bn King Shaka International Airport and for freight, clients are looking for reliability not speed. Given the lengthy customs and freight forwarding process at the port, shaving a few hours off the rail time is insignificant.

Rather:

  1. Invest in maintaing and modernising the existing line
  2. Align the port, customs, container handling facilities & rail to provide an integrated & seamless logistics service from ship to door in Gauteng
  3. Invest in a high quality public transport system (light rail for Durban, Gautrain already in place on the other side) so people can easily get from city to airport.

Pretty sure all this can be done for a lot less.

(Text of articles below)

There is the danger of a vicious circle: declining volumes result in increased tariffs, which in turn makes road transport more attractive 

Transnet is trying to deal with the extended neglect of the country’s railways, at the same time as making plans for 30-50 years down the line — all against a legacy of policy confusion, flawed governance structures and a crippling skills shortage. 

The massive state-owned enterprise (2009 revenue: R33,6bn) is battling to meet demand on core operations like the coal export line to Richards Bay. It is also losing customers in some sectors, and general freight volumes have been declining. Yet Transnet expects total demand for freight to double within the next two decades. 

The prediction may be accurate, but the question is whether most of the demand will in fact be met by road haulage. 

In a wide-ranging but largely overlooked presentation to parliament at the end of last year, the Transnet executive team set out the difficulties for rail, and dropped some heavy hints to its “shareholder” (government) about the need to get beyond “policy and regulatory uncertainty” and achieve “a shared vision”. 

It doesn’t help that Transnet reports to the minister of public enterprises rather than the minister of transport — or that for many months it has had an acting chairman (Geoff Everingham) and acting CEO (Chris Wells), with the succession politicised as an extension of infighting in the ruling ANC. 

Wells and his team reminded MPs that SA has an unusually transport-intensive economy. The country contributes 0,4% to world GDP, but accounts for 2,2% of global surface freight as measured in ton kilometres. Its industrial and commercial heartland, Gauteng, is 600km from the nearest port, Durban. Most export-driven mining activities are as far or even further from the sea. 

This means that domestic logistics costs are relatively high, as are ocean freight rates for container shipping, because of the distance to major trading partners. There is also poor connectivity with other Southern African economies. 

Transnet’s recommended solutions seem like common sense. It needs to streamline its operation and achieve greater integration with port and road. It believes it cannot continue living from hand to mouth and sets out five “rail planning principles”: 

Supply the capacity ahead of demand; 

Align investments with expected freight types; 

Improve operational characteristics; 

Separate commuter services from freight network where appropriate; and 

Reconfigure the network to optimise traffic flows. 

This sounds blindingly obvious — which in itself is a measure of how misguided, chaotic or non existent long- term planning for the railways has been over the past three decades. 

Transnet wants to close or concession about a third of the national rail network — mostly branch lines that served an economic and social need for about 50 years after they were built in the 1920s and 1930s, but are now viewed as redundant (see Features April 16 2010). The remaining 12000km will make up a “high-performance corridor backbone” (see map on page 32) that will ease congestion and provide new capacity. 

Much has already been done since the financial turnaround of Transnet began six years ago under Maria Ramos (now Absa CEO) . In the past three financial years, R53,4bn was spent on ports, rail and pipelines. Between now and 2014, another R80,5bn in capital expenditure has been approved, nearly a third of it to be spent on railway rolling stock. 

Perhaps the most ambitious aspect of the long-term strategy is the “freight ring” concept for Gauteng. Because the province is the hub for most regional and port freight connections, its railways have always been prone to congestion, made worse by having to accommodate suburban passenger traffic. Meeting future freight demand will depend on creating bypass routes rather than merely upgrading the existing network. 

Several bypasses were considered, such as a line from Magaliesburg to Kaalfontein and the Sentrarand marshalling yard (west-east) and from Rustenburg to Welverdiend (north-south), but most were rejected because of the cost or environmental and geological issues. The favoured route seems to be one going from Rustenburg north of Pretoria and then south east to Sentrarand. 

But the cost of a bypass would run into billions of rand and has apparently not been taken into account in Transnet’s overall capex plan, which involves “reinvesting cash from operations and significant borrowing”. 

The problem with “cash from operations” is that rail freight volumes have not increased in line with the financial turnaround, and have in fact been dropping steadily when measured against the growth of the economy. In the 13 years since 1996, total volumes carried by Transnet have risen by just 3% (see chart on page 35) and the general freight business has actually declined. 

Tempting as it is to get excited about big new projects, the legacy of a quarter of a century of neglect is still being addressed. From about 1980, Transnet’s rail infrastructure and equipment were allowed to steadily run down. The average age of diesel and electric locomotives rose to 25 years, against the world standard of 15 years. Only now is this being rectified, as orders for new locomotives are approaching delivery. Desperately needed goods wagons were scrapped, many others in the fleet are obsolete, and there is a nationwide shortage of wheels. 

Safety standards deteriorated to the point where Transnet admitted that “our accident record is not acceptable.” Among the factors cited were “substance abuse, driver fatigue and external stress”. And theft and vandalism have wrought enormous damage, not helped by the incorporation of the old Railways Police into the SA Police in the 1980s. 

Road hauliers have enjoyed the benefits of one of the world’s highest road axle- load restrictions, compounded by illegal and generally unpoliced overloading. Rail has to pay for its own infrastructure, whereas most roads are maintained by the taxpayer. 

Policy confusion over possible privatisation, partial or complete, has been another agent of paralysis. 

The overall result, inevitably and steadily, was more inefficiency, plummeting morale and declining market share. 

Five years ago Dolly Mokgatle, then CEO of Spoornet (now Transnet Freightrail), was interviewed by the FM on how the railways would regain traffic lost to the roads. She referred to “quick customer wins”, reflecting the kind of thinking that she expected would do much to regain the confidence of former rail users. 

“The first,” wrote the FM (Business December 3 2004) “is Thuth’ihlathi, a collaboration between Spoornet and timber industry customers in the Pietermaritzburg area, launched last December [2003] and already a dramatic improvement on previous practice. Timber volumes are up 23%, use 28% fewer wagons, and turnaround time has been halved.” 

The project designer, Magiel Pretorius, commented that “the train service is predictable and runs according to a drumbeat. There is now one set of rules for both Spoornet and the timber industry.” 

The success of the project was based on two simple partnership mechanisms. The strategic “timber council”, involving senior members of Spoornet and the industry, sat every month. The smaller and more tactical “timber table” met weekly to assess the previous week’s performance, discuss changing customer needs and adapt train schedules according to those needs. 

“We have the same objectives — to improve efficiencies and increase volumes,” said a Spoornet manager. “This kind of collaboration will eventually filter through to other industries.” 

Perhaps it has — but the early success in the timber industry was evidently short-lived. In January 2010, Transnet ceased carrying timber on the once-busy lines from Pietermaritzburg to Greytown and Kokstad. Hendrik de Jongh, Sappi Forests MD, told the FM the company’s use of rail had been reduced, “but this is due entirely to the service delivery capability of Transnet Freightrail. Rail remains the preferred mode of transport for Sappi.” So much for “running to one drumbeat”. 

What is disturbing about this tale is that timber is one of the commodities that is regarded as rail- friendly. Others include minerals like iron ore and coal (with dedicated lines that account for 58% of Transnet’s total freight revenue), cement, liquid fuels, fruit, sugar cane and grain . 

The story of Transnet’s interaction with such sectors has not generally been happy. Take sugar cane as an example of a broader trend. The KwaZulu Natal government’s transport databank refers to a sugar mill at Felixton that receives 350000t-400000t a year in rail trucks from the Nkwalini area. “The mill was designed to receive 80% of the cane supply by rail, but the railway operator has gradually reduced the service to the current levels,” notes the databank report. Cane from new developments in the Mkuze area is being transported by a large new fleet of road vehicles. 

“If there is ever a need to revert to the use of rail transport,” continues the report, “there will be very significant capital requirements, as most of the mills have removed all the infrastructure for transshipment from road to rail and, in some cases, developed storage and handling facilities that are not accessible by rail.” 

A similar trend was seen in the grain industry, for many years one of rail’s biggest customers. Admittedly, the peculiarities of the market make this one of rail’s most difficult operations. Grain crops vary because of the weather and planting seasons, and the traffic (especially maize) presents awkward logistical challenges. It is seasonal, which means branch railway lines that serve silos are hardly used for several months of the year, but they still have to be maintained. 

Because of the weather, the size of the crop is unpredictable, which makes planning difficult. Much shunting is required as single wagons from far-flung depots are combined into trains. 

By 2007, the fleet of bulk grain trucks had dropped from 8000 to 5500 wagons in a decade and turnaround times had doubled. 

The problem for Transnet is that even as it tries to improve its service — and it made concerted efforts in the late 2000s — frustrated customers turn to road. Once they are lost, and have bought fleets of heavy trucks (as timber companies have recently done) and invested in alternative loading and storage facilities, it is extremely difficult to lure them back. 

There has long been the danger of a vicious circle: declining volumes induce managers to increase tariffs, which in turn makes road transport more attractive. Branch lines are closed, which in turn reduces the amount of traffic on main lines. The danger, then, is that by the time Transnet’s admirable and ambitious plans are realised, too many customers will have been lost to road.

The enthusiasm which greeted transport minister S’bu Ndebele’s remarks about a new, high-speed, broad-gauge railway line from Johannesburg to Durban was premature. No feasibility study has yet been done — though one was promised more than five years ago by then Transnet CEO Maria Ramos, when she raised the idea.

Engineering experts consulted by the FM warn that such a project would cost hundreds of billions of rand. Using the Gautrain’s estimated cost as a base (it has risen from the original R7bn to R25bn) it’s clear that a line with more than 10 times as much track, carrying many more train sets, not to mention the civil engineering, would break the national bank.

The priority is more mundane: increase traffic on the present electrified, double-track link from Gauteng to Durban. Transnet’s official daily record of trains shows that the corridor’s capacity of more than 200 trains a day (both directions) — established in the 1960s — has not been remotely approached in the past decade. Traffic has actually declined since August 2007, when the most trains to run in any 24-hour period was 64, and the average was 50. In March 2010, the maximum was 48 (twice), the average 35, and there were four days on which no trains ran at all.

Goods traffic in SA has a long way to go before it gets close to testing the present rail capacity available to Transnet. And even if the Johannesburg- Durban lines were operating at full capacity now, the facts of geography would be unchanged. A new, broader-gauge line would require a huge, even reckless, investment in civil engineering.

Southern Africa’s railway gauge is 3 ft 6in, regarded as narrow by global rail standards. The narrower gauge was chosen originally because, in a country with mountainous regions and steep escarpments, it would entail much less civil engineering and therefore save considerably on cost.

The challenges to engineers on the 90km stretch between Durban and Pietermaritzburg alone (see chart) should illustrate the point. Major upgrading of this part of the line — which rises 900m above sea level in just 100km, and was first built in the 1890s — was done in the 1950s, and a broad-gauge line would require a completely new and prohibitively expensive alignment.

In any case, speed is not a major issue for freight customers, who want a service to be frequent, regular and reliable.

Regarding Ndebele’s remarks, transport ministry spokesman Logan Maistry told the FM that a detailed feasibility study would be undertaken by next March, to indicate “the most cost- effective project implementation plan”.

Maistry says the feasibility study will also take into account other spending requirements, such as the R75bn road maintenance backlog.

An engineering consultant, who declines to be named, says even allowing for economies of scale that the Durban link may realise, it is simplistic but reasonable to multiply the cost of the Gautrain by at least 10 to calculate the 600km to Durban — “it would not be under R300bn, maybe much more”. That sort of money would provide more than enough power stations for Eskom.

The feasibility study will also have to answer what type of freight might benefit from having a reduced travel time. And if the line caters for passengers only, it is unclear who it might be aimed at since flights take one hour and a car or bus trip takes a comfortable seven hours.

A known sceptic towards these mega projects is deputy transport minister Jeremy Cronin. In his previous posting as chair of the transport portfolio committee in parliament, Cronin never lost an opportunity to attack the Gautrain. Cronin was particularly irked that the project started as a provincial project and did not need cabinet approval.

When the cost hit R20bn, the province came to parliament to report that the project would have to be co-funded by national government. Cronin’s argument was that such an amount could fix the entire public transport network for Gauteng, and benefit the masses.

This week, Cronin did not return calls and his office referred inquiries to Ndebele’s office.

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