Analysis

Destabilise Transnet At Your Peril

Lucky Montana Argues SA Can't Afford to Destabilise Transnet As It Did PRASA

FORMER CEO of PRASA outilnes the relationship between Transnet and PRASA but more importantly the strategic importance Trasnet holds for the South African economy and the continent. 

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TRANSNET and PRASA (Passenger Rail Service of South Africa) are sister companies. In fact, they were one company for almost eight (8) decades. They were part of the South African Railways (SAR), then the South African Railways and Harbours (SAR& H) and later the South African Transport Services (SATS). The latter was restructured to create Transnet and the SARCC (predecessor to PRASA) in 1989, when the Apartheid Parliament passed the Legal Succession to the South African Transport Services Act.

The separation between Freight (Transnet) and passenger (PRASA) in our transport system was taken to new heights when in 2006 Metrorail was transferred from Transnet into the SARCC, followed in 2009 by the transfer of Shosholoza Meyl and Autopax from Transnet into a new entity known today as PRASA. However, these two public entities are inseparable because, among others, they operate their trains on an integrated rail network, largely owned by Transnet (over 22 000km excluding branch lines) with PRASA owning the commuter network in the Metropolitan areas of South Africa.

Transnet freight trains move on their own network but also on PRASA-owned network and the same applies to passenger trains under PRASA, with Shosholoza Meyl in particular depended for 85% of its operations on access to the Transnet Mainline network and haulage services. These entities have to work together to manage interfaces, mutual use of assets and safety on a daily basis. The mutual dependencies between the two entities are significant and cannot be easily terminated. This is the strength of our railways but also its own weakness.

For those who studied dialectics, its the “unity and struggle of opposites”. Investment into this common, integrated rail network has potentially many benefits for our country, is cost-effective and could bring about major efficiencies. However, the lack of a clear Rail Policy to govern the rail sector as a whole has proved to be its undoing & a major hindrance.

Such a Policy could do a number of things: define the end-state of our railways (do we anticipate a future where there will be competition in the sector and private railway operators to compete with Transnet and RRASA, do we need a rail economic regulator who should own and invest in the rail network, should rail operations be devolved to Metropolitan level of Government, what are the investment requirements to meet current and future freight and passenger demands, etc).

Because of Government failure to resolve and finalise these policy issues, Transnet and PRASA had already been involved in many disputes in the past over matters of access to the network, level of maintenance, pricing (tariffs), railway standards, etc. When Transnet and the SARCC were created, the separation of assets between the two companies was never completed. The result is that there are lots of commuter assets still sitting on Transnet books. PRASA leases these assets from Transnet at a huge cost.

Even before PRASA could start its financial year and run its operations, it owes Transnet an estimated amount of R500 million, which is one big ticket item contributing to financial losses at PRASA.

The separation of assets is a Shareholder and Treasury issue governed by Section 54 of the Public Finance Management Act, which should be resolved as speedily as possible if Government’s objectives is to create a sustainable PRASA. Transnet is however three times bigger than PRASA, in terms of network size, value of assets, number of employees, economic contribution, etc. It is the biggest transport asset we have.

Its operational and financial results are a good indicator or measure of the overall performance of our economy. Speaking with a bit of caution, you can afford to destabilize PRASA as it has been done since 2015, but not Transnet. It’s role in our economy and the economies of Southern African is just massive. It is South Africa’s and probably Africa’s biggest transport company by any measure. Its facilities are located all over the country and supports many rural communities in South Africa. It is also vital to building the technical skills that our country is in desperate need of.

Transnet’s role is not limited to railways but includes all our commercial ports, pipelines as well as a heavy engineering business, which is in the process of being transformed into serious manufacturing capacity for Africa’s future needs. As battle lines get drawn within Transnet, I pray that our collective leadership in Government and Transnet’s Board are granted the wisdom to manage the governance issues at Transnet differently and more maturely than we did with PRASA. Moral of the Story: Destabilise Transnet at your own peril!

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