South Africa: Transnet Grants 11 Conditional Private Rail Access Slots

• Transnet's freight rail monopoly is set to end before 2026, with private companies beginning independent operations on the network.
• Eleven private operators have been conditionally selected for rail slots, pending safety assessments by the Railway Safety Regulator (RSR).
• Two companies are expected to run initial test trains by the end of this calendar year, with a third anticipated by February 2027.
• The reform is crucial due to Transnet's declining performance, which has seen cargo volumes drop by over a third in five years.
• An estimated R70 billion investment is needed over five years to repair the network, with funding expected from Trim's access fees and potential government support.

The urgency of this South Africa freight rail reform stems from the critical role Transnet’s network plays in the nation’s economy.

South Africa is on the cusp of a significant transformation in its freight logistics landscape, with the long-standing Transnet rail monopoly set to conclude before the close of 2026. This pivotal shift will see private sector companies begin to deploy their own locomotives and heavy-haul wagons onto the national rail network in the coming months, marking the first time independent operators will manage sections of these crucial lines. The initiative is spearheaded by Moshe Motlohi, CEO of Transnet Rail Infrastructure Manager (Trim), an entity tasked with the monumental responsibility of rehabilitating Transnet’s extensive 20,953-kilometer core rail network, which has suffered from underperformance. The primary objective behind opening this infrastructure to private rail operators South Africa is to inject much-needed efficiency into the system.

Trim initiated this process by inviting expressions of interest from private sector players, with applications closing at the end of February 2025. Following this, Motlohi’s office provisionally selected eleven companies, granting them conditional rail slots across Transnet’s vast network. This conditional approval underscores the rigorous standards required for entry, ensuring that new entrants meet stringent operational and safety benchmarks.

The conditional nature of these approvals means that the selected private rail operators South Africa must successfully navigate a series of tests and assessments mandated by the Railway Safety Regulator (RSR). A critical requirement is ensuring that their sourced rolling stock is configured precisely to Transnet’s existing rail infrastructure standards, a prerequisite for the issuance of essential safety permits. This regulatory oversight is paramount to maintaining the integrity and security of the national rail system as it transitions to a multi-operator model.

Currently, two companies are in the advanced stages of having their locomotives and wagons assessed, with the process reportedly nearing completion. This progress indicates that these pioneering private operators are poised to conduct initial test runs and commence moving trains on the system for the first time by the end of the current calendar year. While these inaugural operations are expected to cover short distances and involve only one or two trips daily, not fully utilizing their allocated slots immediately, Motlohi anticipates a gradual increase in operational scale over time. Furthermore, a third private entity is projected to gain access to the Transnet network before the end of February 2027, signaling a steady expansion of private South Africa Transnet private rail access.

The urgency of this South Africa freight rail reform stems from the critical role Transnet’s network plays in the nation’s economy. It is the primary conduit for transporting the bulk of South Africa’s iron ore and coal, commodities vital for global exports. Years of mismanagement, rampant theft, and vandalism have severely hampered Transnet’s operational capacity, leading to a collapse in cargo volumes by over a third in the past five years and frequently bringing the country’s exports to a standstill. This dire situation has compelled Transnet to embrace private sector involvement, not only by allowing independent train operations but also by committing to significant network upgrades.

Addressing the systemic issues requires substantial investment, with Trim estimating that approximately R70 billion is needed over the next five years to adequately repair and modernize the rail infrastructure. Given that neither Transnet nor Trim possesses these funds, Motlohi has outlined several fundraising strategies. These include Trim generating its own revenue through access fees and tariffs paid by private operators for network usage, alongside potential financial backing from the government. This collaborative approach, leveraging private capital and expertise, is viewed as the most viable path to restoring the network's functionality and shifting cargo back from road to rail.

The initial phase of this comprehensive rail reform initiative involves the allocation of 2.1 megatonnes (Mt) of rail capacity to private sector participants across five of Transnet’s six main rail corridors. Notably, the north rail corridor, which connects Ermelo in Mpumalanga to Richards Bay in KwaZulu-Natal, has been excluded from this initial allocation. This exclusion is primarily due to a current lack of available rail slot capacity on this particular route. The north corridor is strategically crucial for South Africa’s bulk commodity exports, especially coal, yet it remains Transnet’s most challenging corridor, frequently plagued by incidents of cable theft and vandalism.

Looking ahead, Motlohi has indicated that subsequent phases of the reform will focus on expanding the availability of rail slots on existing corridors, though specific timelines for these developments have yet to be announced. Ultimately, the goal is to further increase access, potentially extending it to include the currently excluded north rail corridor. This phased approach aims to systematically integrate private operators, gradually enhancing the overall capacity and reliability of South Africa’s freight rail system.

Lawyers advising private rail operators or investors in South Africa's logistics sector should monitor the evolving regulatory framework and licensing requirements for accessing Transnet's rail network, particularly regarding safety compliance and access agreements with Trim. This development creates new legal workstreams related to infrastructure investment, regulatory approvals, and contractual negotiations for rail services.

Source: Original reporting via Moneyweb