Keynote address delivered by the Minister of Transport, Fikile Mbalula on the occasion of the industry stakeholder engagement held at PRASA Rhodesfield Station on 2 June 2022 at 10h00
Programme Director, Dr Mathetha Mokonyama Minister of Public Enterprises, Mr Pravin Gordhan
Chairperson of the Portfolio Committee on Transport, Mr Mosebenzi Zwane
Gauteng MEC for Transport, Mr Jacob Mamabolo
Member of the City of Johannesburg Mayoral Committee for Transport, Councillor Funzi Ngobeni
Member of the City of Ekurhuleni Mayoral Committee for Transport, Councillor Alco Ngobese
Member of the City of Tshwane Mayoral Committee for Transport, Councillor Dikeledi Selowa
Member of the City of Cape Town Mayoral Committee for Urban Mobility, Councillor Rob Quintas
Acting Director-General, Mr Mthunzi Madiya
Panelists
Deputy Director-General for Rail, Mr Ngwako Makaepea
Chief Executive Officer of the Railway Safety Regulator, Ms Tshepo Kgare
Acting Group Chief Executive Officer of the Passenger Rail Agency of South Africa, Mr David Mphelo
Chief Executive Officer of Transnet Freight Rail, Ms Siza Mzimela
Chief Executive Officer of the Gautrain Management Agency, Mr William Dachs
Rail Expert, Mr Jaap van der Merwe Captains of Industry
Distinguished Guests Ladies and Gentlemen
Today we are in conversation with captains of industry, operators, private sector partners, prospective investors, rail state entities and the safety regulator. Our objective is to unpack the White Paper on the National Rail Policy and explore the ambitious policy choices we have made to bring about the rail renaissance.
We equally intend to examine the structural reforms that not only seek to bring about competitiveness of our railway system, but also enable private sector participation through concessions. We will undertake a similar engagement with organised labour to ensure that the implementation of the National Rail Policy is responsive to the interests of workers.
Rail transport in South Africa has a long and colourful history dating back to 1859 with the construction of the first railway line from Cape Town to Wellington, finally completed in 1862. In 1860 the first steam train was introduced in Durban from the Market Square to the Point at the harbour.
The government of the time took over the private railway with a strategic purpose of using the railway network as a bedrock for its long-term economic goals in the 1870’s. The initial strategic utilisation of rail transport was military operations and the transportation of agricultural and mining produce.
The railways were then nationalised in 1909 through an act of parliament that gave birth to the South African Railways and Harbours in 1910.
The approval of the White Paper on National Rail Policy by Cabinet in March 2022 marked the beginning of a new chapter for South Africa’s railway industry. The journey this National Rail Policy has gone through, during the consultation process and robust engagements has been one of transformation and revitalisation.
The White Paper creates policy certainty that introduces radical structural reforms, which enable broader
participation and open new avenues for investment and competitiveness.
A key element of this is the opening up of space for private sector investment and effective economic regulation that ensures fair and regulated access to both primary and secondary networks.
Challenges in the railway sector over time, weakened the efficiency of the system and limited its contribution to economic growth and effective community connections. The de Villiers report of 1986 advocated against new rail investments but rather sweating existing assets and deregulating the road sectors.
This led to deferred maintenance of rail assets, particularly passenger rail, which resulted in the decline of commuters and deterioration of commuter rail infrastructure over the decades.
The obsolete state of much of the rail infrastructure and rolling stock, limitations of the narrow gauge and under-
utilisation of existing network presented a few of the many noted challenges facing the sector.
The White Paper on National Rail Policy intends to place rail on a sound footing as the backbone of a seamlessly integrated transport value chain that makes a meaningful contribution to the economy.
Government’s interventions to achieve railway renaissance, the positioning of rail as a key contributor to economic transformation and the reduction in harmful greenhouse gas emissions are clearly articulated in the policy document.
Key thrusts of the policy include enabling railway investment by exploiting rail’s genetic technologies to achieve the envisioned railway renaissance in market spaces such as heavy haul, heavy intermodal including double stacked containers, contemporary urban and regional rapid transit and higher-speed rail, from 160 to 200km/h and up to 300km/h.
Secondary Interventions will give effect to institutional repositioning and allow for on-rail competition.
This means that the rail market will be open for other operators to compete and improve operational efficiency needed to improve service quality and competitive pricing in freight rail.
Research conducted shows that these interventions will undoubtedly reposition both passenger and freight rail to achieve inherent competitiveness though exploiting rail’s genetic technologies that will enable the sector to increase axle load, speed and train lengths across the board.
Productivity increase and adequate skills acquisition is guaranteed through these interventions.
Improved rural access, increased mobility, increased job creation in the rail sector through infrastructure construction and contribution to economic development are some of key elements that the policy addresses in relation to passenger rail. Support is extended to the
agricultural, agro-processing as well as the mining sectors.
The Policy addresses passenger rail capacity challenges where concessioning is introduced on other lines other than those run by PRASA, where private sector can operate their services.
This means that alternative provisions for commuter rail in terms of mobility, funding and competitiveness of commuter rail systems is catered for.
The White Paper presents a multi-decade vision of how the railway sector would evolve over time through private sector participation and investment.
South Africa’s Constitution categorises public transport as a functional area of concurrent national and provincial legislative competence, while municipal public transport is a local government competence. Commuter rail is however, an integral part of our public transport system.
The National Rail Policy therefore acknowledges the importance of devolving public transport functions to the lowest levels of government.
The policy therefore requires the development and approval of a devolution strategy for commuter rail to guide the assignment of commuter rail functions to the municipal sphere of government.
A devolution Strategy aligned with the Integrated Urban Development Framework will be a key feature of the next iteration of the National Land Transport Strategic Framework to take effect in 2023.
The National Land Transport Act of 2009 (NLTA) provides for service level planning by municipalities for passenger rail service on a corridor basis. The law imposes a number of obligations on a municipality in integrating passenger rail planning in its integrated transport plans.
It is equally important to note that the NLTA empowers the Minister to assign a function to a municipality provided that the municipality has adequate capacity to undertake that function.
We will work on a framework with SALGA to guide efforts by municipalities to build requisite capacity that will enable the assignment based on the capacity of the City to manage the rail function as an integral part of the Integrated Public Transport Networks.
This therefore requires of us to implement an effective model that will enable Cities and Provinces to deliver a seamlessly integrated public transport system, with commuter rail as its backbone.
Concessioning of passenger lines is introduced to enable private sector investment and as a means to unlock economic value in the railways. The policy alludes that strategic rail network planning and oversight is a centralised strategic function that the Department of Transport must undertake.
A National Rail Masterplan, anchored on the National Transport Master Plan 2050 will be developed, setting out a sustainable approach to strategic rail network planning and a long-term-plans that inform future developments of rail in the country.
Issues of safety and security are a critical and integral part of rail revitalisation. The Railway Safety Regulator will encourage substantial new investments to implement modern safety technologies.
Current challenges of theft and vandalism of critical rail infrastructure disrupts economic developments in the sector. The corporate sector needs to find constructive ways to deal with issues of crimes, theft of scrap metals and other criminal activities that sabotages the country’s economy and growth of the sector.
Third Party Access is one of the key tenets of the policy in driving efficiency and improving rail competitiveness.
The policy sets the stage for building of local industry capacity, with deliberate bias towards localisation and ramping up local manufacturing capability.
Government will ensure industrialisation and local production of steel, railway lines and supplies, and promotion of rolling stock through policies that will need both state and private operators to procure all supplies from South African based manufacturers.
The White Paper encourages the entry of black, young, female industrialists as local manufacturers in the industry.
A local strategy will be used to develop an industry- based export strategy focused on African countries. This will support the steel master plan of Government.
Collaboration with the Department of Trade, Industry and Competition (DTIC) to create a platform to engage
private sector as part of the investment plan will form part of this journey in revamping the sector.
The White Paper alludes that in the transition leading up to the establishment of the Transport Economic Regulator, the Interim Rail Economic Regulatory Capacity (IRERC) will be utilised as an interim arrangement for economic regulation of the sector.
The Minister of Transport and Minister of Public Enterprises have concluded a Memorandum of Understanding to establish the Interim Rail Economic Regulatory Capacity (IRERC).
The functions of the IRERC include providing advice and recommendations to the Ministers of Transport and Public Enterprises, on issues such as tariff setting, access to the rail network, dispute resolution and other related matters.
The current priorities in the rail sector identified by the IRERC that require economic regulatory intervention include amongst others:
• Playing an inquisitorial role in pilot projects such as the Natcor Slot Sales that promote private sector participation as advertised by Transnet Freight Rail.
• Developing appropriate economic regulation frameworks on the processes and procedures of accessing the rail network. Frameworks for minimum access packages for different segments of the rail network can be developed.
• Building a nucleus of skills and capacity in rail economic regulation which is a scarce skill.
Rolling stock as a key pillar to railway operations will also be an integral part of rail revitalization.
The provision of own rolling stock by both freight and passenger operators is an additional funding source to close gaps between existing funding sources ad overall funding requirements and the provision of extra capacity by private sector rolling stock leasing companies.
The Private Sector Participation Framework will be developed by the Department with the aim to guide anticipated collaboration between major state-owned enterprises (SOE’s) and private sector companies for investment in new economic infrastructure projects.
South Africa finds herself in a difficult situation, where the current funding sources are inadequate to allow Transnet Freight Rail to meet the level of service and infrastructure investment required to address the rail friendly freight in the market. In line with international best practise, the National Rail Policy directs private sector participation through concessioning and third party access as a key remedy to allow rail to fully exploit the rail friendly market.
The concessioning of branch lines and the access of branch line operators to the main line will form a critical part of the Rail Private Sector Participation Framework to be finalised by the Department in the current financial year. This Framework will cover different forms of participation, a clear procurement framework and the role of rail economic regulation.
The revitalisation of the branch line network will provide focus on specific business opportunities and promote the shift of freight from road to rail.
My Department, in recognising the important role that Private Sector Participation can play in bridging the investment gap and improving operational and managerial efficiency, has entered into an Implementation Protocol with the Department of Public Enterprises to drive the development of an Implementation Plan, that will identify strategic branch lines to be put out to concession over the short to medium term.
In this instance, agricultural exports from South Africa have been the shining star in the last decade with continuous annual growth in both volumes and revenue generated for South Africa.
The significant growth of the industry and especially the fruit producing and fruit export business requires focused attention on the revitalisation of branch lines to support the sustained growth of this industry.
The introduction of a high-speed rail framework will focus on the provision of high-speed rail corridors in South Africa. This framework will determine strategic objectives for high-speed rail and the criteria to be used to determine and prioritise specific corridors.
In conclusion, the implementation of the White Paper on National Rail Policy will be segmented in terms of set timelines and policy reforms.
The short-term interventions between now and 2024, will focus on the development of the National Rail Bill, the National Rail Master plan, recovery of rail corridors, branch line concessions, third party access and development of the devolution strategy.
In Implementing this Policy, the Department will establish a working group consisting of government, the rail industry and state-owned companies to co-ordinate the critical path of implementation and periodically assess progress in implementation.
Further engagements will be undertaken with Infrastructure South Africa (ISA) to ensure that the rail projects identified in this White paper form part of the Presidential Infrastructure Co-ordinating Commission (PICC) project pipeline and elements of the broader infrastructure plan.
I thank you.
