Progress on Transnet’s decision to bring private capital to its railways has been sluggish, despite the broad welcome the groundbreaking news received when it was announced last year, according to Kumba Iron Ore.
Reflecting on the outlook for South Africa’s logistics reform agenda in its latest annual report, the country’s biggest miner of iron ore struck a sober tone, saying the utility’s privatisation push will probably take years to yield material benefits.
(Karen Moolman)
“The reform process is progressing, albeit at a slower pace than initially anticipated,” Kumba said.
“While it has been encouraging to see the strong levels of ministerial ownership in this process, the pace of the reform means it will be some time before we see any material benefits from this process,” it said.
“Given the complexity of the regulatory reform process, we recognise that this will be a multiyear process.”
The past two years have been momentous for South Africa’s ports and rails. After years of inefficiency and policy uncertainty, the government’s Operation Vulindlela strategy undertook to place logistics at the top of its economic reform agenda.
The liberalisation agenda signalled a new sense of urgency to policymakers as the state vowed to allow more private capital into logistics, which has struggled to progress under cash-strapped Transnet.
In late 2024, Transnet split into two businesses, one in charge of managing infrastructure, the other of operations.
The former is charged with managing the application process for private “train operating companies” to buy slots on Transnet’s rail network and with financing the restoration of these railways.
The agenda faces huge financial obstacles as vast stretches of Transnet’s railways continue to be vandalised or stolen, rendering them inoperable. According to Transnet CEO Michelle Phillips, customers are losing 4.5-million tonnes of goods due to infrastructure theft despite it spending R4bn on private security annually.
Last year, the utility said it would need R14bn a year over five years to get its ailing network up to standard for private operators. Analysts at Investec put the overall cost of repair at R200bn.
For Kumba, the sluggish pace of infrastructure reform is among the biggest trends in its operating environment with a material impact on its outlook. The pace and complexity of regulatory reform continue to hamper the country’s economic growth, said the group, with the effect “compounded in recent years by government corruption, mismanagement and underinvestment”.
“Critical to Kumba’s success is addressing the underperforming rail-to-port infrastructure,” said Kumba chair Terence Goodlace.
“While there have been welcome improvements this year in the stability of the Transnet’s OEC [ore export corridor], as well as early progress towards introducing private sector participation on the freight rail market, we recognise that it will be some time before we see the full benefits of the reform process given its inherent complexity,” he said.