Review of Freight Transport Development in South Africa

SOUTHERN AFRICAN FREIGHT TRANSPORT INSTITUTE

The development of freight transport in South Africa has been a very short and dynamic process. From the first colony in the Cape in 1652,  transport needs grew slowly with the spread of agriculture and the settlement of the interior. The demand for freight transport was met, firstly by means of ox wagons and then as population and industrialisation increased, by a hectic forty year period of railway construction and rapid expansion of road transport.

The first operational railway line from the Point to the town of Durban opened in 1860 and by 1892 the railway was operational from Cape Town to Johannesburg via Bloemfontein, the Maputo line opened in 1894, the Natal line to Johannesburg was opened in 1896 and the line from Cape Town to Bulawayo via Bechuanaland, in 1897. After the discovery of  gold on the Witwatersrand in 1886, the growth of industry and the concentration of the  population gave impetus to the need for imports,  and rail freight transport accelerated rapidly.

It is particularly noteworthy that all the early freight transport initiatives were driven by private sector investors and businessmen who recognised that economic growth and development  was dependent on the availability of efficient freight transport. The continual pressure from the local businesses in Natal and their representatives in the Legislative Council, for funds from the British Colonial office was at times a source of friction and much correspondence, but once the railway was completed to Johannesburg the coastal colonies began to reap the benefits of railway revenue and efficiency.1

The nationalisation of the Cape and Natal railways by the respective legislatures was a direct result of the decision to place the assets under official control. The unfortunate corollary was the extension of political decision making in the commercial processes of the railways. This was further exacerbated by the full nationalisation of South African Railways and Harbours, at the formation of the Union in 1910.

During the period 1910-1980 the government controlled transport services in rail, road, air, ports and pipelines were managed by the Ministry of Transport Affairs, but were not part of the Department of Transport. The nationalised monopoly supply of transport has long been recognised as a drag on the development of the transport system of the country and has badly skewed national transport policy. In fact Hansard and the newspapers of the 1930s record debate about proposed rail expenditures with dubious commercial rationale, but with support and horse-trading between political figures to build railways in their constituencies,  as well as criticism of the official support for the defence of the SAR&H from private sector competition.

The Motor Carrier Transportation Act 1930 [as amended several times up to 1974] controlled competition from road freight transport and the State monopoly limited investment and prevented competition in ports, pipelines and air transport. According to the NTPS study, the basic principle of official policy was “non-competition” (6  p199).

Throughout the past 100 years the private sector, miners, farmers and business owners continued to find ways to develop their own transport systems on road in spite of the official opposition to competition with railways. Several enquiries (Newton Committee 1949, Marais Commission, Schumann Commission 1964) raised questions regarding the optimality of the situation where government officials were both players and referees, in industries as competitive as freight transport on land and sea.

Then in 1985 the National Transport Policy Study made recommendations to deregulate freight transport of both rail and road to promote competition and increase the efficiency of supply of transport. The same study made recommendations to focus and improve regulatory efforts  on ensuring the quality of transport operations. Failure to develop an effective road operator registration and control system left a wide hole in the application of operator quality regulation that has still not been addressed 30 years later.

For the railways and harbours the “deregulation” meant that SA Transport Services (created in 1981) became a parastatal quasi-autonomous company with one sole shareholder, the Ministry of Public Enterprises ( not the Ministry of Transport). The company was required to “get competitive”, become self supporting, shed non-viable social services (except for those to be subsidised by government). The management responded by restructuring, engaging the unions to achieve reduction of employment numbers, then 230,000 employees, shedding of services, closure of stations and halts and introduction of containerised goods services.

(PX and CX ). Strategy included reorganisation of marketing services in “ a new market oriented approach” to challenge the surge in private sector road transport that was expected to result from deregulation.3

Unfortunately the foray into automated container express services in the PX system did not yield the efficiencies and attract the planned business volumes,  and the policy of closing stations, goods sheds and sidings aggravated the decreasing accessibility of the rail services. At the same time, the effect of deregulation of road transport was a rapid increase in the numbers of long distance road freight hauliers entering the market. The removal of permit restrictions in the 1990s rapidly led to oversupply and fierce competition for high value rail cargo and industrial bulk haulage. The road freight industry responded by making representations to the Department of Transport (as “their” transport authority),  for increased carrying capacity for road vehicles.

The increase in the permissible legal axle loads [LAM] for road freight vehicles from 8200  kgs per axle to 9000 kgs per axle was accompanied by further legislation to increase vehicle combination lengths [to 22 metres] and semitrailer length (from 12 to 14 metres), vehicle widths [2.5 to 2.6 metres] and vehicle height [4.1 to 4.3 metres]. The bridge formula was changed to improve the use of the new dimensions. Although axle loads of 9000 kgs would theoretically  permit a 62 ton gross combination weight  [65 tons with 5% tolerance],  allegedly at the request of the railways,  a limit of 56,000 kgs Gross Combination Mass [GCM] was introduced, [unrelated to bridge or axle load limits]. The effect on the biggest long haul combinations of capping the GCM at 56,000 kgs represents a restriction back to 8000 kgs per axle for a 7-axle rig.

As predicted by the Research Unit for Transport and Physical Distribution Studies [RTPS] at RAU2 , increasing the legally permissible axle mass loads would increase competition for long haul rail cargo and would move volumes from rail to road. This is due to the fact that larger road vehicles can transport cargo at lower cost per ton kilometre than smaller vehicles. In fact the combined effects of deregulation, increased cubic dimensions and increased carrying capacity greatly enhanced the competitiveness of road haulage and caused a rapid expansion of the road transport industry into what was previously high value rail cargo [the extent of the modal switch was originally estimated to amount to about 35%].

This trend was exaggerated by the rapid increase in the manufacture and import of the products of tertiary industries and the fact that a large proportion of industrial and domestic cargo “cubes-out” before reaching maximum weights [in USA 76%]. This means that the increase in vehicle cubic dimensions and the axle loads granted in the 1990s opened possibilities for reduced rates, and aggravated the transfer from rail to road, which has greatly exceeded the predicted  35% of general goods traffic then on rail.

The deregulation of the railways included policy revisions that relieved it  from “public carrier” obligations and committed it as a parastatal monopoly to pursue profit and self sufficiency. The need to be self supporting led to strategic actions taken by the railways management to reduce costs and improve profitability by focusing on profitable operations. These actions included  closure of sidings and stations, scrapping of rolling stock and locos, deferred maintenance, minimal capital  expenditure, introducing minimum consignment sizes, limiting branch line services, and a general withdrawal of wagon load services for general and industrial cargo.

 In the period from 1983 to the present there has been a concentration of railway operations and reduction and scrapping of equipment and facilities. By 2007 the loco fleet had shrunk from 4000-5000 units to about 2000 units [of which about 1800 are believed to be fully operational], the wagon fleet has shrunk from 180 000 units4 to about 80 000 units. During the period the general cargo carried,  has reduced by more than  50% whilst bulk mineral cargo has increased by the same amount, as shown in the graph below.

Annual Tons on Rail by Freight Category – 1949-2011

The overall demand for general freight transport has increased exponentially since 1980 but the railways has substantially reduced its levels of general cargo hauled (blue line). Overall railway capacity has in fact expanded minimally over the past twenty years (red line) whilst the demand for industrial transport has  promoted the growth of road haulage to approximately 180 million tonnes of freight on the major corridors and main provincial routes (pale blue line A-B) in 2008. The fact is that whilst the world has seen the biggest bulk commodity boom in history, over the past 6 years, South Africa missed it completely due to inability to deliver.

The number of Heavy Goods Vehicles [HGVs] on most major roads increased by over 100% in the period 1980 to 2007. The combined effect of transfer from rail and the increasing volumes caused by economic growth meant that road haulage has been  increasing at about 8% per annum. The increase in general road freight cargo is expected to reduce somewhat in the future and continue at about 4-5% i.e. at levels slightly higher than GDP, but continued growth of bulk mineral exports by road can be expected if rail capacity cannot be improved. In 2010 bulk exports of manganese through Durban amounted to 1.4 million tons and coal 1.0 million tons, and at Richards Bay exports of woodchip, ferro-chrome and other minerals provide a growing market for bulk road haulage. The volumes of general long haul road freight have held more or less steady since 2007 due to the world recession, but the tonnage of bulk goods on road continues to rise for lack of rail service.

The question that remains  to be answered , when all the history has been described, is,  “Ja well no fine……”   “Siyaphi suka la  “?  ;  where to now?

In looking ahead, it is important to bear in mind that for 25 years the post-deregulation management of the railways have grappled with the combined effects of labour policy, excess facilities and under-utilised track, lack of finance and the limitations of the ageing infrastructure and equipment. The management has continued to focus on the major priorities of rail freight, bulk haulage of industrial and export commodities, to optimise the available capacity as far as possible. The organisation is  locked into a  policy framework that virtually guarantees the future continuation of the status quo, and only national policy change,  not company management decisions will alter the situation.

The Catch 22 situation is that without huge (and likely unaffordable) capital injections by government and massive service upgrades, the situation will decline further,  but if there is massive capital expenditure and minimal increased efficiency, the resulting services will  be priced out of existence. The only solution is improved efficiency, and that will not happen without changing the model and introducing competition.

Current capital budgets of R90 billion sound like serious commitments but when analysed against the realities of the existing situation, will not make significant impact on customer service. A rough estimate of capital requirement for  equipment to provide rail service for an additional 16.5 million tons of existing bulk commodities currently on road, on the Durban – Gauteng line is approximately  R40 billion, for rolling stock, without fixed infrastructure upgrade costs. The commissioning of some new locomotives in 2012 is good news indeed, but with a loco fleet of 2000 thirty year old locomotives there is need for replacement of 200 per year, every year for the next ten years at about R37 million each, and of course the wagons to match.

Current planning, projects, spin, publicity and promotions are chiefly designed to “prove”  the efficiency of the existing situation and to promote  continued government complacency that the railways, ports and pipelines lead the “state of the art “in provision of transport services. This is not new, in 1985 we were told “ South African ports are consistently found as having the fastest handling rates in the world. Rates of 900 containers in a 24 hour period” ….3 ; in 2011 we are told by the Ports Regulator, that Durban is the most expensive port in the world.

In 2008 we were told “Ramos said the state- owned transport group planned to grow general cargo at a rate of 6.5 p.a.” 4 which should have made it 20% higher by 2011.

In  2012we are told that “TFR target 40% market share gains” 7

The continued claims of increasing efficiency are belied by the failure to provide adequate rail (and port)  services. This is evidenced by the large volumes of bulk commodities on road to the ports, reducing tonnage on branch lines, and disclosures that SA ports are among the most expensive in the world. Competition is increasing from nearby regional ports and corridors and declining competitiveness in South African manufacturing and mining is being aggravated by current logistics costs and constraints.

The American railway renaissance only came about after national transport policy shifted to promote restructuring and competition; the revival of privatised British railways continues steadily despite increasing road haulage. Australia looks to a future of increased use of rail for bulk haulage. In South Africa  there is need for independent, objective, realistic analysis, research and planning for a future free of the political constraints to efficiency in the provision of transport on rail, road, ports and pipelines.

To reiterate the suggestion of the NTPS made in 1984 (5  p. 237), there is evidence of a need for a “Multilateral Technical Committee on Transport “ that can draw on a range of commercial , official and academic expertise to define the scope of objective research that will provide factual bases for  workable policies, strategies, and planning  for the future of all modes of transport in South Africa. The specific objective of such a multidisciplinary task group should be the creation of structures that will result in sustainable transport efficiency as the basis for national economic competitiveness, investment, job creation and growth.

The various “transport policy studies” of the past 30 years have failed to make any impression due to lack of incisive analysis, emphasis on infrastructure, lack of operational research, obstruction, and skew and dilution of recommendations to accommodate the established constituencies. None of them has produced any meaningful analysis of the situation or succeeded in changing the official view that all is well. The problems are known, the impacts are evident and the solution is available, if government has serious intentions of addressing the future efficiency of the transport systems of the country.

References :

1.Heydenrych H.                         

The Natal Main Line Story Pretoria

2. RTPS-RAU                             

A Marginal Cargo Impact Analysis of Rail Freight in South Africa RTPS ; Rand Afrikaans University – May 1993

3. SATS                                     

1910-1985 SATS- The Story of Transport in SA Transport Services -1986

4. SAR&H                                   

This is SAR & H Railways Handbook SAR&H 1978

5. Business Report                     

Transnet ups Tempo to win Freight Traffic Business Report 19-8-2008

6. NTPS                                     

Final Report on Stage 2 : Legal and Organisational Aspects of Transport Directorate Land Transport July 1984

7. Business Report                     

TFR Targets 40% Market Share Gains  Business report 16-2-2012