Third-party freight rail operators hold the key to unlocking the full potential of South Africa’s mining industry, which is losing billions of rands each year because of delays and inadequate rail capacity to get minerals and resources to lucrative export markets.

A ‘rail renaissance’ for South Africa? Photo by Albin Berlin from Pexels

A ‘rail renaissance’ for South Africa? Photo by Albin Berlin from Pexels

The Minerals Council of South Africa has said that coal, iron ore and chrome companies missed out on about R35-billion last year from contracted volumes that couldn’t reach ports. Exxaro and Glencore both reported decreased sales last year, directly because of rail capacity shortfalls.

Without urgent attention, “the mining industry, the fiscus and the rail and port operator will again forgo any benefit from commodity prices by not exporting minerals to South Africa’s full potential,” the Council said. This contributed significantly to South Africa being ranked among the 10 least attractive jurisdictions for mining investment in the Fraser Institute’s annual mining industry survey last year.

Speaking at the start of the Mining Indaba today, African Rail Industry Association (ARIA) CEO Mesela Nhlapo said immediate implementation of the National Rail Policy (NRP), which has opened the door to private third-party freight operators on the South African rail network, would resolve most of the problems mining houses have in moving their products from pit to port.

“Mining remains one of the key pillars of South Africa’s economy and one that should be contributing significantly to economic growth. That growth can only be boosted if mining companies throw their weight behind the National Rail Policy, which allows for independent rail operators to use the national rail infrastructure to provide additional capacity and services,” said Nhlapo.

In his newsletter this morning, President Cyril Ramaphosa again stressed the importance of private third-party access, saying inefficiencies in port and rail had ‘severely affected our ability to export goods’.

“The White Paper on National Rail Policy, which was approved by Cabinet in March, outlines plans to revitalise rail infrastructure and enables third‐party access to the freight rail network. Transnet Freight Rail is already in the process of making slots available for private rail operators on the network,” the president noted.

Also today, in another major step forward for rail reform the Department of Transport held the official press release of National Rail Policy which will be gazetted later today. In this the DOT talks about a ‘rail renaissance’ for South Africa.

Nhlapo said opening South Africa’s rail infrastructure properly to third-party operators, in line with the National Rail Policy, would provide a multi-billion rand boost to the country’s economy over the next five years, potentially creating tens of thousands of jobs and driving massive economic benefits.

“According to the National Rail Policy, every rail line in the country – whether classified as core, non-branch or shared freight and commuter line – will be open to third-party access. The NRP clearly states that the monopoly within the rail sector needs attention, and that introducing competition on the rail network is essential,” said Nhlapo.

There has been ‘significant interest’ from investors since the Government’s decision to move forward with its long-mooted plans to provide third-party access to the rail network earlier this year.

“Early projections by ARIA suggest that additional parties using the rail network will create tens of thousands of upstream jobs by enabling industry (like smelters, steel mills, manufacturing, and agri-processing) and mining (new coal, manganese, and iron ore mines, among others) to become internationally competitive. Similarly, rail corridors into Africa would create cost-effective gateways to take South African goods into these markets,” she said.

“It will take approximately 24 months for private operators to procure new trainsets from Original Equipment Manufacturers. There is no time to lose if we are going to arrest the decline in mining capacity in South Africa. Government has provided the platform through the NRP and Operation Vulindlela to turn the current decline around, unlock investment and create growth and jobs. Now it needs to be implemented in full and in line with policy.”

Source: The African Rail Industry Association (ARIA)