Department of Transport briefing on the transportation of goods by road and by rail

Meeting report

Briefing by the Department of Transport (DoT) on the transportation of goods and the reduction of transportation by road by moving to transportation by rail
Mr Clement Manyungwana, Acting Deputy Director-General, Department of Transport presented the briefing to the Committee (see attached document).

The presentation included a problem statement; a situational analysis; an illustration depicting the key freight corridors; statistical data on the extent of freight moved by road and by rail; the key challenges concerning the movement of freight by road and by rail; the factors contributing to the decline of the rail freight industry; the strategic interventions and programmes of the Department and an overview of the way forward.

The Cabinet approved the National Freight Logistic Strategy in 2005 and the White Paper on Transport Policy dictated the Department’s objectives for the movement of freight by 2020.  The Department had developed Provincial Freight Data Banks, which were used to analyse provincial data on the movement of freight by road, rail, air and sea.  The provincial data was consolidated to provide a picture of the national movement of freight.

The problem statement highlighted the challenges resulting from the increase in the movement of freight by road and the decline in the amount of freight that was transported by rail.  The transportation of freight by road had contributed to the deterioration of the road infrastructure.  The road network suffered from a lack of maintenance and insufficient funding.  The shortfall in the funds available to maintain the road network amounted to R72 billion in the previous financial year and had escalated to R156 billion in the current year.  The movement of freight by road and by rail was competitive rather than complementary.  The transportation of freight by rail was inefficient and exacerbated by the deterioration of the rail network, in particular the secondary (branch line) network.  The railways had insufficient capacity to allow it to re-gain lost market share.

The situational analysis revealed the rapid expansion of the road freight industry since it was deregulated in 1989.  Currently, 87% of freight was transported by road.  The total volume of freight transported by road during 2007 was 1,383 million tons.  The land transport sector contributed 6.6% (i.e. R74 billion) to the gross domestic product (GDP) in 2007.  The road transport sector contributed 5.9% (R66 billion) to GDP during the same period.  Only 1% of freight was transported by rail in the metropolitan areas.

The Department had undertaken a study of the transportation of freight by road and by rail since 2003 in conjunction with the University of Stellenbosch.  The presentation included a map of the country and neighbouring areas, which indicated the main transport corridors.  Statistical data was provided on the total tonnage, percentage of freight transported by road and the anticipated increase by 2020 for the main routes.  The type of commodity that was suitable for transportation by road, rail or pipeline was analysed.

The policy of the Department was that cargo that was suitable for transport by rail should be transported by rail and not by road.  However, the rail network did not have the necessary capacity to absorb the demand.  Consideration had to be given to what mode of transport would be most effective for a particular corridor.  Other factors that had to be taken into account included the type of commodity, the value of the freight, the volume of freight and the distance that had to be travelled.  The Department’s delivery agreement with the President had set a target of 205 million tons of freight to be transported by rail by the end of the 2011/12 fiscal year.  Currently, only 186 million tons were transported by rail.

The key challenges faced by the Department included the damage to roads resulting from intensive use by the freight industry; increased congestion, accidents and pollution; the high volume of freight transported by road; the insufficient capacity of the railways; the aging rail infrastructure and the lack of integration between the road, rail, air, maritime and pipeline modes of transport.

The factors contributing to decline in rail freight were a lack of flexibility in the services offered by the railways; the inadequate investment in the rail network and rolling stock; outdated technology to handle high volume inter-modal traffic; a lack of customer focus; restrictive working practices; insufficient train drivers and inadequate investment in training, staff development and staff retention; incompatible traction power, rolling stock, signalling and train communication systems.  The capital expenditure budget of Transnet was R110 billion over the next five years but this was not sufficient an additional funding would be required to develop the branch line network.  The rail transportation tariffs were determined without consultation.

The strategic programmes developed by the Department included the establishment of an Integrated Transport Commission; the alignment of the mandate of Transnet with the country’s development goals; improving the connecting infrastructure between the rail and other transport modes and setting targets for rail transportation at ports.  The objective was to establish an efficient and integrated logistics system that allowed the various modes of transport to complement each other rather than to compete and to reduce the amount of goods that was transported by road.

The key rail interventions included the development of a clear rail industry governance system; the implementation of a rail revitalisation programme; the introduction of high speed rail systems; the promotion of rail transport as a mode of choice for passenger and freight transport; active State involvement in investment in the transportation networks and facilitating the participation of the private sector; the development of a national programme of recruitment, training and skills development; the implementation of a strategy to revitalise and develop the branch line network; encouraging the involvement of micro enterprises and cooperatives; the implementation of a comprehensive safety and security strategy and the establishment of local industries to serve procurement needs.  A Rail Infrastructure Entity would manage the rail infrastructure on behalf of Government and the Rail Economic Regulator would assist in levelling the playing field.

The presentation was concluded with an overview of the way forward.  The lack of capacity of the railways and increased freight demand had resulted in road transportation becoming the transport mode of choice.  All the stakeholders in the transport sector had to become involved in making rail transportation a viable option.  A Road Freight Strategy was currently under development but was challenged by limited stakeholder buy-in.  Government was committed to the revitalisation of the rail freight industry.  A Rail Policy was under development and the draft Green Paper on Transport was being considered by the DoT.  The Committee would be consulted on the Green Paper before it was formally launched and gazetted.  Extensive consultation with the public, stakeholders, Government Departments and other organs of State, NEDLAC, the Cabinet clusters and Parliamentary Committees would take place before the White Paper on Transport was formally adopted by the Cabinet.

Discussion
The Chairperson thanked Mr Manyungwana for the briefing.  Most South Africans were aware of the increased levels of congestion and the deteriorating road infrastructure.  The need to shift the transportation of goods from road to rail was clearly understood.

Mr S Farrow (DA) noted that the debate on the transportation of goods was long overdue.  The issue had been on the agenda of three successive Ministers of Transport during the previous 14 years.  It would however appear that little progress had been made to shift the transportation of freight from road to rail.  The reasons for the increased demand for road transportation had to be understood.  The freight industry cited cost and delay as the major factors in the transportation of goods.  Transnet had a monopoly over the rail network and had moved to a competitive scenario from an earlier complimentary position.  He asked if the Department had made any progress in getting Transnet to understand that the entity was a part of the transport mix.  It was not possible to achieve a seamless movement of goods and services if two Ministers were responsible for transport and for Transnet.  The focus of parastatals was on making profits whilst the focus of the Department was on the application of State funding on the road transport infrastructure.  The two Departments needed to discuss their priorities and agree on a common objective.  The Rail Economic Regulator had to be established as soon as possible.  South Africa already had the most expensive ports services in the world.  There was much pressure on Transnet to improve its bottom line as well as reducing the cost of services and improving the level of service.  At the Port of Durban there were many trucks waiting to transport the containers offloaded from ships by road instead of moving the freight by rail.  Progress would not be made unless a system of regulation was put in place that would ensure that transportation by rail was more cost-effective.

Mr Farrow said that the South African National Road Agency Limited (SANRAL) had reported a backlog of R140 billion for the maintenance of South Africa’s roads.  He asked if the Department had determined how much funding would be required to maintain the road network and to bring the rail network up to scratch.  He noted that the Department had acknowledged the importance of the branch line network in achieving the rural and social development goals of the country.  The objectives to improve efficiency in the transport sector would not be achieved through Government funding alone.  He wanted to know what progress had been made in involving the private sector through the formation of Public/Private Partnerships (PPP’s).  In terms of the Road Traffic Act, the Minister had the power to regulate the movements of goods and services but the Minister could not unilaterally decide which commodities should be transported by which mode of transport.  Despite the legislative provisions that allowed regulation, the Department had allowed the situation to worsen and the backlog in maintaining the transport network to escalate.

Mr M De Frietas (DA) was disappointed that the presentation did not include anything new.  He had hoped that the Department had devised concrete plans to implement the strategy that had been developed.  He suggested that the Department prepared a briefing to the Committee on the actual implementation plans that had been put in place.

Ms N Mdaka (ANC) said that the Members were aware of the challenges concerning the damage to roads, increased congestion, an increase in the number of accidents and the deterioration of the rail infrastructure.  The Committee could assist the Department in realising the objectives that were outlined in the way forward.  The Committee would rather have heard from the Department on what progress had been made in involving the Cabinet clusters, other stakeholders and the public in finalising the Green Paper on Transport.

The Chairperson noted that Government was spending a significant amount of money on repairing roads.  Road accidents cost the country in excess of R1 billion per annum.  Many trucks were involved in road accidents.  She agreed that the volume of goods that was transported by road was a major challenge.  She urged the Department to fast-track the process as the move from freight transport by road to rail was long overdue.  The Committee welcomed briefings on the progress that had been made, rather than a repetition of the same information.  Transnet controlled the rail infrastructure and it was essential that the Department and Transnet interacted effectively.  Much of the existing rail infrastructure was under-utilised.  The Committee had observed the situation at the Port of Durban during a recent oversight visit.

Mr Farrow asked for details of the feasibility studies on branch lines that had been undertaken.  He understood that the bids for the studies were unsolicited.  He was aware that three of the studies had identified potential PPP’s in the Northern Cape, Gauteng and Free State provinces. He wanted to know if any of the recommendations had been implemented and what the implications were for the PPP’s.

The Chairperson allowed Mr Manyungwana the opportunity to delay the Department’s response to Members’ questions and concerns until the next meeting with the Committee.

Mr Manyungwana explained that the Department and Transnet had issued an expression of interest, which would eventually result in a request for a proposal.  The expression of interest had resulted in three unsolicited bids, which gave an indication of the appetite of the market in getting involved in PPP’s. The Department had initiated interventions with regard to the Durban-Gauteng corridor.  The Minister had undertaken to champion the pilot project concerning the Durban-Gauteng corridor, which would serve as a test of the impact made by the DoT interventions.  The Minister championed the steering committee that was formed under the chairmanship of the Director-General of Transport.  The steering committee included all the relevant stakeholders in the Durban-Gauteng corridor, including representatives from ACSA and the Premiers of the Gauteng, KwaZulu Natal and Free State provinces.  Four work teams were established to deal with infrastructure and planning, funding, policy and communication.  Critical timelines were determined for the priority projects that had been agreed.  The Transport Master and the pilot project would be presented to the Planning Commission on 25 August 2011.  Other projects involved the deepening of the Durban harbour, the old Durban airport and developments in Harrismith, Cato Ridge and City Deep.  The Durban/Gauteng project had been presented to the Cabinet and the Department planned to brief the Committee on the various projects in the near future.

Mr Manyngwana agreed that the process had to be fast-tracked.  Certain issues concerning policy needed to be clarified.  A draft Branch Line Policy had been presented to the Director-General cluster and would soon be presented to the Ministerial cluster and to the Cabinet.  The target date for opening up the secondary rail network to private participation was December 2011.  A final round of consultations would be held before 8 September 2011 before the plan was referred to the Cabinet.  If the plan was approved, the Department would have the necessary leverage to instruct Transnet on what had to be done.  A draft Rail Freight Strategy awaited approval.  The management of the road network had to be changed from the current deregulated regime.  However, extensive public consultation had to take place before the matter could be brought before the Cabinet.

Mr Manyungwana referred to the Department’s S’hamba Sonke Programme, which played a critical role in the maintenance of the road network.  In addition, a joint project with Transnet was undertaken to map the secondary road network and the roads used to move the most freight.  The project had been costed and the Department had requested funding of R3 billion from the National Treasury.  However, the Treasury had turned down the request on the basis that the project fell under the mandate of Transnet rather than the DoT.  Unless there was a clear policy directive on the future direction of transportation for the country, the necessary funding would not be made available to the Department.  The Department continued to negotiate with Transnet in order to implement the pilot projects.  The Committee would be briefed on the progress made, the finalisation of the Branch Line Strategy and the development of the Road Freight Strategy.  However, the National Transport Plan was a pre-requisite and need to be in place before any of the Departments projects could be implemented.  The Department would present the National Transport Plan and the 2050 plan for the freight corridors to the Planning Commission on 25 August 2011.

Mr Manyungwana informed that a Ministerial task team had been established to foster the relationship between the DoT, Transnet and the Department of Public Enterprises (DPE).  The task team focused on reaching agreement on the implementation of Government policy and dealt with the issues concerning the branch lines, the ports and cross-subsidisation.  It was accepted that the DoT was responsible for formulating the transport policy, which had to be followed by all the entities involved in transportation matters.  The process to establish the Rail Economic Regulator was in place.  The Department engaged with Transnet on the Transnet and Ports Infrastructure Plan.  The submission of the plan to the Cabinet was delayed because agreement could not be reached on the plan.  The plan focused on the maintenance of the existing infrastructure but excluded any future developments.

Mr Manyungwana reported that coal from the Limpopo province was distributed to the rest of Africa.  The province had been pro-active in engaging with the private sector to maintain the roads.  However, the Province had been warned that there were doubts about the honesty of private investors operating in the sector.  The Department favoured the alternative of a State Agency to avoid the situation where privately-owned monopolies were created if Government decided to open up private investment in the rail sector.  The Department preferred Government to retain ownership of the rail infrastructure.  Privately-owned enterprises should be limited to operating the services.

Mr Manyungwana agreed that the Road Traffic Act could not be amended to shift the transportation of goods from road to rail without first ensuring that the rail network was ready and able to deal with the demand.  It was essential that the inefficiencies of the railways were addressed before the current legislation was amended.

The Chairperson thanked Mr Manyungwana for his participation in the meeting.  She hoped that the promised briefings to the Committee would indicate the progress made in implementing the plans to shift the transportation of freight from road to rail.  The Committee lacked a quorum and was unable to make a decision on the presentation.  She trusted that the questions and comments of the Members had assisted the Department.  She suggested that the Committee met with the DPE to discuss the issue further.

The meeting was adjourned.