The Business Case For Investing In New Freight Trains In South Africa, Off The Back Of Open Access And Improved Track Infrastructure – The Rail Boom That’s Coming
South Africa stands on the cusp of a transformative shift in its transport and logistics sector, and rail investment is earmarked as a key driver of future economic growth. As South Africa’s rail sector waits patiently for the release of the Network Statement for public comment, essentially the precursor to open access becoming a reality, the question arises: what happens when all this comes to be, and the local private operators do not have available rolling stock to respond to the sudden demand? This concern requires a strategic investment case for new freight trains.
In a recent Coffee with the Editor – Traxtion CEO, James Holley, argues that the investment cases that will arise first in the market will be built around areas where there is a big delta in the price between road freight and rail freight. [https://news.railways.africa/traxtion-railboom]
The investment cases will target the pronounced cost disparity between road freight and rail freight, particularly in the bulk markets.
Bulk markets, characterised by the transportation of coal, iron ore, manganese, chrome and similar commodities, will be the prime candidates for initial train investment. This strategic focus is informed by the potential to price rail services competitively, incorporating efficiency adjustments reflective of the current state of the base infrastructure.
However, of the current South African rail network, which extends over 22,000 kilometres, only about 15% is dedicated to the movement of bulk commodities. While this portion of the network is pivotal for the initial envisaged broad-scale investment in train capacity, to truly unlock substantial upstream economic growth the upliftment of the quality of the remaining 85% of the network will be critical.
James believes that what will drive economic growth is investment into base infrastructure – perway, ensuring track infrastructure is to standard, will be the prerequisite for massive investment into new trains across the full spectrum of the rail freight market.
The importance of a highly effective and efficient core rail network – that already exists, is bolstered by South Africa’s significant advantage: a substantial freight body. The existence of this freight body justifies the investment in base infrastructure and trains and South Africa’s advantage is the cost-effectiveness of refurbishing existing rail tracks as compared to constructing new ones – as is needed in other parts of Africa. This approach leverages the country’s existing infrastructure as a formidable asset.
Government policies are aligning with this strategic direction, aiming to harness rail infrastructure as a powerful economic enabler. However, the transition from policy approval to actionable investment remains a pivotal challenge. The speed with which these plans can move from the drawing board to actual implementation will unlock substantial investment into the economy, but the conditions must be right.
Traxtion is among the private rail operators in South Africa that have made bids to make initial investments into locomotive and wagon build programs upon securing the appropriate access rights as guided by the successful implementation of the proposed policy. Furthermore, the company projects that these investments will continue over five years as part of a carefully scaled rolling procurement program. If you missed that interview you can watch it here: https://www.youtube.com/watch?v=Jg5xAw1dUPU