It writes that Transnet's rail privatization proposals require significant amendments to appease businesses, including raising minimum access charges and addressing theft and vandalism. Vivian Chaplin and Gabby Wesson.
In a move towards transforming the rail sector, Transnet published a draft network statement for public comment in March, outlining measures to privatize the rail network.
This statement has implications for the railway reforms set out in the National Railway Policy (to be decided by the Cabinet in 2022), the Freight Logistics Roadmap and the Private Sector Participation Framework. However, several elements are open to debate, including the proposed minimum price for accessing the rail network, proposed safety measures and how capacity will be allocated.
The statement outlines the requirements and application process for private train operating companies (TOCs) to access Transnet's rail network, overseen by Transnet's Infrastructure Manager (IM).
It also describes IM features and privileges.
The application process is detailed and includes completing a self-assessment checklist, conducting a site visit, and participating in IM's Community and Social Development Plan, Supplier Development Plan, and Skills Development Plan. Includes minimum requirements such as providing commitment.
A successful TOC must submit a risk analysis of the intended operation and sign a TOC-IM interface agreement. TOC must obtain a railway safety permit and operating license from the Railway Safety Regulatory Authority before being allowed access to the network.
The statement provides that TOCs will be entitled to access rail infrastructure for transport services on fair, non-discriminatory and transparent terms.
This includes access to infrastructure connecting maritime ports, inland terminals and other service facilities provided by IM. Capacity is said to be allocated by IM in a “fair, transparent and impartial manner” and by achieving objectives such as maximizing utilization of Transnet's rail network. Realize growth objectives in key strategic economic sectors. Shift transportation from road to rail. Achieve full cost recovery. and inject infrastructure investment through access fees.
Unfortunately, no further explanation or detail is provided regarding these fairness principles.
In addition, the IM has the authority to temporarily suspend the capacity of the infrastructure, or any part thereof, that is rendered unusable due to technical failure, accident or damage. The IM must provide TOC with alternative train routes “as far as possible” and he must compensate TOC for damages resulting from such interruptions (unless otherwise agreed in the Rail Access Agreement). IM also includes the ability to remove capacity that is less than 75% used within a predefined three-month period and allocate such capacity to the next ranked TOC based on the evaluation of capacity requests. There are also rights.
Minimum access fee proposal
Transnet's proposed minimum access charge, set at 19.79 cents per gross tonne, has attracted significant attention in the rail industry. This fee is calculated based on the total weight, including the weight of the train. It increases the weight rather than the net weight, which in turn increases transportation costs and costs throughout the supply chain.
IM is said to have a three- to five-year pricing structure, with provisions for annual minor reviews (with limited parameters such as inflation, interest rates, and energy prices) and major reviews every five years. It is provided.
Interestingly, regarding Transnet's Rail Access Charge Methodology 2024/25 Discussion Paper published with the statement, it is stated that Transnet's freight rail operators have declared that this minimum access charge cannot be paid; This is essentially inconsistent with Transnet's position in the statement. The discussion paper said the IM may consider phasing in the tariffs over five years, although funding may be needed to ensure sufficient funding for short-term requirements. It also states that there is.
To account for this discrepancy, Transnet may revise its minimum access charges.
security issues
Transnet is also seeking to combat theft and vandalism prevalent across its rail network, and specifically includes 'acts of theft' as a force majeure event.
This effectively allows any train to be canceled and Transnet's (and IM's) obligations to be suspended on the grounds of 'theft'. This is a concerning provision given the prevalence of theft across networks.
Additionally, the statement states that due to matters and circumstances beyond IM's control, IM may make deviation management intervention decisions such as canceling, staging, replanning, rescheduling, or rerouting trains without input from all stakeholders. It stipulates that a person may be forced to do so.
Regarding security issues, which have been a burden to the rail industry for years, the statement provides only standard provisos to address the issue without providing sufficient detail. Namely, “Security service providers provide physical security, armed response teams, and interventions to address organized crime groups behind the illegal copper market.”
Additionally, each TOC must have its own security plan for cargo.
These provisions do not adequately address the issues faced by Transnet with respect to security. The issue has cost Transnet significant costs, delayed network operations and resulted in the loss of thousands of kilometers of rail track. These issues have led to, among other things, the rail industry (and the economy as a whole) with reduced network reliability, reduced freight volumes within the network, and weakened economies due to transport disruptions.
These provisions need to be detailed by Transnet in order to give effect to national rail policy and to provide industry stakeholders with appropriate reassurance regarding the reliability of the network for future civilian use.
further work required
Ultimately, this statement represents a significant step forward for the rail industry (and the product providers that rely on rail services), which has been dominated by Transnet, and opens the door to private investment. This would be a way for Transnet to reduce its huge debt burden, increase freight traffic within the network, which has declined due to Transnet's poor performance, and ultimately improve the economy.
However, before the privatization of the rail sector can be effectively implemented, the industry will Significant consultation and amendments are required to appease stakeholders. This is in order to adequately address some of the challenges identified and addressed in National Railways policy, such as competitive pricing, and security issues within the network, including theft and vandalism.
Interested parties have until May 20, 2024 to submit written comments on the statement.
Vivian Chaplin is a Director in Cliff Decker Hoffmeyer's Corporate and Commercial practice and Head of Mines and Minerals. Gabby Wesson is an associate in Cliff Decker Hoffmeyer's corporate and commercial practice.
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