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TRANSPORT PORTFOLIO COMMITTEE
01 AUGUST 2007
SOUTH AFRICAN FREIGHT LOGISTICS STRATEGY: DEPARTMENT BRIEFING
Chairperson: Mr J Cronin (ANC)
Documents handed out
Implementation of the South African Freight Logistics Strategy
Department of Transport Vision [available at http://www.transport.gov.za]
Audio recording of meeting
The Department briefly recapped the presentation made to the Portfolio Committee at the end of May 2007. It highlighted issues in the document dealing with the implementation of the South African Freight Logistics Strategy.
The Department of Transport recapped the Department’s presentation to the Committee in May 2007, and noted the Department’s view that there should be a degree of government ownership and control in rail infrastructures, owing to Spoornet’s lack of capacity to meet all freight transport needs. There was a need for a Freight Information System, as private operators were currently unwilling to provide all relevant information. The strategy was highlighted, which included the need to lower costs, promote integrated planning, deal with cross-border issues, promote public private partnerships and implement freight system corridors. The provincial and national corridors were tabled, and current projects were described. Current initiatives included a national freight databank, development of an IT platform, governance and management. Proposed interventions to be undertaken by the Department included the elimination of duplications, promotion of integrated planning, information and a legislative framework. It was hoped that the Portfolio Committee would be able to agree funding, help to enhance capacity at provincial and municipal level, and give political support to strategic initiatives.
Members expressed concerns that the CEO of Transnet did not appear to share the Department’s vision guiding the Freight Logistics strategy, that most cargo was still being transported by road as opposed to rail, and that the approach proposed by the Department might not be the best way forward. They also addressed maintenance costs on lines being taken over, the fact that these lines had previously proved unprofitable, the issues of pricing and service, and the differential subsidies accorded to road and rail. Further questions were asked around the rolling stock, the necessity for the State to invest in rail, the possible problems of 2010, congestion in cities as well as corridors, weighbridges, the formation of hubs, and the need also to deal with pipeline issues under the control of the Department of Minerals and Energy, as well as social and human development along the corridors.
South African Freight Logistics Strategy: Department of Transport (DOT) briefing
Mr Mawethu Vilana, Deputy Director General, Department of Transport, recapped on the Department’s presentation to the Committee at the end of May 2007 in order to put the briefing into perspective. He read through the vision and problem statement of that briefing document. Briefly these stated that the Government vision was that the ownership of infrastructure should be sufficiently separated from operations. It was the Department’s view that there should be a degree of government ownership in the infrastructure, because of Spoornet’s lack of capacity to meet all the country’s freight transport needs.
Mr Vilana highlighted the implementation slide, showing the various clusters involved in the implementation of the governance and management. He also referred to page 38 of the document titled “Department of Transport Vision”. This section explained in detail the principles surrounding the ownership of infrastructure proposed by Government.
Mr Vilana also highlighted the need for a Freight Information System. The concern was that the private operators were unwilling to provide Government with relevant information, making it difficult for Government to provide infrastructure on an informed basis.
Mr Vilana then tabled the presentation document titled ‘ Implementation of the South African Freight Logistics Strategy’ and highlighted that the strategy included the objectives of:
(i) lowering costs of doing business in South Africa, to avoid inhibiting growth rates;
(ii) promoting integrated planning across spheres and stakeholders. Absence of information made it difficult to plan and integrate Government with private sect, who needed to cooperate better, although some improvement had been made;
(iii) dealing with cross border freight operations and infrastructure in SA, the Southern African Development Community (SADC) and the Continent, so that the key players could develop a symbiotic relationship in the area of trade;
(iv) facilitating seamless movement of cargo between first and second economy, and addressing any hindrance to the movement of goods to achieve lower logistic costs;
(v) promotion of a Public Private Partnership;
(vi) Corridor implementation initiatives
The key Freight System Corridors were tabled, and there was a need to intervene in areas with huge freight movement. This included the
A map titled “Sharing Best Practices: Southern African DCs /SDIs, that had been prepared by the New Partnership for Africa’s Development (NEPAD) illustrated the coast to coast corridors that would bring life to three countries. There was a need to integrate corridors in order to provide seamless movement of cargo. It was important to develop the landlocked countries (like
The core corridors illustrated represented national corridors. There were however also provincial corridors, which were vital to the economies of their respective areas although they did not impact nationally.
Mr Vilana explained that there was a need to break the National Strategy context down to sub-sectoral and Cross Cutting Strategies. The relevant sub-sectors were rail, road, air, maritime and port operations. The pipeline system, which was regulated by the Department of Minerals and Energy, was linked to these. Regional strategies would be informed by Provincial and District strategies.
Mr Vilana described the corridor initiatives. For the Durban-Gauteng corridor, a KwaZulu Freight Task Group had been established including National and Provincial Government, Transnet, private players from port, road and rail and cargo owners. This would address all issues and work cooperatively, under direction from Government.
Mr Vilana described the major projects. These were:
(i) City deep- To achieve this project’s goals, it would be necessary to look collectively at supporting infrastructure.
(ii) Harrismith Hub-This was being dealt with together with the Free State Provincial Department of Transport, and a Phase 1 report had just been finalised, outlining why this was identified as a hub, and explaining the respective roles. It should be completed by November 2007.
(iii) Durban Freight Plan- Challenges in the movement of freight had been identified, and a plan made to make use of the available assets. A further challenge related to the congestion of trucks on the
(v) Track and Trace- dealt with how information would be collected. Consultants had been appointed to carry out this function. An IT system dealing with access was being piloted in the
(vi) A forum was being established to deal with the Walvis Bay- Maputo (
The strategic Initiatives were tabled. Mr Vilana noted that the collection of information and statistics relating to freight movement for the databank must be the centralised function of the Department. This information should feed into the regulatory instruments. The Department was proposing that laws should be introduced which would in future compel cargo carriers to file and provide information. Development of an IT Platform would be informed by the Intelligent Transport System relating to the transport of passengers, which offered some valuable lessons for freight. The Cities Network was engaged to roll out freight plans across cities and metros, in preparation for 2010.
The slide entitled implementation made specific reference to Governance and Management, outlining the main Government committees and teams involved in the implementation of this strategy.
Finally Mr Vilana made some proposals on interventions to be undertaken by the Department and the Portfolio Committee. . Proposed interventions to be undertaken by the Department included the elimination of duplications, promotion of integrated planning, information and a legislative framework. It was hoped that the Portfolio Committee would be able to agree funding, help to enhance capacity at provincial and municipal level, and give political support to strategic initiatives.
The Chair referred to the Department’s vision, which was part of the document approved by Cabinet in 2005. He noted the proposed principle of vertical separation between ownership of infrastructure and operations. This appeared to contradict a Business Day report on 1 August that said that the CEO of Transnet believed that vertical separation was not the direction in which Transnet wished to move. Transnet spoke about the integration of their roles as owner of infrastructure and dominant operator. The Chairperson suggested that this issue be flagged until the Transnet briefing scheduled to take place the following day.
Mr Vilana responded that the Departmental mandate had been derived from the Cabinet mandate. It would also involve bringing in the private sector and other operatives, but this would be done within the proposed framework. The process proposed by Transnet would take a long time to accomplish, which was why the Department was engaging in talks with Transnet about the issue of branch lines. If Government were to obtain a branch line, it could be managed by a utility. Government would still need access to a portion of the main line, since no one could compete with Spoornet in their capacity as mainline operators. As others developed capacity in future this situation could change. The strategy was however clear - there was to be a move to vertical separation, either total separation or partial integration. The framework would provide guidance in this regard.
The Chairperson referred to the Departmental view that the problem was that Spoornet did not have competition on its own lines. This was not quite correct as they did in fact have competition from the road side. He believed that the problem was not lack of competition but lack of investment into rail. He suggested that the Department should consider this possibility in relation to what was suggested in their model.
Mr Vilana replied that the mandate for the strategy was received from the 2003 Cabinet Lekgotla. Submissions made at the Lekgotla were informed by the fact that Spoornet was unable to respond to customer demands and deliver on expectations. Between 2003 and 2004 the freight transported had increased by 205 million tons. Spoornet had only been able to move 5 million tons, which meant that the remaining 200 million tons had to be moved by road. This showed Spoornet’s inability to manage huge increases, which was largely due to lack of investment in rail. It also showed that the rail system Spoornet ran was not sustainable as it could not handle huge increases in freight movement. He referred to the CEO’s comment that rail would be able to compete with roads in 2012 when the first new locomotives would be delivered. This was problematic as it was impossible to wait until then.
Mr S Farrow (DA) expressed concern that the figures indicated that approximately 73% of freight was still being transported by road.
Mr Vilana replied that it was still Government’s objective to ensure that customers would increasingly transport freight by rail as opposed to road. However, this was really difficult to achieve due to cost. The Department still held the view that rail friendly cargo should be moved by rail and not by road.
Mr Farrow stated that the Department was about to acquire portions of branch lines, and pointed out that they had fallen into disuse owing to their unprofitability, and that maintenance of these branch lines would be a problem.
Mr Vilana answered that the Department was not in fact merely acquiring portions of branch lines. DOT had identified three branch lines which were to be revived. These were Kei Rail, Nkwaleni and the Douglas -
The Chairperson asked whether the issue of price was driving the users’ preference of road over rail.
Mr Vilana responded that price was not necessarily the deciding factor. Clients wanted a predictable and efficient service. The CEO of Transnet had indicated that they were meeting up to 70% of customers’ demands. They were experiencing challenges with regard to the other 30%, which included lack of investment for the purchase of rolling stock, and lack of infrastructure, with ageing locomotives of 35 years old and more. Efficient service could not be provided with unreliable equipment.
Mr Farrow referred again to the branch lines. He foresaw the Department experiencing difficulties in reinstating these lines to their former condition due to lack of capital. The Department would have to bear the risk of the line ‘going down’. He referred to the Apple Express. Spoornet placed so many restrictions in the way of operators that it became unviable. Transnet was looking only at profit, while the Department had to look at service. Taking over branch lines would be a massive risk for the private sector, local municipality and whoever was involved further down the line. Its immense constraints would ultimately lead to the disappearance of the line, as no one would take responsibility for the assets.
Mr B Mashile (ANC) said that in 1984 a line had been built between Komatiepoort and
Mr Mashile also pointed out that the rail network generally ran parallel to the road network. Privatising the rail network, while the road network was being run by South African Road Agency Limited (SANRAL ) would lead to differentials in investments between the two modes (since road networks received huge subsidies). This would not lead to the prioritization of rail as intended by the Department.
Mr Vilana said that while Government wanted a direct role in ownership of these lines, they were aware of the differentials in investments between road and rail, since rail would require investments of huge amounts of capital for locomotives and infrastructure. Thus DOT proposed that the private sector should come on board (which would address the problem of lack of capital). This could however only happen if Government owned the infrastructure. The branch lines were not the focus of Transnet. Even if the Department were to take over the branch lines they did not have the capacity to manage them and therefore they would target the private sector for this purpose.
Mr G Schneeman (ANC) referred to the agreement around the Kei Rail and asked what had been the agreement regarding the rolling stock. He also asked if Government would need its own rolling stock locomotives or could lease these from Spoornet?
The Chairperson also wanted to know whether Government would have sufficient capacity to acquire rolling stock for this line.
Mr Vilana replied that the proposed regulatory framework made provision for bringing in the private sector, hereby also promoting Black Economic Empowerment (BEE). The Department proposed leasing rolling stock from companies, as was done in the
The Chairperson said that the public sector bore the huge cost of maintaining roads, which added to the argument that transport of freight by rail was preferable to road. Transnet, because of its status as corporatised entity, was facing its own challenges preventing it from focusing on the development of branch lines. He wondered if the State should not perhaps increase the investment in rail instead of acquiring ownership in branch lines, and then give Spoornet the mandate to focus on branch lines. The Chairperson was not convinced that the Department had presented a convincing case for the proposed model. With regard to the Department’s argument that Spoornet lacked capacity to place rail in a competitive position in relation to roads, due to the fact that locomotives were only being delivered in 2012, he said that the Department’s model relied on companies not even formed or identified yet to provide their rolling stock.
The Chairperson noted that freight that was best suited to rail transport should be moved by this mode of transport.
Mr Vilana agreed, saying that this challenge also extended to the transport of chrome. The problem was Spoornet and its lack of capacity. It was important for other operators to get involved, such as in investing in the acquisition of rolling stock. Whether Spoornet would be able to increase its capacity to meet this challenge remained to be seen.
The Chairperson referred to possible problems arising in 2010. The congestion would not only occur on big corridors, but also within cities. He referred to the recent severe congestion in
Mr Mashile referred to the lines between Nelspruit and Komatiepoort. Both the rail and road run through a gorge. The Department should consider reopening the rail, since the road was becoming congested. In addition, the strategy included the establishment of new entities. It was important to look at how all these entities assisted in speeding up service delivery.
Mr Schneeman referred to a discussion held by the Department a few years ago on the development of weighbridges. He asked if the strategy also included looking at which weighbridges were operational.
Mr Vilana said that it was not part of the strategy at all.
The Chairperson felt that this issue was related to the present discussion and therefore relevant.
Mr O Mogale (ANC) asked who initiated the formation of a hub in any given area, and whether the Department was considering the creation of a hub between
Mr Vilana answered that different exercises were being used to establish hubs, and these would for example be in De Aar and Colesberg.
The Chairperson said that the creation of the Harrismith hub was discussed in the Committee’s interaction around the presentation around 2010. The reason for the creation of the hub had been the vibrant markets in the
Mr Vilana agreed, adding that there was also much movement around
The Chairperson said that the critical issue of he pipeline would have to be flagged, since it was regulated by the Department of Minerals and Energy and would therefore require their mandate. This should however be dealt with by the economic cluster as a whole.
He noted that another important issue was the National Freight Databank. Hearings had been proposed for the fourth quarter of 2007. These hearings would include the relevant Portfolio Committees and the Departments of Minerals and Energy, and Trade and Industry. Among the issues to be dealt with at these hearings would be global challenges, such as global warming. He would hopefully achieve buy-in from the other Committees.
Mr Mashile highlighted the fact that any strategy would also have to address social and human development alongside the corridors.
Mr Vilana said that the Department had looked at local businesses in these areas and aimed to provide services to both the first and second economies.
The Chairperson concluded that among the issues to be discussed with Transnet on the following day would be corridors, hubs, branch lines, and the need also to address the needs of the farmer who only needed to move very small loads
Other Committee business
The Chairperson noted that Transnet would be briefing the Committee the following day.
A briefing by the Department on the General Laws Amendment Bill would take place in two weeks’ time. They would attempt to arrive at a uniform approach to the Bill at that briefing, since the Bill dealt with many other pieces of legislation. Three weeks would be set aside to deal with this Bill.
The Committee would also be discussing the airlift strategy. The question as to the oversight role of the Committee would be left ‘open-ended’..
The oversight visit scheduled for 8 August had been cancelled.
The meeting was adjourned.
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