Transport economist shoots down TFR’s growth objectives

The role of rail versus road in
the supply chain sparked lively
debate at last week’s Southern
Africa Shippers Transport
and Logistics Council
(Sastalc) business breakfast
in Midrand, with Transnet
Freight Rail (TFR) and
transport economist Andrew
Marsay in the sparring ring.
TFR is aware that it is not
perceived as a viable option
for anything but heavy-haul
loads at this stage and will,
as a long-term strategy, put
more thought into what rail
customers want – particularly
for the intermediate, rural and
palletised sectors, according
to Elvin Harris, manager:
strategy and planning at TFR.
Marsay however
suggested that even if
rail were free, 50% of
the logistics market
would still not use it.
Harris admitted
that the state-owned
entity (SEO) needed
to re-examine what
it needed to provide to
create a stronger roadrail
balance.
“However, at the moment,
investment in infrastructure
and rolling stock is a
no-brainer due to the
maintenance and upgrade
backlog. Once we’ve met
the backlog demand, we
will increase stakeholder
engagement and look at the
kind of role rail could play in
the logistics supply chain,”
he said.
He reiterated that the
Transnet Market Demand
Strategy (MDS) – which
includes major investment
in TFR – was based on solid
research. “And the time and
money we spent researching
it has shown us that rail can
definitely play a greater role in
an economy that
largely relies on
ports for the
first and last
leg of goods
entering or
leaving the
country,”
said Harris.
He
pointed out
that TFR’s
objective was
not to see a
major swing from road to
rail. “We are targeting a 25%
market share, which is a far
better balance than rail’s
current less than 15%.”
Harris also refuted
Marsay’s claim that Transnet
National Ports Authority’s
(TNPA) charges were
largely subsidising the MDS,
including most of the rail
upgrades.
According to Marsay,
the National
Ports Act of
2005 seeks
to address
this abuse
of monopoly
power by
making
provision
for TNPA
to become a
separate corporate entity.
“But Transnet is resisting
the implementation of the
Act, knowing the huge
scale of MDS investment
is unsustainable based on
TFR’s balance sheet alone,” he
commented.
And while Harris agreed
that this was the case in the
late 1990s to mid-2000s,
he said that over the last ten
years TFR had been holding
its own as a revenue earner.
Marsay noted that TNPA’s
port charges were up to four
times more expensive than
comparable ports in other
cities, costing South Africa its
competitive edge as a logistics
hub and adding to the high
costs of inland logistics.
He added that it was
“expensive to make rail
cheap”, pointing to a study
he’d done on transport
costs showing that rail’s
operations costs amounted
to 50% of the total cost. “The
other 50% of costs went
towards capital spend and
infrastructure upgrades –
which is too high a cost for
users to have to bear,” said
Marsay.
On the other hand, about
85% of the road transport
sector’s total costs were
operational costs, compared
to 15% of the cost that went
towards
infrastructure
costs.
“The road
sector, with its
multiple users,
is currently
covering its
own costs.
Sure, it can do
better, but it’s
a more sustainable cost,” said
Marsay.
His suggestion was for TFR
to refocus available investment
on the very high bulk sectors
in order to be ready for an
upturn in the international
commodities market.
INSERT & CAPTION
It’s expensive to
make rail cheap.
– ANDREW MARSAY