Department of Transport Reduction of transportation by road: A shift towards Rail

1. Department of Transport Reduction of transportation by road: A shift towards Rail Select Committee on Public Services 08 February 2012

2. PRESENTATION OUTLINE • Problem statement • Situational analysis • Key freight corridors • Road and rail market share • Key challenges facing both road and rail industries • Key factors contributing to the decline of the rail freight industry • Strategic thrust and programmes: Some Interventions • Key Rail Policy thrust: Some Interventions • Way forward

3. PROBLEM STATEMENT • Deterioration of the road infrastructure • Insufficient maintenance of the road network & lack of funds • Inefficiency in freight movement – modal mix of road vs. rail • Inefficiencies of rail • Deteriorating rail infrastructure • Insufficient capacity of the railways to re-gain lost market share

4. SITUATIONAL ANALYSIS • The road freight industry has expanded rapidly since the deregulation of the industry in 1989; • A lot of cargo has migrated to road rather than rail, due to shortcomings in the rail system; • Road freight sector carries 87% of total freight in the country; • Total volume of road freight moved in 2007 – 1,373mt; • The sector contributes 5,9% (R66b) in 2007 and total land transport contributed 6,6% (R74b) to GDP on a value added basis; • In terms of land freight distribution, road freight accounts for 50% of the tonnage in metropolitan areas, whilst rail accounts for only 1%.

5. KEY FREIGHT CORRIDORS Walvis Bay Beitbridge Gauteng – Walvis Bay Gauteng – Walvis Bay Gauteng – Beitbridge Gauteng - Beitbridge Lobatse • 4.8 mill tons • 17 mill tons • 77% road freight Maputo • 90% road freight • 38% growth to 2020 • 40% growth to 2020 Gauteng Sishen - Saldanha Sishen Gauteng – Maputo Richards Bay Gauteng - Maputo • Rail-only corridor • 27 mill tons • 15.4 mill tons Durban • 73% road freight • 40% growth to 2020 Gauteng – Cape Town Gauteng – Cape Town Saldanha East London Gauteng – Richards bay • 19 mill tons Port Elizabeth • 10% import export Cape Town • Transnet Freight Rail Coallink line: 66 mill tons export coal; 8 mill tons general traffic • Pongola corridor 17 mill tons – 95% road freight • 85% road freight • 40% growth to 2020 Gauteng – East Gauteng – EL London Gauteng / Postmasburg – Port Elizabeth • 3 mill tons Gauteng – Durban Gauteng - Durban • 10% import export • 7 mill tons • 91% road freight • 36 mill tons • 36% import export • 31% growth to 2020 • 16% import export • 66% road freight • 70% road freight • 39% growth to 2020 • 38% growth to 2020 Freight flow estimate for 2003

6. NETWORK DEMAND: COMMODITY SUITABILITY Simplified Preference

7. LONG-TERM MARKET SHARE What is suitable freight for rail? Longer Distances Short-haul distribution is more efficient on road High Volumes Rail is a bulk mover Big parcels in a single move Commodity Type Typically Bulk Minerals / Heavy Goods / Containers Corridor Effect Concentrated corridors attract more traffic Mostly Road Friendly Mostly Rail Friendly Competitive Setting the ideal Rail vs Road market share split is a fundamental driver for future rail demand

8. FREIGHT TRANSPORT 2003

9. FREIGHT TRANSPORT 2004 Tonnage 1105mt (270) Figure in brackets denotes average transport distance Road 920mt (200) Rail 185mt (600) Metropolitan 580mt (75) Rural 200mt (200) Corridor 140mt (680) Corridor 45mt (680) Rural 30mt (475) Metropolitan 10mt (150) Sishen & Rbay 100mt (670) Tonkm 300bn Road 190bn Rail 110bn Metropolitan 45bn Rural 40bn Corridor 95bn Corridor 30bn Rural 15bn Metropolitan 1bn Sishen & Rbay 65bn Income R120bn Road R105bn Rail R15bn Metropolitan R30bn Rural R25bn Corridor R50bn Corridor R6bn Rural R2bn Metropolitan R1bn Sishen & Rbay R5bn CSIR 2005

10. FREIGHT TRANSPORT 2006 Figure in brackets denotes average transport distance Tonnage 1533mt (233) Rail 196mt (617) Road 1337mt (177) Metropolitan 777mt (77) 50,5% Rural 380mt (179) 25% Corridor 180mt (600) 11,5% Corridor 41mt (683) 3% Rural 47,5mt (505) 3% Metropolitan 8mt (250) 0,5% Sishen & Rbay 99,5mt (673) 6,5% Tonkm 357bn Rail 121bn Road 236bn Rural 68bn 19% Corridor 108bn 30% Corridor 28bn 8% Rural 24bn 7% Metropolitan 60bn 16,5% Metropolitan 2bn 0,5% Sishen & Rbay 67bn 19% CSIR/USB 2006

11. FREIGHT TRANSPORT 2007 Figure in brackets denotes average transport distance Tonnage 1578mt (237) Road 1373mt (178) Rail 205mt (629) Metropolitan 793mt (77) 50% Rural 384mt (177) 24% Corridor 196mt (591) 12,5% Corridor 46mt (685) 3% Rural 51mt (529) 3% Metropolitan 9mt (278) 0.5% Sishen & Rbay 99mt (687) 6% Tonkm 374bn Rail 129bn Road 245bn Metropolitan 61bn 16% Metropolitan 2,5bn 0,5% Sishen & Rbay 68bn 18% Rural 68bn 18% Corridor 116bn 31% Rural 27bn 7% Corridor 31,5bn 8,5% CSIR/USB 2007

12. KEY CHALLENGES FACING ROAD AND RAIL • Road damage due to intensive use • Congestion, accidents & pollution caused by road • High freight volumes on road • Insufficient rail capacity – road is the default mode • Ageing rail infrastructure • Lack of integration amongst major transport modes – road, rail, air, maritime, and pipelines

13. FACTORS CONTRIBUTING TO DECLINE OF FREIGHT RAIL • Lack of flexibility in service offering • Insufficient investment in network and rolling stock • Limitations of out-dated technology for high volume intermodal traffic • Lack of customer focus • Restrictive working practices and insufficient drivers • Insufficient investment in training, developments and staff retention • Limitation of interoperability due to a variety of incompatible traction power, rolling stock, signaling and train radio systems have emerged on different parts of the network

14. STRATEGIC THRUST & PROGRAMMES: SOME INTERVENTIONS

15. KEY RAIL POLICY THRUSTS: SOME INTERVENTONS • A clear rail industry model that entails that would be determined by the outcome of the Rail Policy, which articulates on the following: • Intensive investment programme • Accessibility and Competition • Regulation etc • A need to expedite the implementation of the rail revitilisation programme to address the inherent inefficiencies in Rail Transport; • Introduction of new technology where possible; • Promotion of Rail Transport as a mode of choice for passenger and freight transportation and implementation of a strategy to move certain current road cargo back to rail;

16. KEY RAIL POLICY THRUSTS: SOME INTERVENTIONS (Cont) • Active state involvement in the facilitation of investment and private sector participation; • A need for a national programme of recruitment, training and skills development; • Implementation of a strategy to revitilise and develop branchlines; • Facilitate the introduction of Rail micro enterprises and cooperatives; • Implementation of a comprehensive strategy for safety and security ; • Establishment of local industries for local procurement .

17. WAY FORWARD • Higher freight demand and insufficient capacity of the railways has led to road becoming the default choice of land transport and this need to be reversed • All stakeholders in the freight sector must come on board and contribute towards making rail a viable option, including Transnet, hence the proposal to establish an Integrated Transport Commission • The draft Road Freight Strategy being finalised • The process of finalising the establishment of a Single Transport Regulator is underway • The process of finalising the establishment of the Rail Economic Regulator is underway • The process for the development of the Rail Policy is taking shape. The draft Green Paper is currently being finalised by DoT for Ministerial approval. Further consultations on the Green Paper process is proposed as outlined below:

18. WAY FORWARD (Cont) • Formal launch of the Railway Green Paper; • Undertaking stakeholder consultation; • Cluster and Cabinet processes; • Parliamentary processes; • Formal adoption of policy (White Paper) by Cabinet.

19. Thank you