World Bank Brown Bag Lunch presentation 23 rd May 2005 Jane Barrett

1. The restructuring of South Africa’s state owned railway company, Spoornet From policy juggernaut to consensus World Bank Brown Bag Lunch presentation 23rd May 2005 Jane Barrett Policy research officer of SATAWU, seconded to World Bank (Europe and Central Asia, Infrastructure) April – July 2005

2. Outline • What is Spoornet? • Road/Rail context in 2000 • Government’s plans and trade union’s position • Description of process • Outcomes of process • New rail challenges • New climate of consensus on restructuring • Issues for reflection • Conclusions

3. Spoornet • A division of Transnet, the transport parastatal • 20,000 route kms (4,000 not used) • 32,000 workers (100,000 in 1980) • Carries 29% of all general freight & 59% total freight tonnage (including bulk) • Assets of R19 bn - 2,500 locos and 95,000 wagons • Self-funding since inception

4. Spoornet’s five business units • General Freight Business (GFB) • CoalLink (coal for export via Richards Bay) • Orex (iron ore for export via Saldanha Bay) • Shosholoza Meyl (Mainline Passenger) • LuxRail (the Blue Train) • Excludes commuter rail, run by distinct Transnet company, Metrorail

5. Road/Rail Context in 2000 • Rail volumes fairly steady, but share of freight down • Road freight transport deregulated in 1987 • Poor law enforcement of road freight • Agricultural Boards scrapped 1995, with mass rail transport orders going too • Government anxiety re underwriting loans for rail investment

6. Government proposals Oct 2000 • Concession profitable Coallink and Orex • Concession some low/light density lines and close others – halve the network • Concession Shosholoza Meyl • Turn the loss making GFB around by cutting out unprofitable customers and reducing workforce by 15,000

7. Trade union position Oct 2000 Reconstruct Spoornet • Grow rail volumes - freight & passenger • Protect jobs • Improve efficiency of rail system - democratically • Use railways to promote economic development - especially regional • Privatisation plan undermines all above • Integration of bulk and general freight makes economic sense & is common elsewhere

8. Engagement • Union exerts political pressure and protests during 2000 • Ministers agree to re-open discussion in March 2001 • Investigation by a tripartite “Technical Working Group” • Final agreement in Feb 2002 • Ongoing implementation processes

9. 3 key focus issues in engagement • Socioeconomic development • volumes • light density lines • sustainability - GFB on its own - GFB cross-subsidised by Coal-link & Orex • jobs

10. Investigation using four twenty year scenarios • Using four different volume and network size scenarios i.e. high/low volumes, reduced/extended network • Projections of investment requirements • Projections of employee requirements • Calculation of potential concession fee of Coallink and Orex • Separation costs if concessions proceeded

11. Scenario results • GFB unsustainable without cross-subsidy from bulk lines or direct government subsidy (first time) • Best financial results from GFB if working on reduced network with low volumes • Costs of separating Orex and Coallink high and with operational implications e.g. shortage of railway engineers

12. Key joint recommendations • GFB a strategic transport asset to operate on extended network at high volumes • Coallink to remain with GFB • Orex possibly to stand as own business - for further discussion • Low Density Lines part of GFB, possible separate managerial structure • Shosholoza Meyl no concession, tripartite investigation re merger with Metrorail • Luxrail (Blue Train) concession - 56 jobs guaranteed

13. Additional joint recommendations • A tripartite Task Team to investigate further ways to mitigate against job losses • A tripartite Working Group to investigate low-density lines • A regular review of strategies to increase efficiency & volumes of GFB • Dept of Transport to continue to develop policies supportive of rail

14. Ongoing and new rail challenges • Possible separation of infrastructure from operations • Low density lines • Internal reorganisation • Much higher volume targets • Ongoing efficiency engagements

15. New climate of consensus – parastals as engines of growth • Spoornet agreement, engagement re ports, and Cosatu campaign • ANC membership criticisms of government’s economic policies • Change in company and ministry leadership • Nepad objectives

16. Issues for reflection • Trade unions to be consulted on the model not just the consequences • Time and energy required • Parties to trust the outcomes • Government willingness to reconsider • Power of consultants and advisors • Clear agenda, and outcomes to be reduced to formal agreements

17. Reflection on trade unions in any SOE restructuring • May already be weakened by job losses and other factors • Nevertheless a crucial representative voice in the enterprise and in society at large • Workers as a knowledge resource • Need to engage in ways that empower, not disempower • Space and resources to be provided for trade unions to develop own positions

18. Conclusion • Sustainable solutions to restructuring needs should be locally grown and locally owned • With few resources trade unions are capable of engagement on models for restructuring • Efficiency, success and serving development needs are not incompatible with state ownership