In early December 2023, the South African cabinet approved the Freight Logistics Roadmap, jointly drafted by the Presidency and representatives of the private sector. While it is common cause that the country requires extensive action to mend its faltering freight logistics system, the Roadmap is only an early and, it has to said, tentative step forward. But it is part of a broader pattern of improvements in recent months.

The Roadmap has been injected into a context where the national logistics crisis, centred on underperformance by state-owned Transnet and its subsidiary Portnet, has finally commanded attention at the top of government. A National Logistics Crisis Committee, incorporating officials from the Presidency and senior business people, was established in June, following President Ramaphosa’s commitment, in his State of the Nation Address, to ‘improve the efficiency of South Africa’s logistics infrastructure’.

A new Transnet board was appointed in July and an inaugural board appointed to Transnet National Port Authority in October. Previously been run as a division of Transnet, South Africa’s harbours have now been corporatised. In July, it was announced that the Manila-based logistics operator, International Container Terminal Services, was the preferred bidder for a 25-year concession to run Durban’s Pier 2 container terminal. Transnet itself has a new, albeit acting, senior management in place, following the resignations of its top three executives in early October.

A stream of issues around inefficient logistics seems to become a cascade in recent years with rail capacity having become a critical constraint since the infrastructure looting during 2020’s Covid lockdown. This is exacerbated by a dispute between state-owned rail monopoly Transnet and locomotive manufacturer, CRRC E-Loco, over the legality of the Chinese supplier’s original 2014 contract. The Chinese company has withheld spares and maintenance support, rendering 161 locomotives non-operational last year.

Bulk minerals exports – especially coal and iron ore – have been lower than mining capacity for several years. In 2022, the country’s main coal export harbour, Richards Bay, processed only 50 million tonnes (Mt), the lowest volume since 1993, despite high international prices and a surge of demand from Europe. The coal terminal has the capacity to handle 91 Mt per year. The country’s major iron ore miner, Anglo American-owned Kumba Iron Ore has had to stockpile 9 Mt at mine site, about 25 percent of its annual production, due to the limitations of the Sishen-Saldanha railway. In December, Kumba announced lower capital expenditure and forecast lower volumes.

Regional value chains have been boosted by private sector attempts to compensate for Transnet’s ineffectiveness. Coal and chromium are being exported through Maputo and Walvis Bay has picked up fresh fruit exports, especially table grapes, which would previously have been shipped via Cape Town. But while these alternative ports have found useful expansion prospects, they do not have the capacity to carry the whole of the South African national economy. Maputo, for example, has the capacity to process about 12Mt coal per year, about one-seventh of the volume of South Africa’s potential exports.

Bulk minerals are just one element of the problem. According to the Roadmap, volumes transported by rail have plummeted from 226 million tonnes (Mt) in 2017/18 to just 149.5 Mt in 2022/23. The vast majority of containers are transported by road, causing massive congestion. Waiting times at harbours and border posts run for days with a variety of criminal networks taking advantage of the opportunities offered by near stationary queues of up to 30 km. Harbour inefficiencies have increased, especially in the country’s biggest ports by container and general cargo volume, Durban and Cape Town. In November, 63 vessels were reported to be waiting for berthing off Durban. Thanks to the congestion, one major international shipping line, Maersk, has started to avoid South African ports in favour of transshipments via Mauritius.

These many bottlenecks have cost the national economy dearly. Logistics consultancy GAIN puts the losses at R1 billion per day and suggests total costs have shaved a full five percentage points of GDP growth this year. In other words, if South Africa’s national logistics system were to have run at full capacity, GDP growth for 2022/23 would have been closer to 5.5 percent than the 0.5 percent actually delivered.

The Roadmap promises to create an Infrastructure Manager which will be the mechanism for introducing competition into South Africa’s railways. This will be the independent rail regulator, responsible for opening various routes to private sector operators by, for example, auctioning off ‘slots’ on existing routes.

But the plan is for the Infrastructure Manager to be lodged initially within Transnet. This has led to the criticism that Transnet would be able to control the pace of its own unbundling and the observation that it has performed very poorly in this regard in the recent past. An attempt to auction 16 freight rail slots to private operators last year was an abject failure, with only one successful bid which was later cancelled.

The Roadmap does offer to open rail transport to greater private participation. But this is a medium-term goal. Transnet has other priorities at present. It has been operating at a loss (ZAR5.7 billion for 2022/23) and has requested a ZAR100 billion bail-out from government. In December, National Treasury agreed to a ZAR47 billion credit guarantee, allowing the parastatal to borrow again and settle maturing debt. But this is a stop-gap measure. Treasury wants evidence of Transnet’s commitment to the Roadmap before committing on-budget support.

Transnet’s immediate objective, when read together with state-owned rail monopoly Transnet’s own 18-month Turnaround Plan (released in October), suggests a concerted attempt to squeeze more efficiencies from the existing system. Refurbished cargo handling equipment has been landed in Durban and Cape Town, shifts are operating 24-hours a day in Durban, Coal miners have agreed to fund spare parts for locomotives on the Northern Corridor (Witbank-Richards Bay), the Port of Durban has arranged more tug capacity and Transnet has improved the quality and regularity of its public communications.

There is much yet to be resolved with truck congestion around ports possibly being the most pressing immediate issue. But generally, there a sense that Transnet finally has a management which is actively engaging with practicalities. The contrast with the previous four years of hapless decline could not be greater. Perhaps it is not too soon to say that despite the on-going delays and frustration, there is a light at the end of the tunnel?