Only those with deep pockets need apply

Transnet is preparing to concession some of its branch lines to private operators. Paul Ash investigates whether the parastatal has jumped the gun

Anyone who's ever wanted to run their own railway would have cheered Transnet's news that it planned to go ahead with a much-

delayed scheme to let private operators try their luck at running some of the branch lines.

The announcement, by Transnet acting CEO Chris Wells's office, was the stuff of revolution, marking as it did the first time since its formation in 1910 that South Africa's state-run railway had even considered the idea of opening the door to private operators on such a large scale.

Wells noted that his board had approved the plan in April last year, and feasibility studies were under way on each "concession opportunity".

On the table are 7300km of branch lines, nearly half of it closed now, while the rest, about 4000km, carries anything from a couple of trains a month to 20 to 30 a week.

Although there have been attempts at concessioning on isolated country railways in the past 20 years, Transnet's latest plan is for operators to take over more than 65 branch lines countrywide.

The company has called for would-be operators to lodge their registrations of interest by the end of the month on a varied collection of properties, ranging from busy grain-hauling operations and sugar carriers in the Western Cape and KwaZulu-

Natal to moribund lines that have not seen a train in more than a decade and are, in the words of a cynical old railwayman, little more than two streaks of rust.

The closed lines, especially those where track has been lifted or stolen, need significant investment to make them fit for traffic, say observers. This might scupper their chances of ever being economically viable.

Wells said he did not think all the railways on offer would be profitable, "but some will be".

The branch lines did not fit the Transnet operating model to run big, scheduled trains carrying bulk commodities and containers, "but there is an opportunity for other freight to be transported". Concessioning "could unlock that potential".

The news has been greeted with both enthusiasm and cynicism from observers and people who rely on affordable, reliable transport for their livelihood. The optimists include farmers and their organisations, which have watched helplessly as their rail service crumbles to dust.

A decade ago, more than 80% of the country's grain moved by rail. Now it is less than 30%. Farmers, millers and co-ops were held to ransom by truckers who filled the gap left by a clumsy or uncaring railway system.

Free State Agriculture chief executive Henk Vermeulen welcomed the move, saying that the Transnet Freight Rail and its previous incarnations - the SAR, SA Transport Services, and Spoornet - could not give agriculture the service it needed. It (concessioning) will work if there's enough interest," he said. "It will also help get some freight off the roads."

Much of the pressure on Transnet is from the government, its major shareholder which, faced with crippling road repair bills and an increasingly hostile public, wants to shift freight back to rail from road.

The rural road network is collapsing under heavy trucks. With a permissible gross vehicle mass of 58 tons, versus 28 tons in the EU, South Africa runs some of the world's heaviest trucks. A booming economy, coupled with freight customers deserting railways for trucks, has meant more trucks pounding along the country's fragile rural road network.

The road repairs backlog is now between R75-billion and R164-billion, depending on which political party you speak to.

Yet successful concessioning would involve far more than handing over branch lines to independent operators and telling them to get on with it, warned University of Johannesburg transport economist Vaughan Mostert. "This is going to cost money," he said.

"Transnet will need to make funds available to whoever the concessionaire is. They cannot do this on the cheap."

Mostert thought getting a daily return train running on each of the 20 or so best lines in the portfolio would take at least R500-million a year, at least until it was on a sound footing.

Some lines on offer might never see a train again. Mostert pointed to the long branch from Calvinia across desolate country to join the Cape Town-

Johannesburg main line at Hutchinson, a lonely junction north of Beaufort West.

The branch was never much of a success, even in the fat years when the South African Railways had a firm grip on freight transport. In the late '80s, the Calvinia branch carried about 60000 tons of freight a year. By the time the axe fell in 2000, traffic on the 270km line was limited to a single salt train once a week from the far end of the line.

"I would love to see trains run to Calvinia again," said Mostert, "but it is just not a viable line."

Transnet acknowledges that some of the lines will probably not survive concessioning. In its instructions to bidders, the company notes that if there is scant interest in a line it will probably be dropped from the list.

Bidders who know what they're doing will stick to the lines that run lots of trains now because running a railway takes deep pockets.

The more freight wagons a railway carries per kilometre a year, the better its chances of survival. According to leading US rail magazine TRAINS, the rule of thumb for a successful "short line" operation is 100 freight wagons a mile a year.

Operators will also have to bear the heavy financial burden of funding track repairs.

Truckers, on the other hand, get their infrastructure free, an issue that irked previous private operators in SA, and is unlikely to change any time soon.

Mostert thinks one of the biggest problems for most private concessionaires will be lack of railway experience.

"There's not a lot of railway know-how out there," he said. "I can't see a group of people running old lines."

Railroad Association of South Africa media and research officer Allen Jorgensen disagrees. Jorgensen, who from 1987 to 2004 was a director of one of the few private common carriers the country has had, KwaZulu-Natal's now defunct private Alfred County Railway, said the country had plenty of skilled operators, such as those who had run private mine ore-hauling railways for decades. "It's about train control," he said. "It's no different, except for the scale."

Jorgensen thinks Transnet's move comes too soon, though. In 2004, a government study, the National Freight Logistics Strategy, concluded that a state agency was needed to look after the rail infrastructure. "Until we have an organisation like that, the whole thing is premature," he said.

Meanwhile, the interest in Transnet's scheme continues to mount. One US short-line operator with a track record in turning around struggling railways in Africa and South America, said he would be interested in bidding.

"It is coming together so quickly," he said.

In the end, the viability of many of the concessions will depend on a commitment from Transnet to haul traffic to and from the branch lines. And integrating this business into the Transnet model is likely to be a stiff challenge.