OBG talks to Brian Molefe, CEO, Transnet

Interview: Brian Molefe

How would you rate the current state of the rail infrastructure in South Africa?

BRIAN MOLEFE: The sooner we are able to shift the transport of freight from road to rail the better, as it offers huge sustainable benefits for the economy. Rail is a much more efficient and a cheaper means of transport. Part of this is due to the fact that Transnet, over the past 10 years, has been dramatically restructured.

In the past we directly managed passenger rail, the national airline carrier and other entities like bus companies – even travel agencies – and were simply too big. Furthermore, we oversaw too many loss-making entities to invest in and manage new infrastructure properly. Today, we have divested to become a purely rail freight logistics company with ports, freight rail and pipelines our primary focus. Similarly, thanks to the government‘s zero dividend policy, we can now plough back all our profits into capital expenditure and borrow through domestic and international markets with gearing that is sustainable.

What opportunities do you anticipate for private sector concessions to build and manage ancillary rail links in the country?

MOLEFE: We have already identified a number of branch lines for concession. Our strategic interest in rail is primarily concerned with managing the iron-ore and coal lines and general freight business, as these are sensitive and strategic national assets. The non-core branch lines will be made available for concessions on an ad-hoc basis, with bidding processes and terms and conditions set according to what makes the most sense in each instance. Mining houses and others are also welcome to make proposals for constructing their own lines linking to the main network.

In addition, rail links into neighbouring countries are quite critical. As with the new rail line running through Swaziland that will also be linked to Mozambique’s Maputo Port, we will fund the South African portion with our own balance sheet and manage the section accordingly. It will be up to the partnering countries to raise the required funding to build and operate the line from their side as well.

Will Transnet be looking to leverage its experience in South Africa to bid on projects outside of the country in the future?

MOLEFE: Our ports are at capacity and experiencing major congestion, and we have to fix our own house first before we begin looking at expanding and operating other ports on the continent. In the short term, until new port capacity comes on-line, we have to try to manage the port more efficiently.

The Durban container terminal is Z-shaped, and we are closing off some areas to reshape the terminal into more efficient straight-line berths. To address congestion on the container side, we have bought new cranes. In the medium term, we are hoping to acquire Salisbury Island, a former naval base which is close to the main Durban port, which should help relieve current congestion levels. And for the longer term, we are initiating the development of a new port at the old Durban airport site.

What sort of future do you see for new multi-product pipelines in South Africa, and how will this affect transportation levies and tariffs?

MOLEFE: Our pipeline, stretching more than 600 km from Durban to Johannesburg, is one of the longest in the world, traversing mountains and challenging landscapes. The tariff increases at the moment are purely to recover the initial capital expenditure.

Once these costs have been recovered, we will then have an asset that will last more than a lifetime with no further need to raise the tariffs further. In the long run, this should help to reduce the retail price of petroleum because it is far cheaper to transfer liquids by pipeline than by roads or rail, and any future increases in the price of petrol will not be linked to changes in the cost of transportation of the fuel.