Friends of the Rail Forum

I don't think the Hartebeespoort line was part of the concessioning process...

There is no line left to concession.
I think the coaches were sold to locals as well.
Surely, there must be another line close to Pretoria that can be used?

Luca, whether the line was up for concessioning or not, an EOI was lodged and the letter quoted above is the result, so I guess it is being considered as concessionable in any event.
Unfortunately, Dylan, apart from the Cullinan line which we already use, there is not. We cannot go east of Rayton.
The remaining lines are all "core" or main lines and we cannot get permission to run on them. The best routes are probably the lines to Brits, Beestekraal and the one to Rustenburg/Pilanesburg/Sun City. Both are not available and both are also really just too long for day trips. Very local short routes like Voortrekkerhoogte (these days it has a new name that I cannot remember), and Mooiplaats (not as nice as it sounds) are closed. The line to places north of Pyramid (Warmbaths - Bela Blea, Nylstroom - Modimolle) is regarded as core as well.

The important thing is to secure the right of way for the line. Track can always be relaid but once the right of way has been lost nothing can be done. This is really the only suitable line in Gauteng for a UK style preserved line. Anyway there will be plenty of permanent way material available at scrap prices when the other branch lines that are not concessioned are torn up.

Very good points, Aidan. That line is ideal for FOTR - although I would not want to give up Cullinan. We need alternatives for variety and to keep the public coming back.

Rail aspirants anxious about state of branch-line assets, low volumes

By: Terence Creamer
Published: 27 Sep 10

Concern over the state of repair of South Africa's branch-line rail infrastructure, as well as the economic viability of the concession opportunities that will potentially be made available for private operators dominated question time at an industry briefing hosted by Transnet on Monday.

The State-owned freight logistics group has formally called for expressions of interest (EOI) for the underutilised network, having already garnered 115 ‘registrations of interest' by the end of June from a range of entities, including some international operators, as well as JSE-listed logistics firms.

Those interested in specific branch-line prospects have until October 25, 2010, to submit a nonbinding EOI, which could then be used by Transnet in its formulation of a competitive bidding phase. However, no timeframe has been provided for the possible release of a request for proposals (RFP).

Group executive in the office of the CEO Vuyo Khala insisted that Transnet had the necessary authorisation from government to proceed. But he also stressed that the immediate objective was to understand "more specifically" the nature of the private sector's interest in the network.

The lines comprise some 35%, or 7 278 km, of the State-owned utility's 20 953-km rail network, with 3 928 km of those branch lines currently operational.

Transnet has identified 12 901 km of its overall network as core to its ‘hub-to-hub' rail services and branch lines concessioning GM Sue Lund highlighted that the process was not intended to facilitate "open access" to the core network, which would remain owned and operated by Transnet Freight Rail (TFR).

However, potential concessionaires who gathered at Esselen Park, in Gauteng, displayed particular anxiety about the state of the branch line infrastructure, some of which had been lifted, or vandalised, or had been encroached upon by communities.

Lund responded by saying that, should an RFP phase be pursued, bidders would have access to detailed information about the state of the infrastructure and rolling-stock assets that could be made available, while site visits would be conducted.

She also noted that a moratorium had been put in place by Transnet on the upliftment of branch infrastructure and called on those aware of any illegal upliftment activity to report such cases.

But assets would be concessioned on a "voetstoets" basis and Transnet had no intention of repairing the infrastructure ahead of concessioning, despite the fact that the physical assets, or cluster of assets, would be retained by TFR and concessioned for a term of around 25 years.

Smaller potential operators raised particular concern about this stipulation, which they felt created a bias towards larger, better-resourced companies.

There was also a more generalised concern that the capital required to repair the lines and rolling stock would place the new incumbents at an immediate disadvantage to road hauliers.

HIGH CAPEX, LOW VOLUMES

Participants were also uncertain whether the volume densities would sufficient to justify the investment that would be required, particularly in the absence of potential subsidies or grants that might enable them to justify such investments.

Transnet's rail unit recorded revenues of around R21-billion in 2009/10 and CFO Nick Thomson reported that, while TRF had not disaggregated its branch-line revenues, these were estimated at anywhere between R300-million and R1-billion yearly.

Given these low volumes and modest revenues, it was likely that most of the concession opportunities would prove unviable in the absence of State support. Transnet stressed that such support would have to be debated at a policy level, owing to the fact that Transnet was a self-funding organisation.

But Lund stressed that Transnet would communicate those projects to government where the objectives of job creation, rural development and transport efficiency could only be achieved through the provision of grants.

On the whole, the participants welcomed the opportunity to interrogate the economies that could be unlocked through the concessioning process.

Arup South Africa transport economics adviser Andrew Marsay told Engineering News Online that the process was a "good initiative", as it could help identify "economies and volumes" that TFR was currently unable to locate.

"Although my own view is that there are probably very few lines that will be viable without a capital subsidy, at least this process will shed light on the investment that would be required and what it really costs to run such operations.

"At that point, Transnet may need to go to government and say: ‘we think there are people who can do a better job than we can, but we may need some subsidies,'" Marsay asserted.

TFR head of branch lines Albert Links highlighted the fact that the Rail Safety Regulator had different standards for different lines, which might help moderate the capital investment that would be required and make the concession more economically viable.

Nevertheless, in most instances, investment would be required even if it were to raise the performance of those small sections of interface between the main line and the branch line.

During the EOI phase, potential bidders would be provided with information about each branch-line opportunity, including the commodities involved, as well as the infrastructure assets and the operational characteristics of each line, or cluster.

A list of rolling stock that Transnet was willing to consider leasing or selling to concessionaires had also to be provided.

Interesting article, seems the potential operators are starting to see the reality of operating branch lines. On most railways the branch lines are not usually profitable but are used as feeders into the core lines and then subsidised by revenue from core lines. The other issue is that many of the branch lines are very seasonal in nature e.g. Free State lines that are only really used during the maize season. It will require some innovative thinking for the operators to make any money out of the concessions.

Thanks Henry. I attended that presentation.
I agree with most of the concerns expressed in the report. At first glance, it seems inherently unfair to expect the concessionares to upgrade the run-down and plain stolen infrastructure at their own costs to some arbitrary levels then contractually hand it back fully ugraded and operational after 25 years.
One hurdle for small entrepreneurs (especially previously - and many perhaps still - disadvantaged), of whom there seemed to be a fair number present, is how to raise the capital required when the assets they intend to repair or upgrade do not belong to them and therefore cannot be pledged as security for finance. Simply allowing the concessionaires to use the assets for free may seem generous, but I fear that is not a big enough incentive in many, if not most, instances.
Many other key concerns were addressed by a "Come up with ideas, put in your proposal and we will look at it" approach. "That's why we are conducting this exercise -- because we don't really know," was the answer many questions appeared to get. I was left with the impression that Transnet has been unable to come up with innovative business plans for the branch lines by themselves, so under public pressure, they have decided to shift the monkey and let private entrepreneurs do that work for them, under the guise of providing small and medium business opportunities. Charging models have not been considered or designed. Another aspect left to the "tell us how you want to do it" methodology.
Left unsaid and unasked was an underlying concern by several that if the monkey doesn't or cannot economically shift and stick, then total closure and upliftment would become justifiable: that this is the final step in the death throes of many branch lines.
All of this leaves TFR customers whose traffic uses branch lines in some sort of limbo. Who knows who will get the concessions, assuming the prcess completes, and what they will charge and, most importantly, will the total charge remain the same; ie will the TFR portion of the total be reduced to compensate? This will affect not only those customers whose delivery points are on a branch line but also those whose SUPPLIERS are located on a branch line. How many TFR customers know what sort of line their suppliers are on and what effect this process may have on their costs?
What happens if there are no concession applications that are deemed suitable for a particular branch line? Will that line now be closed? Not necesarily, says Transnet. Another "wait and see -- we'll assess at it then," type of answer.
All policies still in the design phase.
TFR will retain exclusivity of the core network - "this is not the start of 'Open Access'". Because of the high traffic densities, the core lines have the lowest tonne-km costs on the entire system. The concesionaires on the other hand will have low-density lines with very high tonne-km costs. This will affect total costs, by proportion, much more if the concessionaire is to survive.
Last but not least, is the issue of the likely quality of service levels provided by the concessionaires. By definition and by statement at the presentation, TFR clients will not have any direct say in the selection of the concessionaires. A bad concessionaire that is selected who provides poor service levels could have a massive negative impact on the TFR customers on a particular line, yet those customers will have no option but to tolerate that, unless and until they can convince TFR to step in. Whilst we know that TFR has a reputation for providing poor service levels in some instances, we also know that some underfunded or plain incompetant new entrepreneurs (who may never have operated a railway before) could be even worse.
And, it's not only TFR customers who need to be concerned. For many heritage rail operators (such as FOTR, Umgeni, Sisonke, Paton's and Apple Express, who run over non-core branch lines, this process represents a real threat to their businesses and existences. This has to be considered seriously by them and in turn by HRASA, even though in most instances those operators do not want (nor have the capital) to operate a railway line.
At the presentation, I received assurances from Transnet that the needs of the heritage operators would be seriously considered in the process and that concessionaires would be required to carry all traffic offered on a "common carrier" non-discriminatory basis, including heritage and private trains. However the charges raised for those lines would have to be negotiated by individual operators with the concessionaires. Transnet pointed out that this same provision would apply to thier Phelophepa health train too.

Looks like Transnet is just going through the motions so they don't have too many union problems when the branch lines are closed and uplifted. I don't see how any business can come up with a viable business plan with no clear framework.

Aiden,
From the presentation, I understand that Transnet will not have any union issues with redundancies because the concessioned branch lines will not come with any Transnet employees. Those employees will remain with Transnet and the concessionaires will have to source their own staff.
The only likely exception is if the concessionaire takes up the option of hiring locomotives on "wet lease". In this instance, TFR will probably supply their crew with the loco.
Of course the fact is that spreading the existing employees around the remaining core infrastructure will increase the employee:kilometre ratio and will thus automatically increase the per km base cost of operating the core network. So, unless the extra labour can be gainfully employed in moving suitably increased tonnages (ie TFR increases the amount of traffic over the core), the TFR labour cost per tonne-km would go up too. Result if tonnages do not increase: either increased losses to TFR or increased charges to the customer.