Transnet’s Group CEO said the call to shift the movement of goods from road to rail neglects to consider that the road is subsidised, yet the rail network is not.
Transnet group CEO Michelle Phillips says the debate about SA state support for freight rail must continue, as global experience shows that subsidies remain common where rail is treated as a national economic priority.
“When I go to government, and I ask for financial support, everyone in the room will say: ‘You’re going for a bailout’,” Phillips said on Tuesday during a panel discussion at the Investing in African Mining Indaba in Cape Town.
She, however, argued that rail is treated differently in many parts of the world:
When it comes to rail in particular, in countries where it is considered a national imperative, it is subsidised. Because it is important for the growth of the country. The goods must move on it as much as possible.
Phillips said that in certain other jurisdictions, the focus is less on direct subsidies and more on the policy environment – an area where South Africa must also continue to progress.
She said public funding of core infrastructure remains necessary even as Transnet seeks to operate commercially. Public funding of core infrastructure is necessary, “because we want the system to be up to standard, but we want to run it on commercial principles …[but] we also want to ensure that the cost of logistics is as low as possible.”
Phillips said the call to shift the movement of goods from road to rail neglects one key fact: “We subsidise the road, we don’t subsidise the rail line. It is something that we need to continue to debate.”
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Reforms are taking hold at Transnet Freight Rail, where the Transnet Rail Infrastructure Manager has been separated out of the company, and private train companies have been invited to operate on the network.
But Phillips said these operators will have to run on the same network.
“They are going to be exposed to exactly the kind of [issues] that we currently have as Transnet,” she said, pointing to derailments and loss of volumes.
Phillips said she was grateful for the assistance offered by the government through the National Treasury’s Budget for Infrastructure, where three out of four applications made by Transnet have been successful.
While government support is important, Phillips conceded it is not the be-all and end-all. “We need a robust and sustainable system underpinned by the right policies properly implemented.”
