Equal Access To The Rail Network And Economic Regulation – The Future of SA’s Rail Network

Equal Access To The Rail Network And Economic Regulation – The Future of SA’s Rail Network
Jan-Louis Spoelstra

At the recent Rail Round Table hosted by the Transport Forum, Jan-Louis Spoelstra offered an insightful perspective on the regulatory changes and their impact on South African Railway activities.

Before delving into the primary subject of regulation, Spoelstra emphasised several noteworthy developments in the regional rail transportation landscape. Which he believes South Africa should be mindful of as it looks to enhance competitiveness in the rail and ports sector.

Trans-Kalahari Railway: Recent events have seen the governments of Botswana and Namibia affirm their commitment by signing a Memorandum of Understanding (MOU) for the construction of the Trans-Kalahari Railway.

Lobito Corridor & Lobito Atlantic Railways: Reports from the United States highlight significant sponsorship and investment in the Lobito corridor, especially the Lobito Atlantic Railways. The strategic significance of the port of Lobito was underscored. During a press conference in Vietnam, the U.S. President specifically mentioned the African rail industry, noting that African railways aren’t sufficiently interconnected for easy access from east to west or south to north.

In South Africa, several significant changes are in motion, especially concerning the future of its railways. The South African government officially endorsed the Luxembourg Rail Protocol, which safeguards the private ownership of rolling stock. This step offers more assurance to financial institutions concerning the financing and ownership of locomotives and wagons.

It’s widely known that the cabinet approved the rail policy in March this year. Spoelstra urged everyone to acquaint themselves with this policy, which is available on the Department of Transport’s official website. Drawing from various presidential speeches and reports on Operation Vulindlela, there is a clear vision for a transformative system in the future.

This vision encompasses a comprehensive rail network with multiple operators. Current efforts are aligned with this vision. To achieve this, either a new Railway Bill will be required to be implemented, or an amendment to the legal succession Act that led to the creation of Transnet and PRASA. Both possibilities are currently under review – leading to the formal implementation of the rail policy.

Interestingly, no legislative amendments are needed for Transnet and PRASA to allow private sector access to rail lines. The present Act doesn’t prevent this, and indeed, private ownership of rolling stock is already allowed. Thus, the enactment of new legislation endorsing the new rail policy can proceed even before a new railway act or amendment is established.

Spoelstra also touched upon the Economic Regulation of Transport Bill. This bill is progressing through legislative procedures, with endorsements from Parliament and seven provinces. The Council of Provinces is expected to give its approval by the end of October, after which the President is likely to ratify the bill. This law will amalgamate various transport regulations under the Transport Economic Regulator (TER). Initially incorporating the Ports Regulator, Rail, Roads, and Airline Industry Regulators are slated to join over time. The TER’s inception is projected for the first quarter of 2024.

The second part to this, given the way the legislation has been compiled, requires the Minister to either declare Rail as a dominant entity with more than 70% of what’s required in a market inquiry, or the formal market inquiry needs to start to regulate rail. On that note, Spoelstra explains that, “depending on how you define the market. If I define it as where I own infrastructure, the dominance and announcement of Transnet as a dominant entity owning infrastructure is clear. More than 70% of the network in this country will be owned by Transnet. One of the first regulations, or determinations, that the Minister of Transport can make under this legislation will be to declare the rail network as an entity where access is regulated.”

A few years ago, the Ministers of Transport and Public Enterprises signed a memorandum of agreement to form the Interim Rail Economic Regulatory Capacity (IRERC). Established as an inter-ministerial task team, the IRERC’s mission is to prepare for the Economic Regulation of Transport Bill’s enactment.

Comprising three government officials and three independent board members (including Spoelstra), the IRERC provide regular updates to relevant ministers. Spoelstra noted, “It is quite important to realise that this preparatory work by IRERC is taken extremely seriously by the government to ensure that we can start writing and putting in place all the aspects required to regulate the railway industry in the future.”

Currently, IRERC doesn’t possess any regulatory authority. Thus, if Transnet were to grant network access to any entity today, it would hinge on a commercial agreement. The same applies to PRASA and any designated operator. However, if required IRERC could provide oversight on these agreements.

Contact and inputs from the private sector and stakeholders will become more visible in the coming weeks. “We will be more visible than we were before, and we will ask for more input so that different industry bodies and Transnet can begin testing options with us. On the Transnet side, it’s expected that when Transnet provides access for operators, and to clarify, I’m not referring to third-party access. I’m specifically discussing access to the rail network.

The President has stated that by the end of October, the physical separation of the rail network and rail operations even within Transnet will take place, with implementation set for the start of November (2023). In the future, all operators, whether Transnet Freight Rail or any private operators, will apply to the Network Manager for access. All will receive access on an equal basis It’s not about first, second, or third parties – there are operators, and there’s a rail network, It is important to adjust how we talk about this future, ” Spoelstra concluded.

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