Everybody Wants Rail To Succeed - Transnet Freight Rail CEO

In a recent interview, Phillippa Dean, Railways Africa Magazine editor talks to Russell Baatjies, CEO of Transnet Freight Rail (TFR) about TFR’s strategic direction, ongoing collaborations and formidable challenges.
Baatjies talks about significant industry support received, particularly along the North Corridor, and the potential extension of similar agreements for the North East corridor, servicing chrome magnetite and rock phosphate industries.

He further comments on enhancing seamless cross-border rail services, including upcoming engagements with Botswana Railways and TransNamib, alongside the involvement of the Railway Safety Regulator and the Southern African Railways Association (SARA).

He also talks about TFR’s support of PRASA’s corridor recovery plan, shedding light on ongoing discussions regarding potential line transfers to PRASA.

Baatjies explains the “new” business structure between Transnet Freight Rail Operating Company (TFROC) and Transnet Rail Infrastructure Management (TRIM), and TFROC’s strategies for competitive positioning in an open market.

Dean: We have heard quite a lot about the milestones and projects. We understand perhaps a little bit better about where the constraints are. What is the message that we need to send back to the industry? Where is it that you need support? And how are you going to get the support from the industry to take you seriously?

Baatjies: We have seen and experienced a lot of support from industry. In the North Corridor; I have spoken about the mutual collaboration agreement. So we are clear about the challenges that we have. We are clear about the requirements that we have, what we need to do, and which things we need to fast track. Everybody knows some of our processes take long. The industry stepped up and said, to get these things done faster, how can we get involved and help you with the procurement process and make sure that we get the capacity back as quickly as possible? So for instance, you would have seen the issues with regards to the batteries and the compressors. So industry uses their processes to buy these things, and then we have to repay. But at least we get these things done faster.

The big iron ore exporters have indicated that they want a similar agreement. We have also seen interest from other industries on the North East corridor with the chrome magnetite and rock phosphate to have a similar agreement because they really want to support us. Some of the machines and components that we require have long lead times. And they say, how can we help to fast track this?

For me, the North Corridor and the ore exporters, the coal exporters, have really shown the way as to how industry can assist us. I think everybody wants rail to succeed, and really, we’re making use of that helping hand that’s been extended. Obviously, they want to see performance, and we are clear about where we need to go and what the plans we have to make sure that we get back to where we need to go.

Dean: How are you supporting or integrating with the Southern African Railways Association (SARA), I am talking about neighbours in the Southern African Development Community. We would like to see more connectivity or seamless connectivity without having to stop and change and all the rest of it. And what’s happening with our cross-border projects?

Baatjies: We had engagements with Botswana Rail about how they access South Africa and how we can make sure that we get to that seamlessness that you refer to. What agreements, and how are the engagements that we need to have with RSR? And we’ve certainly started with those steps. There are some issues in terms of the standard of maintenance and the rolling stock when they access the network.

Some of the practices that we see currently is that they would bring some of the products to the border, offload it, and then we have to go pick or move it with road trucks. And we really want to move away from that sort of thing. I will be meeting with our partners at CFM shortly. We have had some discussions recently with TransNamib to see how we can increase cross-border traffic and reduce the dependency on the road.

I think there are some real opportunities. Some of the transit times that you can see currently, are just way too long, which means you have to invest in extra assets. And if you can get these assets to move, which is certainly for us in Transnet Freight Rail an issue. Anything that contributes to delays in the movement of cargo, need to be addressed quickly. And that’s what we’re trying to do with SARA.

Dean: Where are the interoperability issues? We are all on the same gauge. So where are the challenges?

Baatjies: A lot of it has to do with the access, we are busy as Transnet with the infrastructure manager. And I think access would work differently under the infrastructure manager. But obviously, anyone who wants to access our network would have to comply with the RSR regulations. But you won’t have this issue of this train only goes to there, and then Transnet Freight Rail needs to come and get it and take it further. You lose a lot of time at Komatipoort. You can see there’s a lot of congestion there. And if you can deal with some of these issues where you, and others are able to access our network, you’ll probably get more efficiency. We can see now with what we are doing to Maputo, we have these run-through trains and we have seen a lot of efficiency on that. That is through agreements that we have concluded with our cross-border neighbours.

Dean: How is Transnet Freight Rail supporting PRASA’s rail recovery? I was in Cape Town for the 200th train launch, opening at the Southern Line. I understood that there might be just a little bit of friction in terms of lines with Transnet.

Baatjies: I would not say that there is friction. I have had discussions with Hishaam about lines that are more critical to PRASA, the Effingham Line, Stanger Line. We are in the process of concluding agreements where they take over these lines in the short term and then seeing in the longer term how we can transfer it to them. We will still have access to the line, but they want to deploy these EMUs. They want to deploy it there. And for us, it’s not really an electrical line. It just makes sense that they take over the line. But where we require access, we engage them. So for me, I think we have got joint teams working on these things. And it’s not only on the KZN side, it’s also in the Gauteng area. And I am open to saying if it is of more use to them, then what would be the purpose for us trying to keep those lines in Transnet? It just doesn’t make sense. So we need to look at the bigger picture. So I would not say that there is friction.

Dean: I am just looking at 31 corridors of 40 – has the pace slowed down slightly because of the Transnet PRASA, but you’re saying no.

Baatjies: No. We have made a proposal. There is an agreement, both teams are on our side. Like I said, I spoke to Hishaam early in March, and from his side, he appointed some people to work with our team. And I think there is in principle an agreement. I think the process is with their board currently for approval. We are open to this. There’s no friction. Our technical teams are contracted to go into the repairs on the lines. And that is a priority for us.

Dean: How is TFROC going to look going forward? And are you really going to talk about corridors when you no longer have the infrastructure per se? Are you not going to focus more on businesses and promoting what it is you move to become actually customer-centric, not talking about being customer-centric?

Baatjies: We changed our approach in 2020 to have a more inward-looking approach and we moved to these corridors. And my feeling is that under the infrastructure manager, we are going to be an operating company competing with others, we need to look at ourselves again. And we have had discussions about changing the model again to have a more outward-looking approach. We have set up our commercial structure again towards that so that we serve the customers better and have a more outward-looking approach. So as we move forward under TFROC, we would then say, which of these markets are we competitive in and where we need to focus. It’s really doing an analysis of our business and which areas do we need to play in. You will find smaller operators coming in, and they might be better doing some things that they have more agility. And we must be honest about those things and see that we focus our efforts on the things that we can be strong in. What I foresee is that as we move forward, you will see more of the smaller operators coming online and starting to be competitive, and we need to gear ourselves for that. I think there’s more capacity on the network than we can utilise. And with others coming online, certainly, we will be able to move more cargo in South Africa.

Dean: How are you going to actually market and position yourself to your customers to say that you are reliable, predictable, and competitive, considering the cost of the access? Our transport costs at the moment are just incredibly high.

Baatjies: Well, there is an access fee, like you indicated. But I think what you need to do is you have to look at the logistics system in South Africa and you need to look at being competitive. If you look at the access fee, you cannot just say, this is what it’s going to cost on the rail. And then you find that road is much cheaper.

So you have to be realistic about what it is and how much you then ultimately charge the customer for moving the product. If it’s not competitive, you’re going to lose the business and you will find more trucks on the road. So we are going to have to be smart about it. There will be some deliberations and discussions around the access charges. But on the other hand, we also need to make sure that we get to be efficient and we look at cost because any new train operating company would do exactly that. And if we’re not efficient and our costs are too high, we will lose the business.

I think a lot of the work on the TRIM side will also help us. So for instance, the signalling that you spoke about, the running times of trains. Through signalling and manual authorisations, you lose a lot of time. Those issues can be fixed. Obviously, you get efficiency. But there are other issues that we need to fix. I spoke about the locomotives, increasing the fleet of locals.

Dean: Are you going to go buy more locomotives? Hopefully, you have a better package to market.

Baatjies: We need to make sure the ones that we have and we recently bought, we need to have proper maintenance support for it. And that’s our focus really right now. So even for the CRRC locomotives, you need to have a step in OEM that supports you as you move forward. These locomotives are fairly new. So you need to have some maintenance support. And that’s why we’re engaging a step-in OEM that can support us not only now, but as we move forward also. We have agreements already to get other locomotives. I want all the locomotives back in service. There is demand for rail. And we have looked at various partnerships. You would have seen earlier this year with Sasol, where we signed the agreement, where we reduce the tariff, they take care of the maintenance, and they refurbish these wagons.

We need to have a discussion around the commercials, but ultimately get more of the product that’s on road back onto rail. So that’s really our strategy. But like I said, you might find that for some of the low-density lines, new train operating companies might be more competitive than we are. And we have to be honest about the space that we want to play in.

On the North Corridor, on the coal line, with the signalling, that will unlock more slots. We have done some maintenance now on the ore corridor, which gives us even more slots. In TFR, as it is currently, our focus is still very much on refurbishing the network, or rehabilitating the network, and making sure that we unlock capacity.

Dean: I was just a little disappointed because originally the intention was those operators who were ready could apply for slots, who had gone through the process with the rail safety regulation and all the rest. And that’s been excluded until the call for comments have been wrapped up and the ministers have made their decisions.

Maybe with the IREC sessions coming up, it’s something that can be discussed because some operators are ready. They want to go online.

Baatjies: I have certainly received a lot of interest from people who want to and say they are ready, who want to buy a rolling stock and all of these things.

Dean: What Transnet is suffering now was self-inflicted to a degree. I am looking forward to seeing a new Transnet and a new energised vision. I am looking forward to seeing the business position to meet those demands.

Baatjies: That is what we are pushing for. I must stress, that there is a lot of issues that we need to resolve. It’s going to take some time. But I think the things that we are implementing are really the things that will unlock the capacity and get more. So whether it’s on the recovery plan from a TFROC point of view or whether it is then allowing others to also access the network. These are the things that would grow volumes as we move forward. We just need to find the right mechanism as to how we can then get others to get on the network faster. The more players you eventually have on the network, it brings down the cost for everybody, because right now, as TFR, we have to carry the burden of maintaining the network on our own. And if you have other operators through access charges, you can raise more funding for the maintenance of the network.

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