Could rail be the saving grace for South Africa amidst a declining gross domestic product (GDP) rate of 1.3% since December 2022?
Economists expect a further decline of 0.4% growth because of lower trading, finance, mining, agricultural activity, manufacturing and general government services, according to Stats SA.
The Q4 release of GDP figures last week showed a shocking turn as numbers reflected a bigger than expected contraction. Mesela Nhlapo, CEO of the African Rail Industry Association (ARIA), says the government is partly to blame for this decrease in economic activity in the country due to the slow implementation of the National Rail Policy which was approved by parliament last year March.
“These shocking numbers place South Africa on the precipice of a technical recession, and this has been brought about by loadshedding, interest hikes and sustained sharp decline in rail volumes,” says Nhlapo.
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“Financial experts believe that loadshedding, the 350 basis points interest rate hikes over recent months and Transnet’s persistent struggles to transport exports to harbours will continue into the first quarter of 2023. This will give us two consecutive negative quarters which, by definition, is a technical recession,” said Nhlapo.
Macro-logistics expert, Prof Jan Havenga from Stellenbosch University, says “the cost of Transnet’s inability to meet the requirements of the South African economy equates to R400 billion – approximately 6% of national GDP.”
Nhlapo believes the mining sector is facing an existential threat because of the continued deterioration of Transnet’s rail freight volume capacity.
“Over the past year, mining production has slumped by 9% year-on-year, and the mining industry lost an estimated R50 billion in exports in 2022, all due to logistical and energy constraints. In addition, mining could have brought in more than R150 billion extra if Transnet had operated at nameplate capacity,” says Nhlapo.
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Lessen the burden on roads
She continued by highlighting the heavy burden being placed on South African roads because of Transnet’s inability to handle large volumes of freight. Currently about 87% of all freight in the country is transported by road, which is unsustainable and dangerous because of road safety and increased truck accidents. Nhlapo says it is more urgent than ever for the government to implement the National Rail Policy, as this is the blueprint for the future of economic success for South Africa.
“Predictions of a bumper agricultural crop and a rebound in the global economy creating demand for South African exports makes it essential for the government to implement its rail policy and allow the private sector, through third-party access to the freight rail network, to get involved and turn around this dire situation,” Nhlapo says.
National Rail Policy is on the table
“We have Policy on the table – the White Paper on National Rail Policy – which was approved by Cabinet in March last year. The policy outlines steps to revitalise rail infrastructure and enable third?party access to the freight rail network. And it must happen now,” she says.
Nhlapo warns of massive tariff increases from Transnet if no action is taken and sees the issue as a matter of urgency for the Transport Economic Regulator to attend to immediately.
“The impacts of these increases will be disastrous for any hopes of future investment and growth in the upstream economy. It is simply not right that our economy should be burdened by Transnet’s home-grown problems with nowhere else to turn,” says Nhlapo.