Railway company investments to facilitate economic growth

The current investments by the Passenger Rail Agency of South Africa (PRASA) and State-owned freight utility Transnet will largely facilitate economic growth in South Africa through major infrastructure projects currently under way, says consulting and auditing firm KPMG infrastructure deal advisory services head De Buys Scott.

“These investments will help grow businesses outside South Africa, which will facilitate greater export competitiveness, with deeper regional integration . . . possibly helping to propel South Africa towards faster-growing exports. This will enable the country to achieve higher, more inclusive, job-intensive growth, as laid out in the National Development Plan (NDP) 2030.”

He further highlights that upgrades of rail infrastructure will ensure that goods, as well as bulk materials or mined resources, are moved off the road and onto rail, which guarantees much quicker and safer transportation to destinations.

Scott notes that road maintenance is costly; with upgrades being down on rail infrastructure, this means that funds can be allocated to other priorities and projects in government budgets.

“Every economy starts with transport before any other primary infrastructure development. The leverage potential of a well-developed and sustainable transport system (passenger and freight) cannot be underestimated.”

Meanwhile, he states that South Africa’s rail infrastructure is the best of its kind on the continent, yet this industry has been neglected in terms of the required maintenance and reinvestment over several decades.

“There are, however, a number of projects under way . . . in the value chain for metro passenger train development and freight wagon development. Both are significant industries and are either being introduced or are already in partial existence,” Scott comments.

He adds that the projects of PRASA and Transnet are very significant and will provide opportunities for the local manufacturing industry to be developed. These projects will remain sustainable for a long period, given the long timeframe of the procurement processes by both institutions.

Shosholoza Meyl, the long-distance passenger train programme in South Africa, is currently subject to an initial strategy determination by industry experts, which will be followed by a feasibility study that is likely to determine the programme’s future investment phase, Scott says.

Challenges He adds that continued financial support for PRASA to fund these projects is probably the agency’s primary challenge. Such support, against the backdrop of a continued struggling economy, is shrinking amid inflation and the almost nonexistent growth of the South African economy.

He notes that South Africa can fund these investments and the budget deficit “only so much with debt instead of natural growth”.

“There is a very tight and challenging cash flow resource constraint.”

Scott says that the supporting infrastructure upgrades to the stations and depots along the Metrorail lines are piecemeal procurements that need to materialise to optimise the new fleet replacement programme. Thus, affordability of such essential support infrastructure is also an ongoing challenge not to be underestimated.

Another challenge is the ageing existing rail infrastructure. He illustrates that most of the country’s rail tracks are still the narrow Cape gauge width, which does not conform to the current standard gauge width of the newer tracks. Subsequently, replacement trains have to be adjusted, resulting in additional costs, with the replacement of tracks being a time- consuming and expensive exercise in its own right.

The lack of technical capacity and capability in South Africa is another significant challenge, Scott adds.

However, he remains optimistic that the localisation projects of PRASA and Transnet will alleviate this problem, but it will take time.