TRANSNET’S first attempt at allowing third-party access to its freight assets has failed. On Monday Transnet Freight Rail and Traxtion Sheltam issued a joint statement announcing they had both agreed to the cancellation of the conditional award of slots between Kroonstad and East London on the Cape Corridor.
The statement said that the negotiation phase was protracted due to:
- the inherent complexity of the contract negotiations,
- design of the required service,
- interface with municipal-owned rail network on the chosen customer access route,
- unpacking the impact of the Employers Association / Bargaining Council, as well as
- the commercial reality of the service offering to the eventual customer/s.
They said that, given the above scenario and the reform work that the Department of Transport (DOT), and the Interim Rail Economic Regulatory Capacity (IRERC) have embarked on and which informs Phase 2 of the third-party open access regime, TFR and Traxtion Sheltam have jointly agreed to terminate the current slots awarded under Phase 1.
The Interim Rail Economic Regulatory Capacity (IRERC) was established to ensure strategic management of Economic Regulation in the rail sector. The purpose of IRERC is to develop the necessary capacity and skills to implement the regulatory approach.
The statement included a history and background of the deal. As part of the process leading to the implementation of the National Rail Policy (NRP), TFR initiated a project to sell slots on its rail network where excess capacity was available under Phase 1 of the initiatives to open access to third parties. On April 1, 2022, TFR advertised slots on the Container and Cape Corridors through a competitive open market process.
On November 25, 2022, TFR announced the conditional award of slots to Traxtion Sheltam subject to the completion of the application process, including the fulfilment of all conditions precedent before the planned start date of April 1, 2023.
The statement says that the Phase 1 slots sale process was to explicitly serve the purpose of gathering insights and learnings that would inform the future implementation of the third-party open access regime on TFR’s rail network in line with the NRP and other regulatory reform initiatives.
“TFR and Traxtion Sheltam jointly recognise the increased speed of the government’s rail reform agenda and acknowledge that the government’s rail reform process will establish the Infrastructure Owners, Infrastructure Managers and Operators’ rights and obligations within an independent legislated framework, and it would be beneficial to align as soon as possible with those principles, requirements, and objectives. The 2-year pilot project, for example, had certain investment limitations that may have hampered rail development along the East London railway corridor and will be addressed in Phase 2 of the third-party open access regime.
“TFR and Traxtion Sheltam gained great learnings through engagements on this initial Phase 1 slots sale process which both parties will use in the roll out of third-party access. Traxtion Sheltam is looking forward to participating in Phase 2 of the implementation of third-party access and the realisation of rail reform in South Africa.
“Transnet is continuing to engage with all relevant stakeholders on third-party access where appropriate, aligning with the work that the DOT continues to undertake towards the implementation of the NRP,” the joint statement says.
Up-coming slot sales
The initial third-party slot sales were for two years. In the subsequent call for proposals, Transnet has extended the contract period for further slot sales to 20 years. In an FAQ on TFR’s website, the following details regarding the sales of slots on the Container Corridor and South Corridor are provided.
“Transnet will give qualifying third-party Operators access to the Container Corridor and South Corridor. The first phase will be through the sale of slots. Slots mean the temporary occupation of sections of the network to enable end-to-end passage of a train. These will be sold on a take-or-pay basis to third-party operators through a transparent, open market process. We have identified six slots on the Container Corridor (Durban to City Deep) and are looking at ten between East London and Springfontein. The sale of these slots will be used as a pilot which will enable us to ring-fence the business operationally to establish the cost of the network and commercially to determine tariffs and pricing models.”