BYLINE: Saki Macozoma

Managing Director, Transnet

INTRO: Managing Director of Transnet Saki Macozoma reveals to Murray Hughes proposals for a programme of sales and concessioning that will bring radical change to South Africa’s 1067mm gauge national network. Both heavy haul operations will be concessioned within the next 18 months

RECOGNITION that Spoornet had to undergo massive change came with the economic meltdown in the Far East in the late 1990s. This, said Saki Macozoma on May 18, was ’because 95% of Spoornet’s traffic is coal and metals to the Far East’, making it exceptionally dependent on one section of the world economy. Even if tonnages stayed up, prices did not, and ’the downturn had a major impact’.

Apart from that, the financial performance of South Africa’s national railway has fluctuated strongly with the changing demands of the domestic and regional market, with a good maize harvest for example tipping the balance so that Spoornet turns in a profit. But the instability of ’being one year in profit and the next in trouble’ cannot continue.

’It is quite clear to us that the only way forward is a major restructuring of Spoornet’, said Macozoma. Dealing first with the two heavy haul operations, the Sishen - Saldanha iron ore line and the Richards Bay coal line, he said that ’both will be concessioned within the next 12 to 18 months’, possibly ’in partnership with the mining houses’.

The coal line was ’doing fairly well, so there is nothing to do in terms of operational efficiency.’ It is currently carrying 80 to 85 million tonnes of coal a year. For the Orex (iron ore export) business carried on the 861 km Sishen - Saldanha line, electrified at 50 kV, ’we intend to expand capacity to 24 million tonnes a year and eventually to 30 million tonnes, and the board has approved investment of R1·7bn over the next five years.’ This will be spent on ’adding loops, improving the locomotive fleet and obtaining some advanced wagons’. The operation will also be brought under a single management, with Portnet relinquishing control of the Saldanha port.

Freight in trouble

Much more intractable are the problems of running Spoornet’s general freight business, which accounts ’for 80% of turnover and 95% of the people employed’. This is ’actually losing money because of technical problems, because of overemployment, and because of fierce competition from road.’ Noting that there was pressure to increase lorry weight limits beyond the present 62 tonnes, Macozoma was convinced that ’policy change is needed - there is no way that rail service can survive with these kinds of trucks’.

Transnet has appointed British consultants Halcrow ’to identify what needs to be done to improve operational efficiency and to assist with implementation - we want to be sure that we have identified all inefficiencies and taken them out of the system.’ Macozoma expects it will ’take three to five years to effect the kind of changes we want. We know we have to reduce the number of people, reduce the number of kilometres and abandon many customers - there is no way to serve them appropriately.’ On the other hand, he believes the plan will create ’an opportunity to concession off light-density routes, which could be profitable under a different cost structure. Spoornet has to carry medical costs, housing costs and so on, and someone not carrying this burden can do it. We don’t want to abandon customers totally, because if they are lost to road, they will never come back.’

Macozoma knows that customers ’are looking for transport solutions, not for a scheduled train from A to B’, and he plans to develop the use of information technology to provide a full logistics service with individual customers ’so that we do not deal with them in a haphazard manner’. Commenting that Spoornet was ’traditionally an excellent engineering company’, he is now ’trying to build into the management team greater strength in business skills’. His formula is to appoint ’teams for each commodity, for example ferro-alloys, to eat, sleep and wake up in that industry so that the team has a complete understanding, knows what threats there are and how to make the customer happy.’

Asked about proposals suggesting that the Spoornet network would be reduced to less than 6000 route-km, Macozoma says ’no decisions have been taken, and the jury is still out on this.’ The rest would be a taken over by a company known as LinkRail, whose job would be ’to find people to operate the other lines and support those who take this on.’

Restructuring would also raise important social issues at what Macozoma called ’junction towns’, whose only reason for existence was the railway. ’There will be four or five biggish towns with no economic activity’, he said, ’and we must still decide what to do with the asset base and the people. There may be business opportunities in the tourist market.’

Perhaps the first part of Spoornet to be offered for sale will be the Blue Train. ’Every day we receive letters of interest’ from potential buyers, Macozoma noted, citing Orient Express, Virgin and hotel groups. ’It will probably go first because it is easy to deal with, and it really belongs to the hospitality industry rather than the railway’, although he warned that strict agreements on maintenance and safety would be required. He pointed out that the whole process of concessioning depended on clarifying ’several important questions such as access, standards, safety and maintenance as we do not have a regulatory regime for that yet.’ Relationships with the Department of Transport also needed to be defined.

Spoornet’s main line passenger business currently receives no subsidy, and Macozoma insisted that it was impossible to have a long-distance passenger system that is not subsidised. ’The government must decide what service levels they want and provide the subsidy, maybe getting an operator in’.

Conscious of the role that Spoornet has played in helping other railways in the Cape, Macozoma stressed that efficiency of the rail network in South Africa depended on its neighbouring railways making similar progress. ’The assistance we give to other railways is quite important, and we are interested in the privatisation in Zimbabwe. We are doing what we can to ensure the railways survive and that there is interconnectivity.’

CAPTION: Major capacity improvements are envisaged on the Sishen - Saldanha iron ore line, for which an operating concession is to be awarded within 18 months