1. Confidential Department of Transport Reduction of transportation by road: A shift towards Rail Select Committee on Public Services 08 February 2012

2. 2 Department of Transport Problem statement Situational analysis Key freight corridors Road and rail market share Key challenges facing both road and rail industries Key factors contributing to the decline of the rail freight industry Strategic thrust and programmes: Some Interventions Key Rail Policy thrust: Some Interventions Way forward PRESENTATION OUTLINE

3. 3 Department of Transport Deterioration of the road infrastructure Insufficient maintenance of the road network & lack of funds Inefficiency in freight movement – modal mix of road vs. rail Inefficiencies of rail Deteriorating rail infrastructure Insufficient capacity of the railways to re-gain lost market share PROBLEM STATEMENT

4. 4 Department of Transport The road freight industry has expanded rapidly since the deregulation of the industry in 1989; A lot of cargo has migrated to road rather than rail, due to shortcomings in the rail system; Road freight sector carries 87% of total freight in the country; Total volume of road freight moved in 2007 – 1,373mt; The sector contributes 5,9% (R66b) in 2007 and total land transport contributed 6,6% (R74b) to GDP on a value added basis; In terms of land freight distribution, road freight accounts for 50% of the tonnage in metropolitan areas, whilst rail accounts for only 1%. SITUATIONAL ANALYSIS

5. 5 Department of Transport KEY FREIGHT CORRIDORS

6. 6 Department of Transport FOOD AND FOOD PROCESSING BEVERAGES TOBACCO PRODUCTS TEXTILES, CLOTHING, LEATHER PRODUCTS AND FOOTWEAR WOOD AND WOOD PRODUCTS FURNITURE PAPER & PAPER PRODUCTS PRINTING AND PUBLISHING INDUSTRIAL CHEMICALS FERTILIZERS AND PESTICIDES PHARMACEUTICAL, DETERGENTS AND TOILETRIES PETROLEUM REFINED / PRODUCTS OF PETROLEUM/COAL RUBBER PRODUCTS OTHER CHEMICALS NON-METALLIC MINERAL PRODUCTS BRICKS CEMENT FERROCHROME FERROMANGANESE OTHER IRON AND STEEL BASIC INDUSTRIES NON-FERROUS METAL BASIC INDUSTRIES METAL PRODUCTS EXCLUDING MACHINERY MACHINERY AND EQUIPMENT ELECTRICAL MACHINERY MOTOR VEHICLES MAIZE SOYA BEANS SUNFLOWER SEED VEGETABLES WHEAT POULTRY PRODUCTS DAIRY SUGAR CANE OTHER AGRICULTURE COAL MINING CRUDE PETROLEUM & NATURAL GAS IRON ORE (HEMATITE) MAGNETITE CHROME COPPER MANGANESE TITANIUM ZINC OTHER NON-FERROUS METAL MINING STONE QUARRYING, CLAY & SAND-PITS: GRANITE LIMESTONE & LIME WORKS STONE QUARRYING, CLAY & SAND-PITS: OTHER MINING OF CHEMICAL & FERTILIZER MINERALS OTHER NON-METALLIC MINERAL MINING OTHER MINING BARLEY COTTON DECIDUOUS FRUIT CITRUS SUBTROPICAL FRUIT VITICULTURE GRAIN SORGHUM LIVESTOCK (SLAUGHTERED) MOTOR VEHICLE PARTS AND ACCESSORIES TRANSPORT EQUIPMENT OTHER MANUFACTURING INDUSTRIES WATER SUPPLY METHANE-RICH GAS AVIATION FUEL NOT LISTED AS A COMMODITY CONTAINER TRAFFIC FULL NETT TONNAGE COAL MINING Export / Import via DBT/MPT IRON ORE (HEMATITE) Export MANGANESE Export Simplified Preference Road - Friendly Road and Rail friendly Rail – Friendly Pipeline - Friendly NETWORK DEMAND: COMMODITY SUITABILITY

7. 7 Department of Transport What is suitable freight for rail? Longer Distances Short-haul distribution is more efficient on road Longer Distances Short-haul distribution is more efficient on road High Volumes Rail is a bulk mover Big parcels in a single move High Volumes Rail is a bulk mover Big parcels in a single move Commodity Type Typically Bulk Minerals / Heavy Goods / Containers Commodity Type Typically Bulk Minerals / Heavy Goods / Containers Corridor Effect Concentrated corridors attract more traffic Corridor Effect Concentrated corridors attract more traffic Competitive Mostly Road Friendly Mostly Rail Friendly Setting the ideal Rail vs Road market share split is a fundamental driver for future rail demand LONG-TERM MARKET SHARE

8. 8 Department of Transport FREIGHT TRANSPORT 2003

9. 9 Department of Transport Tonnage 1105mt (270) Road 920mt (200) Rail 185mt (600) Corridor 140mt (680) Metropolitan 580mt (75) Rural 200mt (200) Corridor 45mt (680) Metropolitan 10mt (150) Rural 30mt (475) Sishen & Rbay 100mt (670) Figure in brackets denotes average transport distance Tonkm 300bn Road 190bn Rail 110bn Corridor 95bn Metropolitan 45bn Rural 40bn Corridor 30bn Metropolitan 1bn Rural 15bn Sishen & Rbay 65bn Income R120bn Road R105bn Rail R15bn Corridor R50bn Metropolitan R30bn Rural R25bn Corridor R6bn Metropolitan R1bn Rural R2bn Sishen & Rbay R5bn CSIR 2005 FREIGHT TRANSPORT 2004

10. 10 Department of Transport Tonnage 1533mt (233) Road 1337mt (177) Rail 196mt (617) Corridor 180mt (600) 11,5% Metropolitan 777mt (77) 50,5% Rural 380mt (179) 25% Corridor 41mt (683) 3% Metropolitan 8mt (250) 0,5% Rural 47,5mt (505) 3% Sishen & Rbay 99,5mt (673) 6,5% Figure in brackets denotes average transport distance Tonkm 357bn Road 236bn Rail 121bn Corridor 108bn 30% Metropolitan 60bn 16,5% Rural 68bn 19% Corridor 28bn 8% Metropolitan 2bn 0,5% Rural 24bn 7% Sishen & Rbay 67bn 19% CSIR/USB 2006 FREIGHT TRANSPORT 2006

11. 11 Department of Transport Tonnage 1578mt (237) Road 1373mt (178) Rail 205mt (629) Corridor 196mt (591) 12,5% Metropolitan 793mt (77) 50% Rural 384mt (177) 24% Corridor 46mt (685) 3% Metropolitan 9mt (278) 0.5% Rural 51mt (529) 3% Sishen & Rbay 99mt (687) 6% Figure in brackets denotes average transport distance Tonkm 374bn Road 245bn Rail 129bn Corridor 116bn 31% Metropolitan 61bn 16% Rural 68bn 18% Corridor 31,5bn 8,5% Metropolitan 2,5bn 0,5% Rural 27bn 7% Sishen & Rbay 68bn 18% CSIR/USB 2007 FREIGHT TRANSPORT 2007

12. 12 Department of Transport Road damage due to intensive use Congestion, accidents & pollution caused by road High freight volumes on road Insufficient rail capacity – road is the default mode Ageing rail infrastructure Lack of integration amongst major transport modes – road, rail, air, maritime, and pipelines KEY CHALLENGES FACING ROAD AND RAIL

13. 13 Department of Transport Lack of flexibility in service offering Insufficient investment in network and rolling stock Limitations of out-dated technology for high volume intermodal traffic Lack of customer focus Restrictive working practices and insufficient drivers Insufficient investment in training, developments and staff retention Limitation of interoperability due to a variety of incompatible traction power, rolling stock, signaling and train radio systems have emerged on different parts of the network FACTORS CONTRIBUTING TO DECLINE OF FREIGHT RAIL

14. 14 Department of Transport ObjectivesAddressing the issues of: Create efficient & integrated transport logistics system Enable transfer of appropriate commodities to other modes Excess freight on the roads Poor roads (through less utilisation) Strategic programmesDescription Integrated Transport Commission Technical body to coordinate, evaluate & approve transport plans & investments for integration of the individual modes Ensure balanced transport infrastructure spending across the various modes by taking into account the national interests Alignment of Transnet’s mandate Greater alignment of Transnet’s goals with the country’s needs Current challenges within rail can be associated with the conflicting mandate of Transnet Rail linkages with other modes / Inter Modal Terminals Improve the connecting infrastructure between rail & other modes to promote a sustainable modal split Targets for rail at ports Set specific targets for rail mode utilisation at the ports STRATEGIC THRUST & PROGRAMMES: SOME INTERVENTIONS

15. 15 Department of Transport  A clear rail industry model that entails that would be determined by the outcome of the Rail Policy, which articulates on the following:  Intensive investment programme  Accessibility and Competition  Regulation etc  A need to expedite the implementation of the rail revitilisation programme to address the inherent inefficiencies in Rail Transport;  Introduction of new technology where possible;  Promotion of Rail Transport as a mode of choice for passenger and freight transportation and implementation of a strategy to move certain current road cargo back to rail; KEY RAIL POLICY THRUSTS: SOME INTERVENTONS

16. 16 Department of Transport  Active state involvement in the facilitation of investment and private sector participation;  A need for a national programme of recruitment, training and skills development;  Implementation of a strategy to revitilise and develop branchlines;  Facilitate the introduction of Rail micro enterprises and cooperatives;  Implementation of a comprehensive strategy for safety and security ;  Establishment of local industries for local procurement. KEY RAIL POLICY THRUSTS: SOME INTERVENTIONS (Cont)

17. 17 Department of Transport Higher freight demand and insufficient capacity of the railways has led to road becoming the default choice of land transport and this need to be reversed All stakeholders in the freight sector must come on board and contribute towards making rail a viable option, including Transnet, hence the proposal to establish an Integrated Transport Commission The draft Road Freight Strategy being finalised The process of finalising the establishment of a Single Transport Regulator is underway The process of finalising the establishment of the Rail Economic Regulator is underway The process for the development of the Rail Policy is taking shape. The draft Green Paper is currently being finalised by DoT for Ministerial approval. Further consultations on the Green Paper process is proposed as outlined below: WAY FORWARD

18. 18 Department of Transport Formal launch of the Railway Green Paper; Undertaking stakeholder consultation; Cluster and Cabinet processes; Parliamentary processes; Formal adoption of policy (White Paper) by Cabinet. WAY FORWARD (Cont)

19. 19 Department of Transport Thank you