The green paper on national rail policy

National Rail Policy Green Paper Presentation

Transport Forum

01 October 2015 Hlengiwe Sayd

2

Overview

• Railways in South Africa

have lagged increasingly far behind railways that have participated in railway renaissance,

due to several challenges and historic events, to the point where they are:

– no longer able to compete effectively against other transport modes

in capturing their proper share of the national freight and passenger transport task; and

– unable to support South Africa’s exports into global markets

• Lack of policy direction and appropriate institutional frameworks

as well as lack of a strategic approach to major new rail investment decisions

have exacerbated the situation

• A National Rail Policy is required to steer the various role players towards

consistent strategic reform to ensure future sustainable development

of the rail industry over a realistic time period and in an affordable manner

The National Development Plan identifies outdated, malfunction-prone railway technology as straining the road network and calls for focus on total transport system efficiency

to maximise the strengths of the different modes, cut inefficiencies and reduce disparities: The policy positions put forward in the Green Paper are directly aligned to this vision

3

Market and Institutional History

Above rail

Below rail

Vertically

Integrated

Vertically

Integrated

Horizontally

Separated

&

Vertically Separated (Commuter Network)

Preparation for

Vertical Separation

Vertically

Separated

Horizontal

Separation (Freight &

Passengers)

& Vertical

Integration

(Passengers)

1910 1981 1990 1994 1996 2009

Spoornet Spoornet Spoornet TFR PRASA

SA Railways

& Harbours

SA Transport

Services

All services integrated

under Spoornet, freight

and passenger

separated.

Orex Metro

rail

MLP

S

Blu

e T

rain

Orex

MLP

S

Blu

e T

rain

Metro

rail

Blue

Train

GFB

CoalLink CoalLinkCoal & Iron

into regional

structuresMetro

GFB GFB

Shozoloza Meyl

SARCCMetro

Network

SARCCMetro

Network

SARCCMetro

Network

SARCCMetro

Network

Minister of

Transport

Commercialisation

Integrated Port &

Railway run along

Commercial lines

Corporatisation

Transnet & SARCC follow

from the Legal Succession

Act

Transportation

Conglomerate

Restructuring 1

Spoornet closed regions

in favour of Central

Planning & 35 Areas

(Customer Service &

Ops); ring fence Metro &

MLPS & Blue Train

Restructuring 2

SARCC concessions

Metrorail services to

Spoornet

Restructuring 3

TFR

disposes of Metrorail

and

Shozoloza Meyl to

PRASA

Rail Challenges in South Africa

5

Rail Challenges

• Under-utilised infrastructure assets

– Difficult terrain, tight curves and steep gradients

– Investment in other modes vs piecemeal upgrading in rail resulting in technical inconsistencies

– Limitations of narrow gauge, re speed

• Over-age equipment

– Metrorail & Shosholoza Meyl designs dated from 1950s & 1960s

– Tendency to refurbish assets to existing standards instead of upgrading equipment

– Outdated signalling and train braking technologies, compromising safety

• Capitalised maintenance

– Significant capital spent on maintenance

• The status quo is unsustainable

– Narrow gauge precludes the implementation of full strength heavy haul & Double stacking containers.

6

Rail challenges

Low performance

• Railway costs include a relatively high infrastructure fixed cost component: Rail is:

• More cost effective when traffic volume increases for given route distance, and

• Less cost effective when traffic volume decreases for given route distance

• Whether general freight or heavy haul in Brazil or in South Africa,

narrow gauge does not cut it, and more incisive interventions are necessary

Raising availability

and reliability is

always necessary,

but an increase

from

70% (mediocre)

to 90% (good)

cannot raise

performance

sufficiently to

move SA railways

into the league of

its Assertive

Railways cluster

fellows

Reduction of SA

network by ⅔

without material

loss of traffic

would:

Go a long way to

increasing TFR

line density to that

of its BRIC

fellows; and

Usefully reduce

the infrastructure

fixed cost

component

Operation Track Gauge

Freight Traffic

Category

Density106 tonne-km

per route km

Density 106 passenger-km

per route km

Brazil: MRS Broad

All Freight

37.2

China Railways Standard 26.9 8.9

Russian Railways Broad 23.6 1.8

USA: BNSF Standard 20.3

USA: Union Pacific Standard 16.0

USA: CSX Standard 12.4

Indian Railways Broad 10.9 16.6

USA: Norfolk Southern Standard 8.3

South Africa: TFR Narrow 7.4 0.1

Australia: BHP Billiton Standard

Heavy Haul

126

Brazil: EFC Broad 82.3

Brazil: EFVM Narrow 79.6

South Africa: TFR Ore Line Narrow 58.1

South Africa: TFR Coal Line Narrow 37.5

South Africa: TFR Narrow General Freight

4.3

Brazil: ALL, FCA, Transnordestina Narrow 1.2

7

Rail challenges cont.

• Branch lines

– 50% closed & not economically viable

• Institutional arrangements

– Bodies other than govt developing & implementing strategies & policies

– No clarity of roles & responsibilities

• Rail Transport planning

– No coordination nor integrated planning

• Economic regulation

– New market entrants subjected to non-transparent SOE practices

– SOE self-regulate in their favour – fares, tariffs, network access, etc.

• Skills development and job creation

– Skills lost with the decline in rail; inadequate critical skills; training facilities

• Rail safety & security management

– Vandalism, theft, insufficient security, informal settlements

• Lack of Funding

The Railway Renaissance

9

Rail’s Genetic Technologies:

• Supporting achieves heavy axle load

• Guiding achieves high speed

• Coupling unitises vehicles into trains

and leverages Supporting and Guiding

to scale capacity to meet demand—

freight and/or passenger

Inherent railway competitiveness

10

Inherent railway competitiveness

(continued)

Railway Genetic Technologies and Competitive Market Spaces

1960’s – Commercial high speed

intercity passenger trains.

1970’s – Heavy haul unit trains

conveying bulk commodities.

1980’s – Double stack container

trains.

1990’s – Rapid growth of urban

commuter rail.

11

Rail’s Rise and Fall and Rise Again

0

20

40

60

80

100

120

1800 1850 1900 1950 2000 2050

Early Adoption

Maturity

Motorways

Technology

Limits

Alternative

Technologies

Terminal Decline-10

1800 21421964

-10

1800 2142

-10

1800 2142

Hi-speed Intercity

1972

-10

1800 2142

Heavy HaulHeavy IntermodalUrban Rail

19801989

12

Rail challenges

Lessons learned (1 of 4)

Attribute Brazil Russia India China South Africa

Governing Ministry(ies)

Ministry of Transport

Ministry of Transport

Indian Railway Board

Ministry of Transportation

Department of Transport plus Department of

Public Enterprises

Intermediary Institutions

National Land Transport Agency

and VALEC

Engineering, Construction &

Railroad Inc. (SOE)

Federal Agency for Rail Transport

None State Railways Administration

plus Hong KongTransport

Department

None

Operators 12 Vertically integrated

concessionaires on existing

infrastructure; open access train operators on new

infrastructure

Russian Railways 17 Regions; plus

Russian High-Speed Railway Co; Federal Passenger Co; Freight One;

Globaltrans; JSC High Speed

Rail Lines; plus 160 other subsidiaries.

15 Zonal Railways plus Dedicated Freight Corridor Corp of India Ltd

(SPV); High Speed Rail Corp of India

Ltd; Konkan Railway; National

Capital Region Transport

Corporation Ltd; plus 9 other PPPs

China Railways Corporation

plus MTR Corporation

(Hong Kong) plus ≈26 local- and

joint venture railways

Rail freight SOE plus

Passenger Rail Agency

plus Bombela

Concession Co.

13

Rail challenges



Investment Funding Sources

Federal Government,

Regional Government, State Owned Enterprise,

Private Sector Participation

Federal Government,

Regional Government, State-owned Enterprise,

Private Sector Participation,

Capital Markets

Union Government,

State Government, State Owned Enterprise,

Private Sector Participation, World Bank,

Foreign Direct Investment

National Government,

Regional Government, State-owned Enterprise,

Private Sector Participation,

Capital Markets

Freight: State-owned Enterprise

plus Capital Markets;

Passenger: National

Government

Renaissance Achievements

High Speed, Heavy Haul, Long Stacks, Urban Rail

High Speed, Heavy Haul, Double Stacks, Urban Rail

High Speed, Heavy Haul, Double Stacks, Urban Rail

High Speed, Heavy Haul,

Double stacks, Urban Rail

High Speed, Heavy Haul,

Double Stacks, Urban Rail

Market Structure Existing network Vertically

Integrated; New network

Vertically Separated

Vertically Integrated Vertically Integrated,

Vertical Separation under consideration

Vertically Integrated Vertically Integrated

14

Rail challenges



3rd Party Access Sole Concessionaire on existing lines;

Open Access on new lines

Negotiated Currently Closed Closed Limited negotiated

Strategic Horizon for railway networking

Occupies half of South American

continent, currently extending railway

coverage to access its entire territory

East Asia–Western Europe Corridor,

Russia–India Corridor, and North

America

North–South Russia-India

Corridor

Developmental Railway Corridors

to Africa, Asian neighbours,

Europe, and North America

North-South Corridor,

Heavy Hauls, General Freight

Corridors, Branchlines

Track Gauge, mm Heritage lines 1000 and ≥1435, new

lines ≥1435

≥1435 ≥1435 ≥1435 1067

15

Rail challenges



Overall Line Density, line density units

37.2 25.4 27.5 35.8 7.5

All Freight Line Density, tonne-km/route km

37.2 23.6 10.9 26.9 7.4

Line Density, passenger-km/route km

0 1.8 16.6 8.9 0.1

Heavy Haul Line Density, tonne-km/route km

82.3 No information available

No information available

400 58.1

Recommended Policy Positions

17

Government recognises the urgent need for rail revitalisation through centralised

rail planning, investment strategy and decision making which will be driven by the

Department of Transport.

Infrastructure & Track Gauge

• Investment is geared for a move towards standard gauge infrastructure on

a high performance core network stimulating railway renaissance in Heavy

Haul, High-speed Intercity, Double Stacking, and contemporary Urban Rail.

• Urban rail & narrow gauge – where appropriate, for urban rail, the existing

network will continue to be used, will be suitably maintained and extended

where justified. The rest of the narrow gauge network will either be exploited

where required or be disposed of.

• Timing – The timing of gauge change would be informed by demand and

capacity requirements, and is to be determined on a case by case. Feasibility

studies will confirm appropriate gauge.

Recommended policy position

Investment

18

Recommended policy positionFunding & Private Sector Participation

FUNDING

a) The fiscus or through instruments secured via Government Guarantee – PRASA

b) Financial instruments secured by the Balance Sheet of a SOC – TFR

c) Debt and Equity financing

d) Private Sector Participation, where the private sector are willing to fund and bear

the risk. Potential private sector funding models include:

– Private involvement in operations or the provision of assets such as rolling

stock

– Public Private Partnerships (Gautrain)

– Leveraging the commercial value of railway land and the development

opportunities around stations

PRIVATE SECTOR PARTICIPATION

• Government will invite private sector participation to invest in projects

where it cannot presently afford to invest, or where value for money can

be demonstrated for a private sector risk premium.

19

Recommended policy positionFunding & Private Sector Participation cont.

Branch lines

• Branch lines are to be categorized as Strategic or Non-Strategic.

• Criteria for Strategic branch lines include the following: food security,

developmental infrastructure, upliftment of rural communities, amongst

others.

• Strategic - Vertically separated concessions

• Non-strategic - Vertically integrated concessions

• Financially non-viable branch lines categorized as Strategic should be

subsidised by Government.

• Non-strategic economically viable or marginal branch lines that TFR

chooses not to operate are to be concessioned at government discretion.

• Government, through its SOC’s and Agencies, will retain ultimate

ownership of all below-rail infrastructure assets.

20


Centralised rail transport planning

DOT to develop

Centralise and Coordinate all rail planning

Legislation enabling the National Rail Policy - will give effect to these plans

Submissions from stakeholders

NRMP must be a mechanism to implement revitalisation investment led interventions.

Define investment strategy required to revitalise rail - build a new

standard gauge core network for general freight and passenger

services

Determine funding required, funding sources and its application

Planning and communication between all relevant bodies to be

co-ordinated by DOT

Planning must consider

interoperability issues with

neighbouring countries –

revitalisation must not be at the

expense of the region

21

Recommended policy positionRail Economic Regulation

• Government recognises that economic regulation is required to ensure fairness, competition,

and long-term sustainability in the rail sector.

• A Rail Economic Regulator (RER) will be established to:

• Promote equity of access to rail infrastructure and services, as well as to investment

opportunities where relevant;

• Ensure reasonable access and fair pricing to train operators and concessionaires;

• Regulate market entry and exit and service levels;

• Resolve commercial disputes;

• Determine fair and reasonable tariffs for using rail infrastructure and services, which will

inform the approval of tariff requests received from the respective entities.

• RER will be included in the Single Transport Economic Regulator (STER).

• Until RER is established: Interim Railway Economic Regulatory Capacity (IRERC).

• Purpose of the IRERC: Gain better understanding of industry / economic regulatory

practices, establish consultation structures, address capacity constraints.

22


Institutional arrangements Role of National Government

• DOT is responsible for policy formulation, co-ordination of policy implementation, strategic planning, leadership and all

decisions relating to rail revitalisation

• DPE is responsible for overall governance and oversight to ensure that Transnet effectively fulfils its mandate as

envisioned by revitalisation interventions .

Role of Provincial Governments

• Formulation of provincial transport policy and strategy; and Planning and co-ordination of land transport functions

• For rail : Critical that Provincial Governments align their plans with objectives and sequencing of the interventions

in National Rail Policy and the associated plans and strategies developed by DOT

Role of Local Governments

• Per the NLTA, land transport functions are to be assigned to the most appropriate sphere of government –

many Local Governments do not have the required capacity

• PRASA continues to operate urban commuter rail - SLA’s : DOT / PRASA.

Role of Operators / Infrastructure Owners

• Freight rail: Exclusively operated by TFR on vertically integrated basis – except where private sector is invited to

participate (branch lines and other) through exclusively private operators or a combination of TFR / private operators

operated where .

• Passenger rail: Commuter rail and long distance passenger rail - operated by PRASA.

23


Skills development and job creation

• A competitive, revitalised rail industry will set the stage

to attract potential job seekers.

• Government recognises the need for revised and up-to-date training

programmes that would address the requirements of the revitalised

rail industry.

• Current training techniques, curriculum material and learning aids

will be reviewed to identify and address training inadequacies.

24


Safety and security

• Rail safety & security will form an integral part of rail revitalisation.

• The RSR will continue performing its function in ensuring railway

safety.

• The SAPS Protection and Security Services Division (Railway

Police) will continue to be responsible for law enforcement within

the rail environment.

• Operator-owned or outsourced security services will do first line

defence to protect passengers, personnel and assets, and manage

safety and security in the rail setting.

25

Way forward

• Green Paper published on the Government Gazette &

Departmental website

• Written comments and inputs to be provided within 60 days

post publication

• Provincial consultations

• Draft the White Paper on National Rail Policy

Thank You

The green paper on national rail policy

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