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Transnet’s Woes Present an Opportunity for Mozambique

Transnet’s Woes Present an Opportunity for Mozambique

South Africa’s state-owned freight logistics firm Transnet finds itself troubled by the proposed exorbitant rail access fees that could cripple the very mining and manufacturing sectors it is supposed to enable.

Economists and logistics experts have lambasted Transnet’s draft plan to charge 19.7 cents per gross tonne-kilometer for private rail operators to use its network as outrageous and predatory pricing that will make rail uncompetitive compared to road transport in what is becoming yet another chapter in the embarrassing estate of South Africa’s logistic infrastructure.

Transnet’s interim infrastructure manager, recently separated from its freight rail operations, claims the tariffs simply reflect the high costs of maintaining the aging rail network after years of mismanagement and underinvestment. However, the proposed fees could generate over R30 billion in revenue (~US$1.5B) – representing a massive tax on the mining sector that can ill afford further cost pressures.

While a phased 5-year implementation is on the table, the draft tariffs have miners and manufacturers questioning the rationality of using rail for low-value, high-volume bulk commodities. This presents an opportunity for neighbouring countries to position themselves as cheaper logistics hubs for commodity exports.

Mozambique, with its relatively underutilised rail and port infrastructure is poised to be a prime beneficiary. The country’s ports handled just 39 million tonnes of cargo in 2022, well below its capacity. Mozambique rail company – CFM already plays a key role moving coal and other bulk exports, with lines linking the interior to ports like Beira, Nacala and Maputo.

Mozambique rail company – CFM has a golden opportunity if it manages to follow the cue from Maputo Port by maintaining competitive logistics pricing and investing in upgrades. Mozambique could position itself as the preferred export corridor for industries disillusioned with Transnet’s deteriorating service and soaring charges. Tax incentives to attract investment in freight handling facilities could accelerate the process.

South Africa’s logistics issues are also being compounded by broader challenges such as power cuts and insecurity impacting mining operations. Losing bulk exports to competing transit corridors would deal a heavy economic blow at a time when maximising revenue from mineral exports is crucial for the ailing economy.

Transnet and the government need to urgently rethink their pricing model and infrastructure investment strategy. Failure to do so could see South Africa’s coveted freight logistics primacy in the region rapidly eroding to the benefit of ambitious neighbours. With global firms prizing reliability and affordability, the risks of further supply chain shifts are very real.

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