INDUSTRY NEWS
THE FUTURE OF
LOGISTICS
PRIVATISATION IN SA
The logistics roadmap for private sector investment in restoring Transnet’ s operational capability has been laid out, is it the start of the desperately-needed turnaround?
Transnet’ s inability to invest in and maintain its infrastructure over the past decades has resulted in the participation of private sector players. Their involvement aims to restore operational reliability and increase the volume of commodities, mainly from the mines, being railed. Until now, this private sector involvement has primarily focused on sourcing spare parts for locomotives and procuring specialized equipment to ensure continuous cargo movement at ports.
The National Logistics Roadmap was recently published to describe how increased private sector participation will improve Transnet’ s efficiency. This will be achieved by determining the cost of rail services, defining stakeholder responsibilities, and supporting the capital investment needed to restore the infrastructure. According to Thapelo Seanego, Senior Underwriter at Lombard Guarantee, the estimated required capital injection to revitalise Transnet runs into billions of Rands. both the iron ore and coal lines needing over R14 billion investment over the next 5 years to get an average of about 260 million tonnes( volume) a year back on rail by 2030, as an example.
“ By allowing private sector involvement, infrastructure upgrades and operational efficiencies can be accelerated. This is particularly crucial for the mining industry, which has seen a significant decline in transported commodity volumes over the past five years.” Seanego believes that successful privatization requires a balance between government oversight and private sector efficiency. While privatization will introduce competition and accountability, it is essential that regulatory frameworks are updated and maintained to ensure fair and transparent operations.
Financial security and risk mitigation are critical factors in Transnet’ s road to recovery, especially with increased private sector involvement, according to Seanego.“ The transition to privatisation presents both opportunities and risks. As new private operators enter this space, rail users will need to adjust to changing contractual frameworks.”
Seanego predicts that insurance-backed payment guarantees will become vital to maintaining business continuity and upholding contractual agreements in the face of increasing private sector involvement in rail, port, and freight infrastructure. These guarantees would mitigate liquidity risks and ensure operational stability.“ Guarantees provide financial security to all stakeholders, allowing trade to flow without unnecessary financial bottlenecks,” says Seanego,.“ For businesses investing in logistics infrastructure or securing rail and port access, risk management solutions will be key to navigating this new environment.”
Seanego cautions that as the logistics sector becomes more crowded with private players, their financial and operational capabilities will be put to the test.
“ Guarantees act as a safeguard, ensuring that service providers and infrastructure investors can deliver on their commitments without the risk of non-payment by their clients,” he explains.“ This is particularly relevant in managing working capital or failure to pay by clients where delays or contractual disputes could have significant financial repercussions.”
When faced with privatization, stakeholders often express concerns about maintaining a balance between national interests and private sector infrastructure projects.“ We’ re going to see intense discussions on pricing models, service reliability and long-term maintenance commitments come to the fore.”
Businesses that want to operate in this changing environment will need strong financial backing to support their involvement. Meanwhile, regulatory bodies will need to make sure that privatization doesn’ t lead to monopolistic pricing or exclusionary practices, says Seanego.“ Guarantee providers, alongside financiers and insurers, will play a massive role to enable sustainable investment.”
Seanego believes that the importance of guarantees in risk mitigation will grow as the country transitions towards increased privatization of logistics.“ Guarantees provide a layer of confidence to all parties involved, helping to ensure that infrastructure managers can secure constant volume with less disruptions to the logistics value chain.”
The success of South Africa’ s logistics transformation will depend on cooperation between the government, private businesses, and financial institutions as the country begins this significant change. In order to make sure the logistics industry runs efficiently and resiliently in the future, a well-executed privatization strategy could result in significant economic advantages.
aBr WORDS IN ACTION 08 MARCH 2025