The devastating financial results reported by Transnet at the end of August 2004 may well have marked an important watershed in the unfolding story of road freight transport in South Africa.

A net total group loss of R6,332-billion was dissected in chilling detail in the 126-page report issued at that time. While a large portion of the total loss could be attributed to South African Airways’ deficit of R8,73-billion, it was significantly aided and abetted by the R668-million worth of red ink to be found on railway operator Spoornet’s financial statements. Against this background, the profit contributions of the National Ports Authority, South African Port Operations and pipeline operator Petronet were completely neutralized.

While the stark numbers were cause enough for national concern, the report went quickly into spelling out a recovery plan. The sentiments expressed by Group Chief Executive Maria Ramos in defining this strategy then added real dimension to the transport utility’s current predicament and provided some clear clues to the fundamental direction chosen for the recovery plan. Ms Ramos made it clear that leaving the lumbering giant to continue on its current course would lead to its ultimate destruction. She then revealed that her strategy for the future would lie in concentrating on Transnet’s core capability in freight transport through the effective use of rail, port and pipeline assets, in conjunction with public-private partnerships. The highly significant statement on the first page of the report clearly identified Transnet as the "custodian of port and rail infrastructure in South Africa". Note that well, particularly the word "custodian".

It should also be noted that Transnet’s present predicament does not fit in with the South African Government’s priorities, at all. The State President, Thabo Mbeki, stated, in May 2004, that he wanted the public sector to "reduce the cost of doing business in our country". A financiallycompromised and ineffective Transnet would, clearly, not be able to fulfill this mandate.

At this point, it would be appropriate to sketch the broader status quo of land freight transportation in South Africa. The national rail network, established in the colonial era and further strengthened in the early apartheid years, has been in steady and rapid decline for, at least, the past decade-and-a-half. The infrastructure hardware has just been rusting away, both through inadequate replacement management and the actions of a large section of the local population who believe that everything that does not move, or cannot defend itself, can just be carried away. Nowadays, the rail system is so inadequate and lacking in security that it can hardly compete for the long-distance line-haul traffic that should, realistically, be its bread and butter.

Meanwhile, the South African market for commercial vehicles over 3 500 kg Gross Vehicle Mass experienced substantial growth during 2004 reaching a post-1982 record volume level of more than 20 000 units. Economic consultancy Econometrix is of the opinion that the currently prevailing conditions of strong fixed investment growth and consistent vehicle prices will be sustained for some time into the future and is predicting annual markets of around 30 000 units by the end of the  present decade.

The industry enjoys very little public support for the vital role it plays in the national economy - a perception confirmed in editorial comment by Patrick O’Leary in the August 2004 issue of FleetWatch. (See full comment on www.fleetwatch.co.za  – Past Issues)

This is wonderful news for local truck manufacturers and suppliers but there is a concern that needs to be confronted. Recently, there has been evidence that the transport industry’s support, supply and licensing infrastructure has been at full stretch. This suggests that volumes going forward run the risk of being artificially restricted unless local bodybuilders, trailer manufacturers, equipment suppliers, and dealers reinforce some of the facilities that have run down through effective disinvestment since previous market peaks in the early eighties, or overseas suppliers move in to fill available gaps. The problems relating to vehicle licensing and registration, being firmly rooted in the civil service, probably relate more to inefficiency than any facility shortcomings.

Continuing growth in the truck market will demand, quite simply, more infrastructure. There is, for example, a dire shortage of safe, overnight parking space for our truckers on most of our major routes. This will need to be addressed.

There must now be a distinct possibility that imported bodywork, trailers, equipment etc. are about to become a serious threat to local suppliers. More trucks and buses mean, quite simply, more bodies and trailers. The new vehicle technology, such as electronic brake system management, also dictates a growing need for new-generation semi-trailers and equipment. Some welcome early signs of a move towards operator self-regulation and increased legal compliance should, if it gains momentum, create opportunities for optimized bodywork and cargohandling equipment. It is also logical that vehicle manufacturers and suppliers will become quickly frustrated when customer handovers are delayed by supplier capacity constraints - and they should not be blamed for seeking alternatives when increased interest charges start to erode their corporate bottom lines.

So what, then, does lie in the future for transport in South Africa? A slimmer, more effective and profitable Transnet, concentrating on the multimodal handling of freight through rail, port and pipeline assets, working with private enterprise partners to provide cost-effective service to its customers? This is Maria Ramos’ dream and if Spoornet is to win back lost market share, then this can only come, realistically, from the road transport sector. The hope is that any such switch will be achieved through superior, more cost-effective service levels but can the politicians resist the temptation to intervene, as so often in the past, with insufficiently thought-through legislation? The recent 5-year, still inconclusive debacle surrounding Taxi Recapitalisation suggests that lessons still remain to be learned in this area. We hope that the prominent use of the word "custodian:" in the preamble to the Transnet turnaround plan does not indicate that an emotional, rather than business-rational approach, will be taken in any realignment of national freight transportation priorities.

Does Transnet’s talk of private-public partnerships rekindle some hope that the issue of intermodalism may, at last, be seriously addressed in South Africa? There can be no doubt that optimal use of national assets is the most desirable way forward but the way in which this process is managed will be crucial. In any event, the real challenge will be to raise the performance of the Spoornet portion of any partnership to acceptable commercial standards of cost, performance and delivery which, given the historic attitudes of public sector operations, could be a difficult task indeed. This area will also present opportunities for Black Empowerment initiatives, something that Transnet can be expected to fully exploit and promote.

The obvious synergy between Transnetcontrolled port and rail operations at the major import/export terminals of Durban, Port Elizabeth and Cape Town may give some clue to the main thrust of the new strategy. Retaking control of the discharge, transshipment and delivery of inbound and outbound traffic between these points, and distribution hubs in the principal market in Gauteng, may be just the sort of scenario needed by Transnet to make this strategy work. Theoretically, such a move, if effectively managed and executed, could be to the country’s advantage but getting it wrong would bring consequences, to the national economy, which would be too horrible to contemplate.

The absolute worst thing that the private sector could do would be to sit on its hands while the inevitable restructuring of Transnet unfolds. Early engagement in the process is crucial, while the road transport operators need to get their collective house in order. A unified, strong representative body for this sector will now be needed more than ever before and responsible, law-abiding operators need to firmly position themselves against any erosion of their market base. If market share is to be lost, it must be taken from the mavericks who shamelessly destroy our national infrastructure, while causing mayhem on the roads.

Nobody should doubt Maria Ramos’ obvious determination to carry her strategy through. Doubt, if you will, the public sector’s ability to become commercially competitive but remember that it has direct access to the legislative framework so it can always change the rules. It seems inevitable that the shape and direction of transport in South Africa is about to change, possibly forever, but for any major player to be excluded from the process, can only result in lost opportunities and business, in the final analysis.

On the other side of the coin, continuing growth in the truck market will demand, quite simply, more infrastructure. Improved levels of consistency in the market size will provide welcome justification for reinvestment, or new investment, in facilities and people. Under these circumstances, existing players, be they manufacturers, importers, dealers, bodybuilders or suppliers, will have to read the signs effectively, or be overtaken in the rush to service - and exploit - the more numerous opportunities provided by the market. Failure by local players to apply the necessary remedies can only lead to a rush by new and possibly foreign participants, to take advantage of the opportunities on offer.