Statement against the vertical separation of Transnet Freight Rail announced by Transnet Group CEO

4 October 2024

The uMkhonto weSizwe Party notes with deep concern the announcement by Michelle Phillips, Group CEO of Transnet, that the 1st of October 2024 marked the "official start of the vertical separation of Transnet Freight Rail (TFR) into two operating divisions: Transnet Infrastructure Manager (TRIM) and Transnet Freight Rail (TFR). This is the beginning of the destruction of railways in South Africa, a major setback for South Africa and its economy. The MK Party rejects this privatisation plan being rolled out by the Coalition between the ANC and DA, which is not based on the demands of the people, our level of economic development, and lacks sound understanding and knowledge of the business and operations of Transnet Freight Rail.

Contrary to the assertion by Transnet that vertical separation of TFR will bring about "a more efficient, reliable, and sustainable rail system that can contribute to economic growth, job creation, and social development", the truth is this will increase the cost of doing business in the South African economy. In fact, our assessment suggests that the TRIM will require billions of rands of financial support from the National Fiscus from as early as 2026, with increasing funding requirements every year thereafter. The MK Party says this is extremely irresponsible and should be rejected.

The MK Party is not surprised. Behind this decision for vertical separation lies the greed of white business through the so-called Rail Private Sector Participation (PSP) Framework approved by Cabinet recently, which had seen the creation of a dedicated PSP Unit located in the Department of Transport to drive the privatisation of freight and passenger railways as well as our ports. We are aware these plans have been developed by the private company known as GTAC, appointed by the Department of Transport. It is this same company appointed at PRASA a few years ago to draft the PRASA turnaround strategy. Today, PRASA is in even a worse position based on the plans and advice of GTAC.

The MKP Party will invoke the Access to Information Act to evaluate how GTAC is appointed and how it is possible for this one company to win tenders within the Department of Transport and at its various entities. We ask who is behind GTAC.

The MK Party stands for a business model based on vertical integration for most of our State-Owned Enterprises. This is the most suitable model for SOEs in a developing country. Public entities like TFR thrive because of the cross-subsidisation which defines them. Vertical Separation cuts the very interdependencies. The MK Party's view is that vertical integration is the only way to make these SOEs sustainable, and contributes to economic development, job and skills creation, development. Transnet proved in the past that an integrated freight rail that delivers reliable services and has the right capacity is the route to take, it made huge profits in 2018 which is the model currently being destroyed the current so called GNU.

The ANC of Ramaphosa and the GNU championing the interests of white business are now accelerating the process for the selling of our strategic assets and national resources to even the lowest bidder. We are taken aback that in many parts of the world, governments are taking steps and investing billions of resources to get their railway networks working and preparing them for future demand. As always, the opposite is happening in South Africa. The splitting ofTFR will take the same direction as the unbundling of Eskom, which plunged the country into darkness. The modus operandi for looting is clear: destroy SOEs and public entities, appoint task-teams or preferred companies like GTAC, and bring the private sector to take over these national assets. We saw this being applied at SAA, where Business Rescue Practitioners made money but left on their path a trail of destruction. The workers of SAA and the people of South Africa were the biggest losers.

The MK Party says the age of impunity is now over. We intend to take action to ensure that the privatisation and looting of our national assets are stopped. Barbara Creecy was clearly appointed to the transport portfolio to advance the privatisation of our railways and ports. She must be stopped.

We call upon the people of South Africa, the trade unions, community-based organisations, and all those committed to an equal and just society to join the MK Party to fight against this irresponsible decision to split Transnet Freight Rail into two.

The model chosen by the Government and its privatisation of our strategic assets should be resisted with the might at our collective disposal.

Issued by Nhlamulo Ndhlela, Head: Media and Communications, 4 October 2024