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The Economic Regulation of Transport Act could prove to be a major departure from what has been the status quo

By Chris Hattingh, Centre for Risk Analysis

POSSIBLY lost in the noise and uncertainty swirling around South Africa’s 2024 national and provincial elections, on 11 June a potentially momentous event in the country’s macro logistics space took place, President Ramaphosa signed the Economic Regulation of Transport Act into law.

Should the momentum of this piece of legislation be used effectively, the country’s ailing railway networks and ports will be given precisely the kind of reforms they have long needed.

The act consolidates the economic regulation of transport of passengers and goods into a single framework, whether by land, sea or air, and by road or rail or through ports or airports. Furthermore, the act establishes the Transport Economic Regulator.

The regulator will be able to set prices for access to markets, entities and facilities in the transport sector, and to set levels of service in the sector. This new regulator will also have the power to conduct hearings and market inquiries.

The potential upside here lies in the fact that there will be one port of call for the controlling of prices across the transport sector.

On the risk side, should the entity lean into over- or minute-regulation, and impede competition, market signals would be ignored, and reforms could take even longer (or possibly be delayed indefinitely).

An additional aspect of the act pertains to rail; provisions governing third parties’ (including private sector players’) access to rail infrastructure are introduced.

It should be relatively early to see whether the act, and the regulator, are used in the best-intentioned manner; do they consult and engage with industry players, or are decisions made absent of inputs from those very businesses that are crucial to the running of the country’s trade arteries?

The country’s railways and ports underperform due to equipment breakdowns and shortages, systems and processes that are not as modern and up to date as they need to be, and a lack of competition (as Transnet, for all intents and purposes, has enjoyed a monopoly position for many years).n

To fix these various problems will take a long time.

But the significance of the Act cannot be underestimated, as it aims toward the long-term state where there is real private sector participation in, and ultimately competition between government and private players.

This would be a major departure from what has been the status quo.

South Africa’s ports of Ngqura in the Eastern Cape (404th) and Cape Town (405th) occupy the very bottom of the table in the latest Global Container Port Performance Index (CPPI) produced by the World Bank and S&P Global.

The index ranks 405 ports and facilities across the world, using 2023 data. The port of Durban, which handles nearly 50% of South Africa’s port traffic, was ranked 399th.

The honour of highest-ranked South African port went to the port of Port Elizabeth, in an unimpressive 391st place. While the various operational, processes, and equipment issues at the various ports cannot be fixed overnight, progress could be rapid if the Transnet Ports Authority focuses on getting the basics right.

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