TRANSPORTATION PLANNING ASSIGNMENT

In many countries worldwide, more than 80% of freight is carried by road.

Name: Leonora Oosthuizen
Student number: 200840019
Name: Jaco Vermeulen
Student number: 200833620
Name: Linda Gunther
Student number: 200624338

TABLE OF CONENT PAGE

1. Why is such a greater proportion of freight carried by road? 3

2. Identify and discuss the advantages of moving freight by rail. 9

3. In respect of South Africa, how can Government influence freight modal split in favour of rail? 12

4. References 16

(i) Why is such a greater proportion of freight carried by road?

It is a well-known fact that ‘without trucks, South Africa stops!’
Trucks are the only way to reach most factories, stores, restaurants and homes. They carry everything, from TVs and computers to clothes, medicine, children’s toys, food and construction materials – all along the production chain, to local stores and doorsteps.
The current inefficiencies of the rail infrastructure in South Africa is the main cause why such a greater proportion of freight is carried by road.

It is true that approximately 80% of all freight in South Africa is transported by road. The routes travelled include both proclaimed and un-proclaimed roads. The un-proclaimed roads make up an estimated 140,000 km that mostly serve rural areas. The un-proclaimed roads do not fall under the road inventory of Government and as such do not get maintained even though they are important access routes for rural communities.

The deregulation of freight transport in South Africa two decades ago, and low historical investment in rail which resulted in poor service delivery, has caused the increased rail to road phenomenon. In South Africa our economy faces major challenges through the lack of an effective freight rail service in terms of the cost of logistics. The insufficient rail capacity has led to a higher demand for road based transport, which has resulted in vast deterioration of the road network. Further underlying issues are the mandates of Transnet (and TFR), which should have been aligned with the overall goals and needs of the country.

The Department of Transport is responsible to provide South Africans with an optimal enabling transport environment and should urgently initiate a process of moving road to rail transport to bring about a cost efficient and competitive transport industry. This can only be achieved by closely coordinated transport plans.

Another factor that currently influences the road-rail relationship is the rail-port linkages which are a burning issue. The importance of our country’s ports is highlighted by the fact that approximately 96% of South Africa’s exports are conveyed by sea. In order to attract world trade, Durban’s position in relation to the N3, and its high throughput volumes, make it a suitable candidate for the establishment of a “mega-port”.

The Johannesburg to Durban corridor has already reached capacity and will have a 21million ton excess capacity problem in 2017 if something is not done to alleviate the congestion. Although the Department of Transport in conjunction with Transnet are currently devising plans to upgrade various rail lines which are required to export mineral commodities, increased focus should be placed on the importance of improved operations on the Johannesburg – Durban freight line corridor. Johannesburg is the economic hub of South Africa and Durban is known as South Africa’s primary port, thus increased investment to improve operations between these two cities is vital.

The dominance of road freight is a given fact and the key question is what else needs to be done to shift bulk transportation demand to rail? Transnet is the main contender who has to continuously conduct extensive research and ensure public engagement to plan for future freight transport capacity requirements. Some of this research has been consolidated into the Transnet National Infrastructure Plan, which forms an important part of a national planning process. However, spending money does not guarantee results. The perceptions of poor service quality and unreliability have led customers to switch to alternative modes of transport and investment needs to be sufficient to cover the costs of maintenance, extension and replacement of old and outdated rail inventory as the average age of the current rail fleet is 30 to 40 years, with the maximum life span being 46 years and 51% of the rail fleet is soon to be retired (Montana, 2011).

These realities and the fact that the last significant railway construction project was undertaken in the mid-1980, it must be acknowledged that the fleet, infrastructure and operations elements of the freight rail system are not able to meet demand, in a safe and efficient way. These old trains, signaling and sub-stations systems are always prone to breakdowns on any given day which will inevitably result in an increase in maintenance costs and significant delays. This basically explains the poor reliability of the current rail system which impacts negatively on consignors and consignees.

It has been identified that the one way to reduce costs will be to invest in inter-linked rail and port infrastructure, which can then be supported by road. Railway technology suits the transportation of bulk commodities over long distances at low prices, yet only 11.3 percent of freight was transported by rail in 2009 (31 percent of ton-kilometers), with the remainder being transported by road (DBSA 2011a). The main goal of this infrastructure investment will be for management to get customers to believe in the quality and price benefits to be gained through bulk-transport by rail. Transnet, the State-owned entity unfortunately is the dominant player the logistics environment, owning and operating a network of rail freight, port and pipeline assets.

The disinvestment of rail infrastructure in South Africa has placed tremendous pressure on the road infrastructure and Figure 1 below clearly indicates that there are already major limitations on the road network particularly on the manganese line to Port Elizabeth, and to a lesser degree on the iron ore export line to Saldanha Bay. Both are however receiving attention, but in 10 years, the system limitations will become more serious-especially on key corridors, including the coal line to Richards Bay. This is another network, depending on traffic growth, that seems substantially in need of investment (Steyn 2010). The capacity of rail could also be expanded by modernizing the signaling system.

In global terms South Africa’s port productivity is seen as substandard (see Figures 2 and 3). While there has been significant investment in ship-to-shore cranes and straddle carriers at Durban, South Africa remains well behind its competitors. Comparatively high tariffs payable by vessels calling at South African ports have also contributed to lower volumes and shorter port stay times, but in some instances significant delays at specifically the Durban port increases costs to transport operators and owners of the goods.

Core freight activities account for 95% of TFR’s, the largest operating division of Transnet, revenue. On the other hand Transnet Ltd that operates and controls South Africa's major rail infrastructure, is also responsible for ensuring that the country's transport industries operate according to world-class standards. In reality South Africa does not come close to the accepted world-class standards in this area that forms an integral part of the southern African economy. Even though Transnet: * moves 17% of the nation's freight annually * exports 100% of the country's coal * exports 100% of the iron ore * has annual revenues of over R14 billion * will, over the next five years, invest R35 billion in capital * has 25 347 employees countrywide.
It has failed dismally in maintaining the extensive rail network across South Africa that connects with other rail networks in the sub-Saharan region. This rail infrastructure represents about 80% of Africa's total requirement.
The list below provides some overview of the proposed solutions driving and constraining forces and the implications arising from it and the major associated risks in transferring rail friendly freight back to rail:

Driving forces * Reduction of freight transport costs * Less utilisation of road infrastructure for long
Distances
* Transfer of cargo from road to rail

Constraining forces * Insufficient rail capacity and poor performance with lack of certainty over when it will be improved * Uncertainty over Transnet’s degree of collaboration * Ports are operating sub-optimally – congestion, slow turnaround time * Transnet’s priorities and willingness to cooperate due to the focus on own priorities – lack of alignment to pull in the same direction with regard to the national needs * Lack of funds to invest in rail

Implications * Reduced demand for road freight services over longer distances – might lead to
Overcapacity in the trucking industry and potentially consolidation in the long run * Reduction of transport costs for the end Customer * Transfer of cargo to rail * Reduced congestion around the ports and in the urban areas near the ports * Reduced utilisation of road infrastructure and thus reduced wear and tear

Risks * Status quo with Transnet and rail services might continue which would adversely affect the proposed solution * Political intervention might be necessary and level of political support is uncertain * Capacity of the ports to accommodate additional projects * Ability to reach agreement on the national transport system needs and local government plans.

Road freight is convenient, fast, efficient but extremely expensive and operators are forced to maintain tight controls on diesel and other relevant costs. Rail on the other hand is slower, but much more cost effective but unfortunately not an option with the current state of South Africa’s rail system.

(ii) Identify and discuss the advantages of moving freight by rail

Identification of rail-friendly freight in South Africa, rail’s core strength has traditionally been the transportation of bulk commodities, because this market segment enables the optimal utilisation of rail’s genetic technologies and economic fundamentals.
Railways can create and develop market opportunities by taking advantage of their genetic technologies, i.e. bearing, guiding and coupling. Bearing supports axle-loads of up to40 tons (and therefore density) but at relatively low speed, while guiding refers to the wheel on-track differentials (and therefore speed of movement) but with relatively low axle-load.

When bearing and guiding are added to coupling, this translates into long trains with high volumes (Van der Meulen, 2007). Bearing, guiding and coupling in optimal combination therefore support heavy intermodal or double-stack container trains, attaining axle loads of up to 32 tons at 120 km/h. This provides volume throughput opportunities, but also slightly less price-sensitive markets.

The key economic fundamentals that apply to rail are freight uniformity and long-distance line density. Freight uniformity refers to the standardisation of freight to facilitate handling and transport, such as bulk and palletised commodities.

Some important rail commodity drivers: * Coal driven by Eskom’s consumption and migration from road to rail for power stations. Sustained strong demand for SA Coal with the emergence of China and India as net importers of thermal coal. * Iron ore domestic and regional consumption of steel fuelling demand for iron-ore and new iron ore export project from Thabazimbi to Richards Bay / Maputo. * Managnese SA’s share of world output set to grow with expansion projects planned by both traditional miners and junior miners. * Rail container volumes to increase in line with Freight Rail’s objective of increasing market share along key intermodal routes such as the NATCOR. * Containers Rail container volumes to increase in line with Freight Rail’s objective of increasing market share along key intermodal routes such as the NATCOR * Cement Volumes to increase in line with SA’s GDP growth (4% on average). * Freight Rail is also targeting rail-friendly volumes in this sector. * Magnetite Demand mainly from China remains strong – driven by increased steel production. Export growth indicates modest increase and domestic consumption is set to grow once local beneficiation projects are started. * Grain, Maize, Wheat & Foodstuffs Domestic harvests approx. 10mtpa – 14mtpa. Demand represents TFR’s increased share of total market demand as more traffic is shifted from road to rail. * Petroleum Liquids/Products Demand projections indicate increased volumes by rail in support of the NMPP and increased over border demand from Botswana and Mozambique
Some other considerations as reported previously by (CSIR 2005; Ittmann, King and Havenga 2009) are as follows: * Commodities that are currently transported on road that could potentially move to rail; * Measures to get such commodities back to rail; * Cost implications, and savings, of transporting the above commodities by rail; * Intermodal solutions required; * Benchmarking of costs for companies in specific industry sectors, i.e. more micro-level cost calculations and comparisons; * The effect on logistics costs of service-orientated industries; * The effect of toll roads on logistics costs; * Drive to Green Logistics; * The feasibility of re-introducing the rail branch lines; and * The feasibility of more government-led initiatives to encourage industries, especially those that want to export, to locate closer to coastal areas and ports.
In essence rail should be the backbone for long distance (greater than 250 km) heavy load freight volumes. There would be many advantages of moving freight off road and onto rail.
These include:
• A reduction of heavy trucks on our roads.
• Overall transport and logistics costs will be reduced.
• Cost of externalities i.e. road damage, road accidents, road congestion, noise pollution and carbon emissions will be reduced.
• The impact of rising fuel prices would be minimized.
If the modal contribution land freight as a percentage of total ton/km is taken into consideration, and the fact that the USA’s rail sector constitutes 41.5%, China 47.0%, India 36% Brazil 21.7% and South Africa 33% and given that the USA and China are the world’s biggest economies, the case for moving South Africa more onto rail makes a lot of sense.

(iii) In respect of South Africa, how can Government influence freight modal split in favour of rail?

The transport sector has been highlighted by the government as a key contributor to South Africa's competitiveness in global markets. It is regarded as a crucial engine for economic growth and social development, and Government has unveiled plans to spend billions of rands to improve the country's roads, railways and ports.
Improving the country’s 20 247km rail network is a top government priority, with projects aiming to increase freight rail volumes and increase market share of container traffic.
The rail network is managed by the Department of Public Enterprises via Transnet. Transnet Freight Rail is the largest railroad and heavy haulier in southern Africa, with about 21 000km of rail network, of which about 1 500km are heavy haul lines. Just over 8 200km of the lines are electrified.
Major transport modes – road, rail, air, maritime and pipelines – should function together to provide an efficient and cost-effective transport logistics system. Current transport authorities are not integrated, and each transport mode is planned and funded in isolation. Integrated transport planning requires a shift in focus from improving individual transport modes to improving the performance of the whole transport system. To achieve this, a number of strategic interventions are proposed and central to these is the establishment of an Integrated Transport Commission (ITC).

The proposed solutions seek to facilitate the transfer of rail friendly commodities back to rail through creating an operational environment with sufficient capacity and coordination amongst all transport modes. All such interventions can be absorbed into the mandate of the ITC. It is strongly suggested that the Department of Transport takes the lead in resolving these burning issues with immediate effect.

Given the dominance of road freight, a key question is what needs to be done to shift bulk transportation demand to rail. Transnet as the main contender has conducted extensive research and public engagement to plan for future freight transport capacity requirements. This has been consolidated into the Transnet National Infrastructure Plan, which forms an important part of a national planning process. However, spending money does not guarantee results. Given that perceptions of poor service quality and unreliability have led customers to switch to alternative modes of transport, investment needs to be adequate to cover the costs of maintenance, extension and replacement.

The following aspects need to be adhered to by the Government in order to move the modal split in favour of rail freight in South Africa.

* Railway infrastructure: While upgrading the rail lines required to export mineral commodities is essential to realise the value of those commodities, increased investment and improved operations on the Johannesburg–Durban freight line should be given higher priority when taking into account the impact of freight exports, given Johannesburg’s central economic role, and Durban’s status as South Africa’s primary port.
Infrastructure all over South Africa needs to be upgraded and expanded in order to accommodate the current growth of imports and exports in South Africa.
Although a large amount of the tax payers money will be spent to upgrade and build new railway infrastructures, it will have a positive effect on the consumer and the economy of the Country.
The main reason why most of the freight in South Africa is moved by road is because of the lack of sufficient railway stations and access to and from railway transport. Government need to build and upgrade train stations, to accommodate intermodal freight movement. Access from rail to other modes of transport need to be upgraded in order for companies to use rail and road, instead of just road. New engineering and technological systems need to be implemented in order the service level of rail in South Africa. Service level is one of the major reasons why 80% of the countries freight is moved by rail. Although rail is a slow mode of transport, by improving the loading and offloading time at train stations and ports will have a positive effect on the service level of rail freight. Technological and engineering improvements will be beneficial, an example of information systems, like tracking the progress of the cargo, estimation software can predict the time of arrival, whereby companies can arrange for the offloading/ loading of the cargo, like in road transport.
Engineering improvements can be seen as the equipment used to offload/load the cargo from rail. Other improvements can be used, like rail truck carriers, whereby the whole truck drive’s on the train carrier, and at the end destination just drives off the rail carrier, eliminating the loading and offloading time of the rail carrier, and also reduces the risk of traveling on the road. By improving the infrastructure of rail freight in South Africa, more freight will be moved by rail that is a low cost mode of transport, thereby improving the state of South Africa’s economy.
The maintenance and state of the current rail carriers need to be upgraded as at the moment only certain types of cargo can be carried by rail.
Proper training need to be provided by the Government to all operation staff working in the rail freight industry, as it is labor intensive and can be a big safety risk.

* Monopoly
The Government needs to privatize rail carriers as with road transport, in order to give companies the freedom of choice of rail carriers. Although this sector need to be closely monitored, in order to promote healthy competition. By privatizing rail freight, the customer service level will automatically improve; job creation will be one of the advantages as this will improve South Africa’s economy.

* Cost
The cost of rail transport is very low as rail freight can move big quantities at a time. Therefore by providing a mixture of good service level and low costing, rail transport must use their competitive advantage over road transport. With proper capital investments in rail transport, the cost of the transport can be kept at a minimum as the percentage of freight carried by rail increases.

In conclusion, there are a lot of advantages that rail freight in South Africa have, if it is managed correctly, and the necessary infrastructure is built. Although it’s a long process due to the lack of investment in rail freight in the past, it would be beneficial to implement good rail freight systems and infrastructure in the long run. Rail transport has the ability to boost the economy of the country, by lowering the transport costs of freight, creating jobs, minimizing the risk of road travelers and protecting the environment.
Government need to invest and manage proper rail freight infrastructure that can compete with road transport in order to move the freight modal split to rail freight.

References: http://www.info.gov.za/aboutsa/transport.htm http://www.agbiz.co.za/LinkClick.aspx?fileticket=eEDB8eDPB4Y%3D&tabid=113 http://www.jtscm.co.za/index.php/jtscm/article/viewFile/26/24 http://www.transportworldafrica.co.za/2012/04/20/rail-transport-opportunities-in-south-africa/ http://www.iru.org/en_road-freight-transport http://www.southafrica.info/business/economy/infrastructure/transport.htm#ixzz2RwNthtSL