Key players in industrialisation, railways have the ability to reach out to and have a meaningful impact on rural development in particular. Small towns are often built around them, promoting economic activity and development, while alleviating poverty and empowering people in rural areas with skills development opportunities.
For these reasons, Transnet Freight Rail plays a major role in the economy, providing strategic links between mines, production hubs, distribution centres and ports in South Africa, as well as connecting with the cross-border railways of the Southern African Development Community (SADC) region.
Transnet Freight Rail's core business lies in freight logistics solutions designed for customers in industry-based business segments, which include mining, heavy and light manufacturing, as well as the transportation of agricultural products, industrial products, consumer goods and coal.
With over 34 000 employees, who are spread throughout the country, the company maintains an extensive rail network across South Africa that connects with other rail networks in the sub-Saharan region, with its rail infrastructure representing about 80% of Africa's total. Currently active in 17 countries, Transnet Freight Rail has positioned itself as a profitable and sustainable freight railway business, assisting in driving the South African economy forward.
As the number one rail operator in Africa and the Middle East, and ranking in the top-10 worldwide, Transnet has put in place a Market Demand Strategy (MDS) to see it become one of the top five railway operators in the world. Already midway through the seven-year investment programme, Transnet Freight Rail collaborates with a number of leading freight railways around the world to benchmark its own railways’ performance.
In 2012, President Jacob Zuma announced in his State of the Nation Address that Transnet would invest more than R300 billion in infrastructure development to rejuvenate the economy, create jobs and address poverty and inequalities.
Of this amount, R200 billion will be channelled to Transnet Freight Rail to refurbish and expand its rail infrastructure in order to create capacity and increase cargo volumes. Through investment, Transnet Freight Rail will be able to optimise its capital portfolio, build a world-class capital execution function and leverage capital procurement and localisation. In accordance with the strategy, the company has committed itself to railing more than 350,3 million tons of cargo a year by 2018/2019.
Chief Operating Officer (COO) of Transnet Freight Rail, Mlamuli Buthelezi, plays an important role in ensuring the execution of the strategy for the business. “I have to be at the coalface of the business to ensure that our operations run efficiently, to achieve our targets and meet our customers’ needs and demands as well as shareholder expectations,” he says.
Buthelezi was born in Durban and grew up in Umlazi township, matriculating at Vukuzakhe High School, after which he completed a year at Hilton College. An Engineer by profession, he has experience in logistics, manufacturing and the energy sector. Buthelezi completed the Master of Business Leadership Programme with UNISA, after having completed his engineering studies at Mangosuthu University of Technology, Durban University of Technology and The Tulane University of Louisiana in New Orleans, USA.
As Transnet Freight Rail’s COO, his main task is to oversee the freight company’s daily operations and he says he is involved from the moment an order is placed to the time the train arrives at its final destination. “This includes developing the train plan, assigning resources - including human resources—and the execution of the train plan.”
Under Buthelezi’s leadership, Transnet Freight Rail now boasts an 80% on-time departure rate of trains to its customers. “My role is really a people orientated one, where I deal with various teams constantly to ensure that our goals are achieved and the customer is satisfied,” he says.
Transnet’s MDS, closely aligned to government’s National Development Plan, was designed to assist in both expanding and modernising the country’s ports, rail and pipelines infrastructure.
“Investment in infrastructure and growth of the economy are central to our government’s New Growth Path and the National Development Plan. By investing in our rail infrastructure and facilitating the modal shift back to rail, the MDS will have a positive impact on the cost of doing business in South Africa,” he says.
The MDS investment programme is set to create and sustain thousands of direct and indirect job opportunities whilst delivering lasting economic, social and environmental value to the country and the Transnet customers.
“The implementation of the MDS provides for significant spend on the infrastructure. Our focus has been on creating enough rail capacity ahead of the demand. This include revitalisation of the network, locomotives, wagons and technologies, as well as the development of strategic infrastructure expansion projects like the Waterberg and Manganese corridor.
“We have achieved volume growth of 226 million tons per annum from the 201 milltion tons since the inception of the MDS and our market share has improved from 11% to 15% (tons of surface freight) and 30% to 36% on tons per kilometre,” Buthelezi says.
Transnet Freight Rail has recently acquired 1 064 brand new locomotives to improve its rail product offering, and the rail network is in the process of being upgraded in line with the new locomotive delivery. According to Buthelezi these new locomotives will largely be constructed locally, with only some of the major technology used to build them coming from abroad.
“Our continued involvement and solid working relationships with neighbouring countries and their railway operations will also assist in improving railway operations—not only in South Africa but the SADC region as a whole.”
Since the inception of the MDS, Transnet has also launched several technological enhancements to its current service offering. The Navis System was launched in 2012, making it easier for customers to track their containers in the container terminal. New locomotives regenerate electricity and are also equipped with dual traction, enabling them to travel on both the AC and DC electric lines. “Our new locomotives also emit less carbon dioxide, which positively contributes to preserving the environment. They are also able to generate electricity through regenerative braking, and this electricity is then harnessed and pumped back into the grid to help alleviate some of the current strain on our energy supply,” he says.
The company is also in the midst of a complete overhaul of its IT systems, providing customers with better visibility of their trains and cargoes, as well as state-of-the-art rail planning processes and supporting systems, giving Transnet the capability to do real-time train planning and better deviation management.
“We are busy with the deployment of on-board computers on all of our locomotives. While this programme started several years ago, we were quick to realise the benefit of safer train handling by the train crew. The on-board computers give drivers visibility of their train handling as well as monitor vital measures such as speeds being travelled and fuel usage.
“This type of technology is vital to strengthening relationships with our customers. This new technology allows for greater performance from our side, while giving our customers access to business crucial information. We want to give them better visibility over their cargoes on our trains—often one of their greatest requirements,” says Buthelezi.
Change management, however, forms a large part of the freight rail company’s strategy with the need to improve human resources as infrastructure and technologies improve.
The accelerated progression of the capital programme has, according to Buthelezi, placed the railway in an exciting and challenging situation. “We still need to operate legacy systems and assets—and specifically the locomotive fleet—in conjunction with modern and new technology. Our older assets have to be retained and maintained to an appropriate level of functionality and safety and drivers need to retain their licenses for the old technology while new locomotives are still being deployed,” he explains. “We also have to maintain and upgrade our network whilst operating under the philosophy of ‘it’s business as usual’. It’s a lot like renovating your home while living in it. This means that we have to schedule shutdowns and maintenance windows which will have the least disruption on operations, knowing that this maintenance is still a very big component of running an efficient railway.”
“That being said, I do think our various teams are coping well under the pressure, and that’s important because ultimately it’s up to our people to deliver the results.”
Other challenges facing Transnet include harsh weather conditions, theft and vandalism of infrastructure. “These issues, at times, prevent us from delivering goods on time and vandalism and theft of railway equipment is a major issue and one we have been fighting for years. When it comes to safety, the interaction between road users and trains at the level crossings is another matter that receives our attention continuously through focused campaigns,” he says.
While Transnet Freight Rail’s greatest reliance is on mining commodities in the primary sector, Buthelezi says that various other opportunities are being pursued. “Opportunities in the secondary or manufacturing sector are being pursued, particularly in the automotive, steel, cement, beneficiated mining commodities and fuel industries.”
Catalyst for economic growth
While Transnet is also not immune to current economic conditions, it is at the same time, expected to serve as a catalyst for economic growth. “We are reaching out to customers, road hauliers and LSPs to grow our share in the non-traditional markets, where it makes good business sense, and where rail can fulfil its natural role of providing a reliable, safe and cost-effective transport solution,” he says.
The company is also approaching customers with value propositions to rail beneficiated products rather than only raw input materials. “We are looking at investing in appropriate technologies and really understanding our customer requirements so that we can offer more customer-focussed value propositions,” he says.
Shifting rail-friendly freight off our roads and onto rail will reduce logistics costs and pressure on the road network, with many other indirect benefits for the country, including a reduction in transport sector carbon emissions and road accidents.
“Our Back to Rail Strategy is aimed at moving rail friendly traffic off the roads and onto the railway. This will not only make the cost of doing business lower, but will also alleviate the strain and pressure on our road network. We are in constant collaboration with the road industry and logistics service providers to create an holistic and seamless logistics solution for freight.”
Transnet Freight Rail serves a wide range of industries, catering to the needs of companies like Sishen Iron Ore, Anglo, Eskom, Sasol, Total and PPC Cement Pty Ltd.
Rail is seen as a key player in the logistics supply chain to ensure that commodities flow efficiently from mines to ports for export. At present rail has between 95% and 100% share of the mining commodities transported, while the world-class heavy haul coal and iron ore lines have a 100% share.
Efficient and cost-effective
Buthelezi believes that it is imperative for the total supply chain and the country’s cost curve to be kept efficient and cost-effective—especially during times of lower commodity prices. For this reason, Transnet works closely with the mining industry to align its investment planning.
“And while we are working to further improve our own service offering, there is also the expectation of our customers to continuously improve their own operations. They need to grow their infrastructure as we provide capacity. We do not operate in isolation and require that our customer, the ports, mines and other sidings, grow and improve as we do,” Buthelezi says.
Transnet Freight Rail has divided its business into six business units to provide for better customer focus, namely Agriculture and Bulk liquids (ABL), Steel and Cement (SAC), Mineral Mining and Chrome (MMC), Coal, Containers and Automotive business (CAB) and Iron Ore and Manganese (IOM).
“We have also entered into a number of co-operation agreements with road hauling companies like Unitrans and Barloworld Logistics. This is largely due to our own realisation of the role these companies play as we reshape the supply chain through improved partnerships.”
The company’s most recent partnership is with City Logistics, a significant player in this industry who handles more than 50 000 tons out of the port of Durban each day. “We believe these types of collaborations will put us on the fast track to reaching the end objectives of our MDS journey,” he adds.
At present, Transnet funds its own investments from income generated from its operations. “The MDS however requires that some money is borrowed from the international and domestic money markets. These deals are negotiated by Transnet SOC (group) Treasury and are conducted in a manner that ensures that the MDS financing requirements are met and sustained.”
Transnet has also conducted studies to assess future demand of all key commodities over a 30-year time frame. According to Buthelezi the demand is revised annually in conjunction with customers and industry input and resources are created accordingly.
“Current developments in the fuel and gas industries are being monitored so that plans for distribution within South Africa and to the greater Southern African region are made, with special consideration to the integrated ports, rail and pipeline capacity needed to serve the market effectively,” he says.
Not only is Transnet committed to economic growth, but the company is also committed to helping fellow South Africans and communities alike. Aside from constant support for NGOs through its CSI programmes, its key focus areas include skills development, with a number of bursaries and apprenticeships made available each year.
“We have programmes such as the Techno Girls Programme where, during school holidays, female students in Grades 8 to 12 visit our work areas and are given physical demonstrations and training on the different functions within the company.
“We also have the Young Professional in Training Programme, where graduates are placed in a two-year programme related to their qualification, with an opportunity to be given permanent employment depending on Transnet’s current skills requirement,” says Buthelezi.
Following a very stringent research and adjudication process Transnet Freight Rail has also been selected as one of the organisations to achieve the Top Employers South Africa 2016 certification.
“We are delighted to be officially recognised as a leading employer. The aim of the award is to recognise leading employers around the world—those that provide excellent employee conditions and nurture and develop talent throughout all levels of the organisation. To us, this award is a positive indication that we are realising our ambition to continue developing our employees with the best human capital practises,” he says.
“If I look back, I think we have already changed significantly from the days of the old Spoornet. The railways have improved their service and continue to do so on the back of the MDS investments.”