#198 Transportation in the 2020 Station of the Nation Address

LONG WALK AHEAD: The State of the Nation Address takes place during a period where we need to know if anything has happened between last year and today. While some issues are to big to solve in one year (any student of public policy knows this), others can show some results sooner than others. The transport industry is plagued with government intervention, especially in the SOEs, which was the focus. But the more local area development discussion– that’s missing. Perhaps because the walk ahead is so long, dry and lonely that talking through it all could parch one’s lips. Actions speak louder than words.

When listening to the State of the Nation Address (SONA), was premised upon confronting our challenges and acknowledging our potential as a country. While our President reported the results of interventions made since the 2019 SONA, at the heart of the 2020 SONA are four major branches embedded in the role of government through public-private partnerships and a social-compacts framework, namely: 

  1. A focus on the fundamentals addressing the structural issues embedded in the SA economy;
  2. Inclusive growth orientation which will trickle down to sectors and households;
  3. Planning and execution with actionable goals and objectives that are transparent and measurable; and
  4. Effective governance that is focused on enabling investment-led development to balance the probable distortions growth side of the economy

A lot can be said about and for the transport industry, here is my take on the SONA in transport. However, we must understand that the South African economy used to be growth oriented and the premise described in the SONA is to focus on the growth orientation and an investment development approach. Sampie Terreblanche argues that in the 1990’s transition there were numerous factors which (a) convinced the African National Congress to lean into capital during the negotiations; (b) threatening the ANC to concede to capital demands; and (c) buying the ANC out. Essentially, he argues that the trickle down economics which poised the nation toward a non-redistributive model, but rather: redistribution would take place through proliferating industry within the political framework of Liberalism and free market economics.

Trade-offs between development and economic efficiency 

“We are moving from the stabilisation of state-owned enterprises to repurposing these strategic companies to support growth and development. The business rescue practitioners are expected to unveil their plans for restructuring the airline in the next few weeks. In the interests of South Africa’s aviation industry and our economy, it is essential that a future restructured airline is commercially and operationally sustainable and is not dependent on further government funding.”

The complexity of repurposing State Owned Enterprises (SOEs) in order to align them with their development mandate is crucial for economic competitiveness. Particularly if it means they are rationalised to the appropriate scale and participation in order to enable new entrants to participate comfortably. Meanwhile, implementing Treasury’s Economic Policy proposal implies that fundamental unbundling of SOEs in the transport sector may be en-route, largely to simplify the entities and to ensure focused development objectives are pursued. However, in the case of South African Airways and SA Express Airways, there are fundamental decisions that need to be made about their principle function in African skies. In essence, the non-dependence on state funding may inevitably result to job losses or concerted reallocations of labour to other related entities and services. The early 1990’s lurch toward corporatising SOEs in the transport sector, relied on the natural attrition of employees over the years, with no new hires— only skimming staff as they choose to retire. 

Rebuilding commuter rail in SA is a higher priority than a bullet train

“A key priority this year is to fix commuter rail, which is vital to the economy and to the quality of life of our people. Our rail network daily transports over a million commuters to and from work.We are modernising PRASA’s rail network. The Central Line in the Western Cape and the Mabopane Line in Pretoria have been closed for essential refurbishment and upgrades. We are investing R1.4 billion in each of these lines to provide, a safe, reliable and affordable service. Work underway on other lines includes station upgrades, parkway replacements, new signalling systems and overhead electrical traction upgrades. As we work to fix the capabilities of the state, we know that growth and job creation will in large measure be driven by private enterprise.”

To revive commuter rail in SA is a tough challenge to overcome. One major obstacle is beneath the belly of the Passenger Rail Agency of South Africa (PRASA). The complexity of its reform has taking centre stage in the implementation of the White Paper on National Rail Policy. Priorities in the policy focus on taking advantage of rail competitiveness and investing in new standard gauge and high-speed rail connections, in addition to the development of local rail transport services. Not all of these priorities can be achieved at once. 

While a high-speed railway line may seem ideal, ambitious and symbolic— but it may not be a state-run project, perhaps a public private partnership. In this format it would not detract public finance and attention away from the much needed revitalisation of PRASA. Today, PRASA genuinely underperforms and cannot plausible recover 20% of its costs through the revenue it generates: this is the severity of the issue. As I’ve noted in other pieces, we have a passenger transport crisis in South Africa and it is a deeply alarming issue. Separating infrastructure from operations may be their only ticket out; but this requires a stable organisation. Stability may take half-a-decade to realise, there is not enough time to wait that long. 

Improving logistics performance in SA is key for economic growth

Port congestion relief is essential for South Africa’s economic performance. The overhaul of Durban Port is a key point of departure for the logistics efficiencies that are necessary for international trade and enabling global market access for domestic products. However, there are land-locked cross-border inefficiencies which hold the regional economy hostage through long delays which add to the border posts; through major cities trapped in grid-lock congestion; and these highlight the significant need for Special Economic Zones which are adjacent or aligned with dry-ports in our towns, cities and regional corridors. 

Branch-line developments he mentioned are associated with agricultural reform, which was a historical justification for their construction. Revival is essential for economic development, and Zane Simpson and Jan Havenga has made this clear in terms of the practical reduction of externalities from road transport by investing in the branch lines. In the 1930’s and 50’s their role in the provision of cheap transport was crucial. Based on the notion that the railways need to serve both developmental and industrial objectives, and business principles will govern— particularly in the Union of South Africa Act of 1909. However, due to their underutilisation and lack of attention from Transnet Ltd. many of these lines have been pilfered and require deeper revival. For much of the agricultural reforms to be effective, it is plausible that the railway lines their respective branch lines should be revived where economically justified— specifically to avoid the lock-in effect of uneconomic industrial decisions seen during the 1930s to 60s. 

Missing issues

A few policy priorities which I thought would get mentioned are for instance the Public Transport Subsidy strategy which is currently being developed for the 2020 year; or the investment in Dry Ports in Gauteng; or the digitisation of bus transport subsidy and contract management in some Provinces; and many others. Consider the mention made of the Competition Commission’s inquiry, the findings of the Land Public Passenger Transport Inquiry remain unknown and unmentioned without debate or discussion. Meanwhile, legislation on the Economic Regulation of transport has been tabled, the restructuring of tariff structures, fuel input pricing and others have already been set on the table in 2018/19. These are actions which are worth reporting, for all to know. 

My biggest concern is that there is a public perception that government is doing nothing. That the public sector is apathetic, especially in the transport industry. However, the more time I’ve spent trying to figure government’s workings out, to identify the interventions and map them, the clearer it is that there is more taking place than what is being reported. Even within and through the Presidency. But this presentation, just reminded me how important it is to have the discussions, and help through participation.  Thank you for reading.

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