The macrologistics effect of a state-owned enterprise, Transnet, on the South African economy

Background: Transnet moves around 80% of South Africa’s rail-friendly freight tonne-kilometres, which drops to less than 40% if the rail-only coal and iron ore export lines are excluded.Objectives: Calculating the costs, negative externalities, and job losses caused by Transnet’s recent and historical operational issues and using the results to inform future reform possibilities.Method: Aspects contributing to Transnet’s failures are indicated through an assessment of rail freight’s decreasing market share and infrastructure investment, port ownership and inefficiency concerns, Transnet’s deteriorating financial performance, loss of critical skills, and instances of state capture. Resultant costs and their impact on employment are calculated across various freight flow segments, whereafter reform models are suggested through international benchmarking and extracting lessons from relevant global reforms.Results: The cost of Transnet’s failures are estimated as 7.43% of gross domestic product. A healthy relationship between the government and the private sector is a frequent occurrence in successful reforms seen globally. Locally, recent government reforms acknowledge a meaningful role for the private sector, which is in turn offering pragmatic and achievable solutions.Conclusion: Improved private sector participation can contribute to Transnet’s recovery. South Africa depends on this collaboration and the development of port and rail master plans to guide the infrastructure development required to meet its overall transportation needs.Contribution: Actionable implications for policy implementation, the economic regulation and horizontal separation of the freight railway, shifting freight from road to rail, the corporatisation of the port authority, and increasing port efficiency and capacity.