Transnet Freight Rail’s scheduled rate increase in April of between 16,5% and 22% would reduce farmers’ margins and likely impact on food prices, especially grain-based foods. he rate increase is attributed to high costs and low profitability caused by erratic demand, due to the seasonality of commodities, weather patterns and volatile commodity prices. These factors, according to Transnet, make “long-term planning extremely difficult”.
Tariffs are broken down as follows: when more than 10 wagons are used, transport costs would increase by 16,5%; for fewer than 10 wagons the cost would be 19,5% higher; and for out-of-the-way and cost-inefficient areas, tariffs would increase by 22%. S andile Simelane, communications officer at Transnet, is quoted as saying the tariffs are specifically targeted at the grain industry. “We’re not trying to kill the grain industry,” said Simelane. “The tariffs should not be viewed as an umbrella structure.” According to Nico Hawkins, manager of commodity services at Grain SA,� although “farmers are not direct clients of Transnet in many cases, the tariff increases would indirectly affect the prices they get for their grain. It will influence the way Safex calculates its transport differential.” John Gordon of the South Grain Laboratory said views grain as a low profitability product as opposed to iron. “The company’s market share has decreased from 80% a few years ago to below 50%,” said Gordon. “Their motivation is that they are still cheaper than road transport. But millers are increasingly turning to road transport because of Transnet’s unreliability.” ransnet, however, has invested over R18 billion over the past three years to improve its rail service. It now aims to offer incentives to customers who plan better and plans to create maize hubs, which will combine consignments to a minimum of 15 to 20 wagons per train. ransnet’s outlook is still favourable. “If the good weather continues SA could harvest one million tons of grain for export,” said Gordon. “Such volumes would be difficult to transport by road.” – David Steynberg
