South Africa’s railway system was modelled on Britain, the inventor of railways — except in one important respect. South Africa’s railways, apart from a few small companies in the very early days, have always been owned and operated by the state.
In 1830 Britain had only about 100km of railway open to public traffic. Over the next 20 years, “railway mania” saw an explosive expansion. By mid-century, Britain had about 10,000km of railways. All this investment was private. For nearly a century, British railways were an extreme expression of capitalism, with all the resultant booms and busts.
In 1923, the UK government grouped more than 120 railways together into the “big four” regional companies, also privately owned and all listed on the London Stock Exchange. These in turn were nationalised in January 1948 by the socialist Labour Party and combined into British Rail (BR). For the first time, a British government owned and operated the railways, and did so for another 45 years,
In the 1990s John Major’s Conservative government reprivatised the railways. It proved a largely unhappy experience.
The BR network was split into more than 100 companies. Railtrack took ownership of the infrastructure — tracks, signals, stations — and train operating companies ran the services under franchise. The rolling stock was owned by private leasing firms.
It soon emerged that accountability was unclear, incentives were not aligned with outcomes and safety was compromised. Most galling for Tory ideologues, instead of falling, state rail subsidies rose dramatically. Some entities had to be put back under public control.
Britain should have followed the approach of most European countries. When they reformed their railways, also in the 1990s, they tended to retain vertical integration — they kept the infrastructure, rolling stock and train operators under one holding group.
Under this model, privatisation of Transnet might follow the approach taken with the listing of chemicals giant Sasol (1979), steelmaker Iscor (now ArcelorMittal South Africa) in 1989 and telecoms operator Telkom (1997). The government could still retain a minority stake and lay down social obligations, with regulatory fences against unfettered market forces.
Yet it seems lessons have not been learnt. Vertical integration is clearly not the route the government has chosen for Transnet. For ideological reasons that are hard to fathom, it wants to retain ownership of the infrastructure, while allowing private operators access through a blend of long-term concessions and slot allocations.
By August 2025, 11 private operators had qualified to run freight services across 41 key routes. It sounds good, but the devil is in the meaning of “run”.
If the government still owns the infrastructure — which is generally in a state of advanced dereliction — will it also pay the tens of billions of rand needed for rehabilitation? Not likely. And who will the private operators be competing with? Not with each other, if they are on different routes. And what if a private operator decides its allocated route is uneconomic?
Transnet will retain its monopoly on all available rails, along with the pricing power a monopoly entails.
Tariffs will not be set by the market but by an “independent” body — well, we have seen with the National Electricity Regulator of South Africa what problems that can cause.
History seems to teach that railways are best run by the state or the private sector, not a hybrid.
All the excitement about the government’s new ideological (but limited) flexibility on rail should not be confused with viability. The signals should be set at danger for now.
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