Prices, investment and efficiency on the railways: a sectoral review of efficiencies in administered pricing in South Africa

Abstract

There has been little change to the operational structure of the South African rail industry over the past century. Now, as then, it remains a state-owned monopoly, run as a division of the same entity that houses the South African ports. Despite attempts to introduce greater commercial discipline in the 1980s, the rail industry is still only intermittently profitable and seems to be cross-subsidised via the high returns achieved in Transnet's ports division. This research investigates the current approach to pricing of the South African rail sector, its impact on the productivity and competitiveness of the broader economy and benchmarks rail prices to global competitors. Because rail is owned and operated by government, prices in the sector can be regarded as 'administered', rather than as determined by market forces. It is thus important to ensure that price structures in rail are consistent with the wider macroeconomic policy goals of government.