A Feasibility Assessment of Government‟s Road-to-Rail Policy Implementation:

A Freight Logistics Perspective

A research report presented to the

Graduate School of Business Leadership

University of South Africa

In partial fulfilment of the requirements for the

MASTERS DEGREE OF BUSINESS ADMINISTRATION,

UNIVERSITY OF SOUTH AFRICA
by
Judite dos Santos Rocha
June 2014
Abstract

A severe capital shortage in South Africa during the 1980s resulted in significant losses
for both freight and passenger rail, which gave rise to cutbacks in new investments for
rail. By 1986 expenditure on fixed rail assets was reduced from R1.44 billion to R500
million; this was the beginning of the decline of freight rail. During this period freight
transport was deregulated and road freight used this opportunity to compete with rail
transport in the same market segment by transporting bulk goods on long hauls. The
result of this was an increase in truck traffic on the roads, causing a negative impact on
the conditions of the road and placing freight rail in a continuous decline, leading to the
obsolete state of the rail infrastructure, rolling stock and its under-utilisation. This had a
detrimental impact on freight rail and the economy.

Having realised the extent of the problem, government, through the Department of
Transport (DoT), decided to intervene by changing the current model of the freight
transport system. To that effect the DoT is in the process of developing a National Rail
Policy, with the main focus being to encourage the shift of freight transportation of bulk
commodities from road to rail.

As the National Rail Agency, Transnet undertakes all South Africa‟s freight rail
operations through its Transnet Freight Rail (TFR) division. As such, TFR is ultimately
responsible for the implementation of the road to rail implementation project. To that
effect, TFR developed the MDS to revitalise itself and ensure its success.

The objective of this research is to (a) assess the capacity of TFR to successfully
implement the road to rail policy; (b) determine whether the implementation of road to
rail will lead to freight rail efficiency and competitiveness, reliability and sustainability;
and (c) establish the industry‟s reaction towards the shift from road to rail.

In order to respond to the research question, qualitative research was chosen as the
most appropriate approach. This facilitated an in-depth exploration and understanding

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of the issues around the road to rail project including how the industry feels about the
issue, as well as an exploration of other possible alternatives which could provide the
same or better results in a simpler and more effective manner.

This research may serve as additional information for authorities to consider during the
implementation of the road to rail project, and could render a better chance of success.

Upon completion of this research the author concluded that Transnet Freight Rail has a
good chance of success. The implementation of road to rail is being given adequate
attention. Integration is possible as the industry welcomes and supports the road to rail
programme, in fact a number of collaboration agreements already exist between rail and
other transport modes. This will enable Transnet Freight Rail to achieve efficiency,
sustainability and a competitive advantage within the seven year timeframe of the MDS.

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Declaration

I hereby declare that this research is my own original work. It is not a duplication of
anyone‟s work of any kind. The information used to support this research was
genuinely obtained by me through documentation review and personal interviews with
key role players in the rail industry. All interview participants were formally requested to
be interviewed and were adequately informed of the purpose of the interviews. The
interview questions were forwarded via email to all interview participants beforehand in
order for them to familiarise themselves with the issues for discussion.

Furthermore, all contributions to this research made by different authors and

participants are genuinely recognised, cited and referenced using the Guidelines for
Referencing Source Material for assignments, articles, research reports and theses, as
recommended and provided by UNISA.

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Dedication

This research is dedicated to my two precious God given children, Dario and Wronelle,
for their understanding, love and support, as well as to my husband Jacinto, for his
unconditional love, continued support, inspiration, patience and motivation. I love you
all.

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Acknowledgments

I would like to thank all the people who contributed to the completion of this research:

 My supervisor, Dr Neil Barnes, for his guidance and support and professionalism
throughout the research process;
 All the participants in this research study for their willingness to assist, their time
and encouragement; and
 My extended families and friends for their encouragement and their understanding
of my constant absence from social events and commitments during the time of
my studies.

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Table of contents

Abstract ............................................................................................................................ii
Declaration ......................................................................................................................iv
Dedication ....................................................................................................................... v
Acknowledgments ...........................................................................................................vi
Table of contents ............................................................................................................ vii
List of tables .................................................................................................................... x
List of figures ................................................................................................................... x
CHAPTER 1: INTRODUCTION ...................................................................................... 1
1.1 Background information .......................................................................................... 1
1.2 Problem review ....................................................................................................... 3
1.3 Problem statement .................................................................................................. 5
1.4 Research objectives ............................................................................................... 5
1.5 Importance/benefits of the study ............................................................................. 6
1.6 Limitations and delimitations ................................................................................... 6
CHAPTER 2: PROBLEM ANALYSIS / THEORETICAL CONSIDERATIONS ................ 8
2.1 Change – The overall model of change .................................................................. 8
2.2 Resources and capacity – The relationship between resources, capability and
competitive advantage model ................................................................................. 9
2.3 Competitive advantage – Porter‟s Five Forces Model .......................................... 10
CHAPTER 3: LITERATURE REVIEW .......................................................................... 11
3.1 Introduction ........................................................................................................... 11
3.2 Overview of transport ............................................................................................ 12
3.2.1 Introduction ................................................................................................ 12
3.2.2 The role of transport in an economy .......................................................... 13
3.2.3 Road and rail freight transport ................................................................... 13
3.2.4 Rail freight ................................................................................................. 14
3.2.5 Dynamics of road and rail freight ............................................................... 17
3.2.6 Role of Government in transport ................................................................ 18
3.2.7 Road and rail freight in South Africa .......................................................... 20

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 3.2.8 Integration within the freight sector ............................................................ 22
3.3 Organisational change, capacity and competitive advantage ............................... 24
3.3.1 Change ...................................................................................................... 24
3.3.2 Resources, capacity and capabilities ......................................................... 25
3.3.3 Competition and competitive advantage .................................................... 28
3.4 Conclusion ............................................................................................................ 30
CHAPTER 4: RESEARCH METHODOLOGY .............................................................. 31
4.1 Research design concepts.................................................................................... 31
4.1.1 Introduction ................................................................................................ 31
4.1.2 Quantitative and qualitative approaches to research ............................ 31
4.2 Population ............................................................................................................. 32
4.3 Data collection methods........................................................................................ 33
4.3.1 Data collection instruments........................................................................ 34
4.3.2 Data analysis ............................................................................................ 35
4.4 Validity and reliability ............................................................................................ 36
4.5 Ethical considerations ........................................................................................... 37
CHAPTER 5: RESEARCH RESULTS .......................................................................... 39
5.1 Chapter overview .................................................................................................. 39
5.2 Brief profile of interviewees ................................................................................... 40
5.3 Interview questions and responses ....................................................................... 43
5.3.1 Questions and responses: TFR and DoT (Group 1) ................................. 43
5.3.2 Questions and responses: Industry stakeholders (Group 2) ..................... 51
5.4 Assessment of TFR‟s capacity .............................................................................. 68
5.4.1 Introduction ................................................................................................ 68
5.4.2 TFR‟s resources and capacity ................................................................... 69
5.4.3 Competitive advantage ............................................................................. 73
5.4.4 Change ...................................................................................................... 75
5.4.5 Development of codes and themes ........................................................... 78
5.5 Finding and analysis ......................................................................................... 81
5.5.1 Introduction ................................................................................................ 81
5.5.2 Analysis of the interview responses ........................................................... 82

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 5.5.3 Summary ................................................................................................... 89
CHAPTER 6: CONCLUSION ....................................................................................... 90
CHAPTER 7: RECOMMENDATIONS .......................................................................... 93
APPENDICES ............................................................................................................. 105

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List of tables
Page No.

Table 1: Examples of few extracts with codes and themes………………………79

Table 2: Interview questions for DoT and TFR: Group 1………………………...102
Table 3: Interview questions for the industry: Group 2…………………………..107
Table 4: Phases of thematic analysis………………………………………………108
Table 5: Example of the initial coding developed for this research……………..110
Table 6: Themes and codes…………………………………………………………112

List of Figures

Page No.

Figure 1: The relationship between resources, capability and competitive advantage

model…………………………………………………………………………69
Figure 2: Porter‟s Five Forces model…………………………………………………74
Figure 3: Governance structure of TFR………………………………………………76
Figure 4: The overall Model……………………………………………………………77
Figure 5: Initial thematic map showing seven themes………………………………80
Figure 6: Developed thematic map showing five main themes …………………...81

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CHAPTER 1: INTRODUCTION

1.1 Background Information

Rail started in South Africa as a privately-owned enterprise in 1860 with the introduction
of a steam train in Durban. The Freight Logistics Company, Transnet, became state-
owned in 1989 and was mainly used for the transportation of military equipment and
agricultural products. The South African Act of 1909 nationalised some transport
services and the South African Railway and Harbours (SAR&H) was established, after
which the railway services became partially regulated. Development and strategic
decisions at the time were focused mostly on agriculture and industrial development.
This position continued through to the 1960s, during which time freight transport
became highly regulated. In 1981 SAR&H was renamed the South African Transport
Services Act No. 65 (the SATS Act) in terms of the same Act. This Act brought
significant changes to the rail transport services; however a severe capital shortage in
South Africa during the 1980s resulted in significant losses, both in freight and
passenger rail. This gave rise to cutbacks in new investments for rail, and by 1986
expenditure on fixed rail assets was reduced from R1.44 billion to R500 million. During
this period freight transport was deregulated and road freight began competing with rail
transport in the same market segment - the transportation of bulk goods (South African
Department of Transport, 2012).

The deregulation of freight led to the deterioration of rail freight services, and road
transporters took advantage of the opportunity to transport rail friendly cargo by road.
The increase of truck traffic on the roads had a negative impact on the conditions of the
roads, however. The situation placed freight rail on a continuous decline, which led to
the obsolete state of rail infrastructure and rolling stock, and the under-utilisation
thereof. This had a detrimental impact not only on freight rail, but also on the South
African economy.

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According to the Development Bank of South Africa (2012), South Africa does not have
a national rail policy to direct and guide the development of rail, which has made the
situation worse. Having noticed the decline of the freight rail industry and the
continuous deterioration of the roads, the South African Department of Transport (DoT)
decided to intervene by changing the current model of the freight transport system. In
this regard it is developing a policy, the National Rail Policy which is still a Green Paper,
with the intention of developing the existing rail industry to be a „railway of the future‟
that will perform optimally and effectively; compete locally and abroad; satisfy the
industry‟s needs; and positively contribute to the economic and social development of
South Africa (Department of Transport, 2012: 23). The main focus of this intervention is
to encourage the shift of the freight transportation of bulk commodities from road to rail.

As the National Rail Agency, Transnet undertakes all South Africa‟s freight rail
operations and is the sole provider of rail freight services through its Transnet Freight
Rail (TFR) division. Transnet owns all freight rails‟ related rolling stock such as
locomotives and wagons, the entire rail track and its infrastructure. As such, TFR is
ultimately responsible for the implementation of the proposed road to rail policy and all
its related projects. To this effect it has developed a turnaround strategy, namely the
Market Demand Strategy (MDS), and embarked on a revitalisation programme to
ensure the successful implementation of the National Rail Policy.

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1.2 Problem review

A critical reflection of the problem in context opened up the following themes for further
reflection. These themes include: change; resources and capacity; and
competitiveness:

 Change

The implementation of the MDS will inevitably result in changes within TFR. According
to Karl and Schoemer (2009), “no matter what kind of change it is – whether it‟s
exciting, unexciting, eagerly accepted, unwelcome, or unwanted – our first and natural
instincts are usually negative and resistant”. Karl and Schoemer further stated that
when change occurs people normally experience a mixture of feelings, including a
sense of loss; ambiguity and uncertainty; deterioration of trust; withdrawal; and self-
preservation. The best predictor of the success or failure of organisational change is
changeability, which includes leadership, internal routines, and organisational
capabilities that make companies fit and ready to change (Jarrett, 2009). For change to
be effective and lasting it needs to be managed not only by monitoring what happens
outside the organisation, but also by responding to it internally.

In light of the changes brought about by the road to rail revitalisation programme, TFR
needs to ensure that the organisation is ready for such change by assessing its
changeability. In this regard it will need to implement a suitable strategy for the change
at hand. The Overall Model is a tool with which its leadership can combine its external
environment opportunities with its internal capabilities to assess its changeability and
readiness.

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 TFR‟s resources and capacity

The development of a National Rail Policy for the freight industry and the revitalisation
of the freight rail sector by shifting from road to rail may be the solution for a more
economic transportation of bulk goods in South Africa. The question is, however,
whether TR and the government have the necessary capacity to implement this policy
and successfully shift from road to rail to a position where freight rail in South Africa will
be revitalised, efficient, cost effective, competitive, reliable, and sustainable and
contribute towards the economic growth and development of the country. To answer
this question, rail freight‟s internal and external environments were scrutinised and
assessed. TFR‟s current and future capacity was also assessed to establish its
resources and competiveness, as well as its readiness to change and successfully turn
freight rail around.

 TFR‟s competitiveness

The proposed National Rail Policy aims at improving competition within the freight
industry (South African National Rail Policy - Green Paper, 2012). In the business world
of today, the Just-in-Time (JIT) lean system is a powerful management tool that could
easily determine the success or failure of the manufacturing system (Yahaya, 2012). As
a service provider, TFR also needs to support customers operating on the JIT system
and achieve effectiveness and efficiency. In view of the current position of rail freight,
which is characterised by infrastructure limitations and rolling stock which seems
inadequate and insufficient to support road to rail and ensure the competitive advantage
of freight rail, the question is how flexible rail transportation is and how well rail can
meet all freight demands, as well as gain a competitive advantage in its industry.

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1.3 Problem statement

Freight rail transport in South Africa has become uneconomic due to the decline and
degradation of Transnet‟s infrastructure and rolling stock, as well as other limitations
(South African National Rail Policy - Green Paper, 2012). Even worse is the fact that
South Africa does not have a National Rail Policy to direct and guide the development
of rail, or to adapt and reform the industry to respond to the changes in demand and
competition from the road freight sector. As a result the road freight industry adjusted
itself to cope and flourish in the absence of competition from freight rail. Although
government is now in the process of developing a policy to encourage a shift back from
road to rail, such a shift may be seen as draconian, especially in such a dynamic freight
industry which has developed without the full presence of freight rail for decades. This
may hamper the success of the implementation of the road to rail project.

1.4 Research objectives

The objectives of this research are:

 to assess the capacity of TFR to successfully implement the road to rail policy and
the feasibility thereof;
 to determine whether the implementation of road to rail will lead to freight rail
efficiency, competitiveness, reliability and sustainability; and
 to establish the industry‟s reaction towards the shift from road to rail and their
willingness to integrate with rail.

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1.5 Importance/benefits of the study

The importance of this study is twofold. First is the contribution towards a successful
implementation of the road to rail project. Upon presentation of this study to the
relevant authorities, it will serve as additional information to consider before and during
the implementation of the project, which could offer a better chance of success.

The second importance of this study is of a personal nature. As a researcher whose

career and interests has been in the transport field for almost 20 years, I wish to
broaden my knowledge and understanding of the dynamics and inter-play between road
freight and logistics. As such I am always interested not only in following the trends and
happenings in the various spheres of transport, but also in contributing towards a better
transport system which benefits South Africa as a whole.

1.6 Limitations and delimitations

Limitation, according to Leedy and Ormrod (2010), refers to the shortcomings,

conditions or influences that cannot be controlled by the researcher, which place
restrictions on the methodology and conclusions of the research. In this research, the
following limitations included: (1) Finding the right people at the right positions to
interview within the limited time frame of the research; (2) Having the population find
time to be interviewed. Some kept postponing until the researcher ran out of time, while
others never responded to the requests.

Delimitations refer to the boundaries that the researcher chooses to set for the scope of
the research; they are what the researcher does not intend to do in the research (Leedy
and Ormrod, 2010). For the purpose of this research the freight industry was
investigated, but the focus was mainly on freight rail.

6
The researcher conducted interviews using unstructured questions and documentation
review to collect data. The financial aspects of TFR or any other organisation was not
scrutinised in this research.

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CHAPTER 2: PROBLEM ANALYSIS / THEORETICAL CONSIDERATIONS

The approach of the problem analysis was to further interrogate the themes identified in
the problem review by applying appropriate business theories and management
models. The following themes were interrogated:

 Change
 Resources and capacity
 Competitive advantage

According to Porter (1985), competition is at the core of the success or failure of any
organisation. The fact that freight rail has been declining means that one can assume
that TFR has not been able to compete effectively. The shift from road to rail as a
solution to revitalise freight rail will only be successful and sustainable if the company is
prepared in all three themes discussed here. Various models which were later used to
assess TFR‟s capacity in this research are now introduced.

2.1 Change – The overall model of change

This model assumes that the internal capabilities that set the changeability of an
organisation are seen in the strategic leadership, as well as the culture and structure of
the organisation. It also assumes that environmental dynamics often create the drivers
for change, and that the way in which the organisation responds with strategies affects
its performance (Jarrett, 2009). It can be argued that the magnitude of the change that
TFR had to contend with has led them to lag behind other modes of transport in South
Africa. Furthermore, TFR‟s revitalisation programme, guided by their MDS, will also
bring about change in the organisation. The Overall Model will be used as a tool to

8
establish the way in which TFR‟s leadership strategies can ensure changeability and
readiness for the transition of change resulting from the MDS.

2.2 Resources and capacity – The relationship between resources, capability

and competitive advantage model

This model suggests that in order for a company such as TFR to operate efficiently and
achieve a competitive advantage, which will ultimately contribute to economic growth,
all its resources have to complement one another and be strategically combined in the
most efficient and cost effective manner (Jarrett, 2009). The Resource Based View
theory is a tool used to identify the firm‟s potential key resources and evaluates whether
those resources are valuable to the company, if they are rare and inimitable, and if they
are non-substitutable. According to Barney and Clark (2007), this theory assumes that
the organisations are heterogeneous, meaning their resources differ from other
organisations‟.

As explained in the problem statement, freight rail transport in South Africa has become
uneconomic due to the decline and degradation of Transnet‟s infrastructure and rolling
stock, as well as other limitations. When assessing the feasibility of the success of the
shift from road to rail, TFR‟s resources were assessed to establish whether they can be
a source of competitive advantage. The company‟s capabilities should be built with
various resources to acquire a competitive advantage, which include the organisation‟s
human resources such as special skills and knowledge; motivation; communication and
interactive abilities within the organisation; and intangible and tangible resources
comprising of financial and physical resources (Bakhru and Gleadle, 2005).

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2.3 Competitive advantage – Porter’s Five Forces Model

Competitive advantage is at the heart of firm‟s performance in the competitive market

(Porter, 1985). It can be argued that TFR has not been competitive in its industry as it
has been in a continuous decline. In this research Porter‟s Five Forces Model was used
to assess TFR‟s competitiveness in relation to its industry.

Porter‟s Five Forces Model can be used as a tool with which to understand the structure
of the sector of an industry and to create a framework with which to identify possible
structural changes. It is a very simple but useful approach to determine whether a firm
has any chance of success and profitability in its industry. It is also useful to identify
whether new products or services have the potential to be profitable and to understand
the balance of power in other situations (Bakhru, 2005). The model identifies five types
of competitive advantage within a sector, namely established competitors, new entrants
to the market, substitute products, and the bargaining power of suppliers and
customers.

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CHAPTER 3: LITERATURE REVIEW

3.1 Introduction

This chapter deals with the literature review and gives an overview of the relevant
literature which covers the research topic, namely „An assessment of government‟s road
to rail implementation‟. It is used to discuss the relevant literature around the topic,
which helped the researcher to obtain a clear understanding about transport in general,
as well as more specifically about freight transport, and to gain knowledge of the
different views of the road to rail issues and complexities.

Cooper and Schindler (2011) defined a literature review as an evaluative report of

information found in the literature related to the selected area of research. It is both a
summary and an explanation of the complete and current state of knowledge on a
limited topic, as found in academic books and journal articles (University of Guelph,
n.d).

According to Saunders, Lewis and Thornhill (2009), there are two kinds of literature
reviews. One is a stand-alone literature review which is normally a university
assignment; while the other is written as part of an introduction to, or preparation for, a
longer work, usually a thesis or research. The latter was used for the purpose of this
research. Saunders et al. (2009) explained that the main purpose of a literature review
is for a researcher to develop a good understanding and insight into the relevant
existing research and the trends that have emerged.

In this literature review the recent and historical issues around the topic of this research
were analysed by examining the relevant previous research studies, journals and
publications. The aim here was to understand what others had done in areas that are
similar, although not necessarily identical, to the topic of this investigation. This enabled

11
the researcher to understand the significant issues around the problem in order to pin
down the research problem and provide the reader with a clear understanding of the
issues around the topic of this research (Leedy and Ormrod, 2010).

3.2 Overview of Transport

The previous section gave a brief overview of the previous chapter and an introduction
to the literature review. This section will provide an insight into transport in general,
looking specifically at the role it plays in an economy.

3.2.1 Introduction

Transport plays a pivotal role in South Africa as it enables the country to achieve
economic growth and facilitates the movement of freight and people (Diza, 2013).
Common forms of transport include planes, trains, automobiles and other two-wheel
devices such as bikes or motorcycles (Wessel, 2012).

Londoño-Kent (2009) described logistics as the management of the flow of goods,

information and other resources, including energy and people, between a point of origin
and the point of consumption to meet the requirements of consumers. It is the
integration of transport with the management of the flow of goods and goes and-in-hand
with transport as it adds the value of time and place utility to it. It also involves the
integration of information, transportation, inventory, warehousing, material-handling,
packaging, and security.

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 3.2.2 The role of transport in an economy

According to Quinet and Vickerman (2004), transport plays a key role in economic
activity and is the first of all the sectors in an economy to contribute to national output.
Moreover, transport is a derived demand and growth in that the transport sector follows
the growth of the economy as a whole. Quinet and Vickerman further stated that
transport improvements can also determine the rate of economic growth and lead to
positive externalities in the economy.

Rodrigue and Notteboom (2014) stated that transportation is an economic factor of

goods and services, where small changes can have substantial impacts on costs,
location and performance. An efficient transportation system with modern infrastructure
leads to positive economic changes. Rodrigue and Notteboom further stated that the
economic impacts of transportation can be direct or indirect; they are direct when
accessibility enables employment; contributes towards growth of markets and saves
time and costs, thereby adding value to the economy. They are indirect when prices of
commodities, goods or services drop as a result of efficient transportation. There are
also, however, significant negative impacts on individuals and societies, the most
significant being mobility gaps, cost differences and accidents.

3.2.3 Road and rail freight transport

Freight transportation is the movement of goods to and from producers to retailers and
finally to customers. Factors such as cost of transportation modes, reliability and cost of
holding inventory affect producers‟ logistical choices and supply chain configurations.
Freight transport is facilitated by using transport logistics processes, which enable
producers to make use of just-in-time inventory management by combining the fastest
and most reliable transportation with information technology to reduce the need for
maintaining large inventories. This improves the overall efficiency of the logistics
process and reduces costs (Envision Freight, 2011).

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High value industrial and consumer freight are more demanding than low value bulk
freight, however, and are therefore more costly for railways to carry. Nonetheless, as
the tariffs for high value industrial and consumer freight are much higher than bulk and
semi-bulk, the profit margins are more often much lower (Amos, 2004).

According to Londoño-Kent (2009), transport in general facilitates trade, which creates

wealth, reduces poverty and sustains growth. Of all modes, road freight transport has
the most direct impact on poverty as it employs millions of people and generates a
significant portion of GDP, especially in low and middle-income countries.

Londoño-Kent (2009) further suggested that the road freight industry is comprised of
carriers that transport commodities for shippers using commercial motor vehicles.
Although trucking competes with other forms of cargo transportation, including rail, air,
and water, the shift toward intermodal transportation means that these modes of
delivery are often more complementary than competitive. According to Russell (n.d.), in
the UK, for example, only a few goods can complete their entire journey by rail alone,
therefore shippers tend to prefer the road shipping industry over rail for better service,
despite the higher freight rates. Furthermore, Londoño-Kent (2009) stated that once the
rail service in a developing country loses its market share to trucking, it is hard put to
reclaim it in the short and medium term. Similarly, Amos (2009) also argued that road
freight is more penetrative; more immediately responsive to urgent orders; faster door-
to-door; more flexible and can be dispatched more frequently. Therefore road freight
has the advantage over rail if the latter has higher tariffs and road has sufficient
capacity.

3.2.4 Rail Freight

“Rail freight is important to economic development because of its comparative economic

advantages in serving certain forms and flows of freight, if its wider benefits compared
to road transport and sometimes its significant implications for national budgets (Amos,
2009:2).

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Rail freight bulk and semi bulk are considered to be low value and slow-growing
markets; however they are high in volume and if well run, can provide low costs to these
markets through economies of scale, economic generalisation and economic growth.
However, a study by Transportation Economics and Management Systems Inc. (2008)
revealed that in monetary terms, the rail operation cost increases is much less than
other modes as overall rail costs start from a lower base. This study further revealed
that the overall rail costs are affected much less by fuel price increases, reflecting the
relative energy efficiency of rail over trucking.

Rail freight can only potentially achieve a competitive advantage if it operates at a low
cost and meets its customers‟ minimum service expectations. However, Amos (2009)
argued that costs and services are not the only considerations in freight transport, as
there are still issues of regularity and reliability to be met, even if it is for bulk transport.
Amos claimed that rail freight cannot always match that to the advantage of road freight,
and suggested that rail freight needs activity management accounting tools
encompassing the variable costs of infrastructure, train operations and corporate
administration if it is to attain a commercial advantage. It further needs to attain the
most efficient base levels in all its cost categories, offer attractive tariffs, attain
economies of scale and traffic density, and have a low incremental cost. Moreover,
Amos (2004) also stated that the so-called economies of scale in rail freight are actually
economies of scope, because they arise out of the decreasing costs of adding
additional traffic to a pre-existing railway infrastructure.

According to Amos (2004), successful freight transport companies are those that
strategically target markets which best suit their modal capabilities and then adapt a
specific performance to meet their customers‟ needs. Those needs include a good
price, capacity, service characteristics and specific demands. Eeden and Havenga
(2010) added that rail needs to identify freight transport segments that suit the long-
haul, high-density nature of its core competence.

15
Because passenger rail is more a government responsibility in terms of provision of
services to the public, to make rail a business means that the passenger and freight rail
have to be split, each with their own structures and accounts, boards and
shareholdings. In cases where both passengers and freight rail share the infrastructure
and where freight dominates the network utilisation, it is best that freight rail manages it.
Although sharing the network has its own challenges, there are also benefits of cost
reduction (Amos, 2004).

According to Magliolo (2005), using rail to move goods is increasingly the most cost-
effective way of transporting freight, because it is more fuel efficient than road haulage.
In Britain, for example, their largest power stations were built around “merry go round”
rail facilities so that their bulk fuel can be delivered at a rate of millions of tonnes per
year. This, according to Magliolo (2005), would have been uneconomical and
unsustainable if it were transported by road.

According to Amos (2009: 20), “a typical investment on infrastructure normally relates to

the number of tracks, source of motive power, maximum train speed, length of crossing
loops, weight of rail, rail connections, loading gauge, method of train control, and
methods of maintenance”. However in order to be effective in its market, a freight
railway must always transform its investments in such a way that it simultaneously
delivers cost savings, capacity that can be sold and service improvements that can
attract new rail freight markets. The choice of investments in a railway can enhance or
limit its comparative advantage, and train performance improvements are only useful to
customers who value them. For these reasons, Amos suggested that any upgrade to
railway infrastructure needs to be justified in the context of local markets and economic
conditions. Investing in infrastructure to achieve cost reductions can always be
translated into value for customers or higher returns for the provider, however, creation
of additional capacity is only valuable if there are growth markets available to use it.

16
 3.2.5 Dynamics of road and rail freight

Freight rail is the transportation of goods by rail, whilst road freight is the transportation
of goods by road (Quinet and Vickerman, 2004). According to Amos (2009), freight rail
is more cost effective in the heavy haul of bulk freight with both high traffic density which
delivers low unit cost of infrastructure and large train size which deliver low train
operating costs. It can also provide the lowest costs across short distances than other
modes when it runs from the pick-up directly to the delivery points.

Londoño-Kent (2009) stated that the main qualitative attributes of a freight service
include transit time; reliability of meeting expected times; likelihood of loss; damage and
theft; availability of capacity; and convenience of departure times and frequency of
service. Rail rarely meets these factors. Moreover, for freight customers and services,
issues such as door-to-door, service frequency and delivery times are crucial, which is
very limited in rail freight. Road freight is more immediately responsive to urgent orders
and more flexible. These, combined with transhipment times, train assembly and low
speed, produce distinct disadvantages for freight rail for general freight in relation to
road freight. However, Amos (2009) asserted that rail can mitigate this on busy routes
and long hauls.

With regards to freight competition, Quinet and Vickerman (2004) stated that most
modes of transport, with the possible exception of road haulage, tend to be a natural
monopoly. This is due to the extent of economies of scale and scope, network
economies, and the need for expensive and lumpy infrastructure, which are the basis
for a natural monopoly and are often accompanied by a public service obligation, for
example, railways. Furthermore, Quinet and Vickerman (2004) also stated that one of
the intended objectives of rail reform is the introduction of competition between
operators to reduce inefficiencies. However, different firms providing the same product
or service is virtually non-existent in rail freight; rather, direct competition is most
common. An example of such a situation can be found in Germany and Sweden, where
a principal operator occupies the major part of the market and the national rail operator

17
is in direct competition with other modes. Another example is also found in South Africa
(SA) where freight rail still has to compete with road haulage operators (Development
Bank of Southern Africa, 2010).

Quinet and Vickerman (2004) argued that it is rare to find a clear-cut case of a direct or
indirect market in transport, as most markets are likely to be oligopolistic. The authors
also argued that a national rail operator is, after all, a competitor with other modes; even
relatively small road hauliers have some power over some individual geographical
markets or routes and build up preferential dealings with certain clients. Furthermore,
Quinet and Vickerman also argued that competition in transport occurs most often in the
domain of price, especially when price is interpreted as including elements such as time
and convenience. Moreover, in terms of road and rail transport, competition tends
towards perfect competition when the number of operators is large and each of them is
small. As the number of operators decreases, competition tends towards a Bertrand-
type oligopoly and the shipper uses operators with lower prices. When it comes to rail,
however, assuming that price is the only variable, shippers base their decision on
whether their marginal cost is higher than roads. If that is the case, rail will be excluded
from the market. Amos (2009), however, argued that costs and services are not the
only considerations in freight transport, as there are still issues of regularity and
reliability to be met, even if it is for bulk transport.

3.2.6 Role of Government in transport

According to Quinet and Vickerman (2004), the government has a general role in the
oversight of economic activities, verifying that laws and regulations are being observed;
ensuring the quality and safety of products; and protecting the rights of workers. In
transport specifically, there is a particular need to ensure meeting obligations to provide
public services, often through the protection of a monopoly provider.

18
Quinet and Vickerman (2004) further stated that governments can also impose control
on a monopoly as an alternative to imposing competition, especially when the monopoly
is invested with a public service obligation and when the external effectiveness is in
direct contradiction to the profit motive. This supports Thompson‟s (2009) view that
monopolies which are sustained within the freight logistics sector contribute significantly
to high levels of inefficiency, which leads to a situation in which there is little incentive to
reduce costs. Moreover, a government‟s intervention also fulfils an efficiency function
by correcting the negative impacts of external effects through taxation and relaxation
thereto. Intervention can take many forms, depending which areas need most attention.
A country may, for example, regulate or deregulate a market to protect a certain market,
increase competition and/or improve efficiency therein (Amos, 2009). In the 1940s
Germany regulated road haulage in the two main markets, short and long-distance, to
protect both railways and inland shipping, whilst in the UK there was a deregulation of
road haulage. In South Africa the economic regulation of freight was terminated in 1990
(Pienaar, 2010). The results in all three examples were similar to what Quinet and
Vickerman (2004) stated, a decline in rail freight and the substantial increase of road
haulage traffic in relation to other modes.

Furthermore, according to Amos (2004), a study on three different continents, Latin

America, Africa and Australia, revealed that it is not always clear why countries wish to
stay in the business of transport freight, but evidence shows that private participation in
rail freight has always been successful in improving performance almost everywhere it
has been tried. Germany, the UK and South Africa are somewhat similar in that their
road haulage traffic increased to the detriment of other modes, especially rail freight
(Quinet and Vickerman (2004). Moreover, Quinet and Vickerman also stated that more
recently there has been a tendency for governments to reduce interventions around the
world, partly due to changing political ideologies and partly due to understanding the
ways different economic mechanisms work. However, Van der Walt (n.d.) argued that
ownership and competition are key considerations in rail reform and rail performance
improvements. It is because of the inherent monopolistic nature of rail infrastructure
and other public transport assets that governments are influenced to rather regulate

19
and/or retain a say in the provision of those assets, especially rail or mass transit
infrastructure created or governed by transport policy interventions.

According to Quinet and Vickerman (2004), in most African countries where

governments rule out competition in rail freight transport, exclusivity measures in the rail
freight industry is in such situations justified, and rail freight can still be made
contestable by ensuring that a transparent and competitive process is followed in the
granting of exclusive rights, thereby creating at least periodic competition for the market.
In fact, Quinet and Vickerman also stated that governments are almost never totally
absent from transport markets; they can at various times be seen as promoters of
competition whilst on the other hand legalising monopolies.

With regard to deregulation, Quinet and Vickerman (2004) argued that it is generally
beneficial for users because prices and costs are reduced, while services expand, are
diversified and are better adapted to users‟ needs. Moreover, deregulation also
encourages new techniques and technologies as well as hub-and-spoke networks.

3.2.7 Road and rail freight in South Africa

According to the South African Department of Transport (2012), South African rail is
regarded as the backbone of the country‟s future transport industry as it plays an
important part in its economy and promotes social development. South Africa has an
extensive rail network – the 14th longest in the world - which connects with all the
networks in the sub-Saharan region. Its railway system is the most highly developed in
Africa and is the most important element of the country's transport as all major cities are
connected by rail (SAinfo Reporter, 2012).

South Africa‟s freight rail is a publically-owned monopolistic company, with rail freight
being solely provided by the state owned agency, TFR. TFR is a division of Transnet,
which owns all the railway lines and the entire railway infrastructure. Pienaar (2010)
stated that TFR is a monopoly only as a rail operator and not from a competitive

20
intermodal perspective, because there are other alternative modes such as road freight
that compete with rail. According to Amos (2010), railway cannot provide a complete
freight service without integration; it needs intermodal collaborations with other transport
modes to provide such services. In South Africa though, an integrated alternative to
road and rail competition was never developed due to the rapid deregulation of freight
transport (Havenga, Simpson, Fourie and Bod, 2011). However, Havenga also stated
that according to DoT, 2005 and 2011, policy makers have recently been expressing the
desire for a modal shift and a domestic intermodal solution. Moreover, private partners
also expressed interest in participating in such a solution through both direct
investments and cooperation using licensed technology such as RoadRailer. Domestic
intermodal freight transport in South Africa refers specifically to road and rail.

According to Thompson (2009) the South African government controls the entire
network, which it justifies on the basis of competition with other nations, believing that it
is somehow nations that are competing to form logistics chains. Thompson further
stated that such interventions by governments to influence logistics are complex sets of
interacting pieces and are almost always certain to fail.

With regards to freight regulation, freight in South Africa is currently deregulated. Road
and rail transport compete in the same market segment, transporting bulk goods and
long haul freight (South African Department of Transport, 2012). However, according to
Stander and Pienaar (2005), rail freight in South Africa has a small impact on
metropolitan and rural markets as there is only one-third of rail corridor movement.
Road and rail are therefore only in competition in a small portion of the freight market.

While it is generally considered that higher value goods should ideally be transported by
road and bulky lower value materials should be transported by rail, this is not the case
in South Africa. A study by Ittmann and King (2010) revealed that over 60% of road
transport volumes of goods should primarily be transported by rail, but in South Africa
only 34% are. Furthermore, Stander and Pienaar (2005) stated that when comparing
road with rail in terms of freight movement, rail freight appears to be less effective.

21
 3.2.8 Integration within the freight sector

Thompson (2009) described integration as a spectrum of possible relationships that

distinguish it from true independence, which can be defined as separate activities or
entities that interact only at arms‟ length. The degrees of integration can begin with
information sharing, moving to various kinds of cooperation, joint ventures to own
facilities, and extending to common ownership either in a single company or within a
broader conglomerate or holding company. Amos (2009) argued that technologies
define railways, but railways have always depended on their integration with other
modes and most rail freights have always been part of a longer supply chain.
According to Havenga et. Al. (2011: 151), “integration requires the promotion of efficient
interconnection and interoperability between network and modes – intermodal freight
transportation. This process consists of short-distances and road feeder services to an
intermodal terminal in a logistics hub where freight is consolidated into main-line block
trains running the length of the corridor to a destination terminal where it is then
transported to end destinations via road transport.

Integration in the sector can involve a wide range of businesses. Horizontal integration
can be between shipping lines, terminal operators, logistics providers, rail companies or
between other inland carriers. In rail markets, the integration of companies providing
parallel and competing routes have different implications for efficiency than end-to-end
mergers that link companies along a route OECD (2009).

Thompson (2009) suggested two types of integration - horizontal and link integration.
Horizontal integration is a logistical process involving various stages; however
Thompson believed that such integration is generally considered questionable because
of its impact on intra-modal competition, especially when the owner is a private entity.
The second type of integration is link integration, where a mode, for example a railway,
also owns part of a port or a trucking company. In theory this type of integration could

22
increase competition on links, but it could also suppress competition, especially if it
denies others access to one of the links. There could also be a negative affect if the
transfer from one link to another is defective, however this challenge can be mitigated
by allowing a liner company to own port facilities; allowing a railway to own part of a
port; or by allowing a railway to own a trucking company. This could guarantee effective
and low cost linkages and thereby increase efficiency (Thompson, 2009).

Both Ilie (2011) and Amos (2004) suggested another way of integration in which rail can
respond to competition from other modes of transport, which is to seek better
connections with them. Amos stated that railway freight managers should assess the
opportunities not to replace but to co-operate and partner with other modes, as well as
freight forwarders and logistics services providers, failing which they will become
disconnected from final markets and become price-takers from middlemen. Moreover,
Amos added that railways can increase market reach without increasing network length
through intermodal activities. This involves the movement of goods in one loading unit
or vehicle, which successively uses several modes of transport without handling the
goods themselves between changing modes. Multimodal transport involves using at
least two different modes of transport on the basis of a single multi-modal transport
contract to move a load of goods from origin to destination.

The bulk of freight rail and port assets are integrated in a single national company in
some countries. In theory this should contribute to technological and network
efficiencies (OECD, 2009). According to Thompson (2009), it could also provide
increased scope for market power and the inefficiency that sometimes accompanies
market power. Examples of such situations, according to Thompson, are found in
Turkey and SA, where, as a result of this kind of integration potential efficiencies are
lost, because revenues from profitable activities are used to subsidise other parts of the
system, robbing the profitable businesses of funds for investment. As a result prices for
shippers are inflated and service declines.

23
Furthermore, according to the OECD (2009), vertical separation of ports and railways is
the starting point for improvement in performance, because it increases the
transparency of financial flows and provides for support to the railways to be subject to
tests of value for money. On the other hand, horizontal separation of the ports brings
benefits of competition and freedom to price services according to local conditions that
are likely to outweigh any advantages of port integration. The railways could also benefit
from horizontal separation, especially in South Africa where the iron ore and coal lines
are viable without public support and are very different businesses from the general
freight network (OECD, 2009).

Furthermore, according to Quinet and Vickerman (2004) collaboration within the freight
industry is of utmost importance, as the services of combined transport, where a
number of operators use a variety of modes, can provide a through-type of services
particularly to exploit the possibilities of open access to rail network. Quinet and
Vickerman added that in a number of countries combined transport has been heavily
controlled by the national rail company.

3.3 Organisational change, capacity and competitive advantage

3.3.1 Change

According to Jarrett (2009), change is a natural part of a business‟ life if it is to grow and
remain competitive. Rodrigue and Notteboom (2014) argued that transportation is an
economic factor of goods and services, where small changes can have substantial
impacts on costs, location and performance. According to Sturges (2009), there are
many factors trigger change including globalisation, technology, competition,
organisational restructuring, and other market forces. An example of such is the
revitalisation programme of the South African Transnet Freight Rail guided by their
MDS. This would inevitably lead to changes in various, if not all, the areas of the

24
organisation, including strategies, culture, leadership, technology, structure and
processes. However, to make change stick, organisations need to be ready for such
change (Jarrett, 2009).

Management needs to assess what type of changes they are facing and be ready to
implement them. According to Jarrett (2009: 8), “change favours a prepared mind”.
Jarrett further suggested that changeability is a combination of leadership, internal
routines and organisational capabilities, which make companies fit, ready for change
and helps to predict the success or failure of organisational change. Jarrett (2004)
stated that successful change is a function of how well an organisation‟s internal
capabilities – its management, capacity, culture, processes, resources and people
match the requirements of its external environment. In support of Jarrett (2009),
Burtonshaw-Gunn (2008) added that for any change to stick it has to be properly
managed, supported and sponsored by senior management, but more so, there must
be readiness for, and acceptance of change by the people whom that change is
applicable to.

Schoemer (2009) did not dispute the steps suggested by Jarrett and Burtonshaw-Gunn
(2008), but stated that for every change process there are always various stages which
the process goes through. These stages include betrayal, denial, identity crisis and
searching for solutions, and failure to recognise and understand these stages means
that a process of change is bound to fail.

3.3.2 Resources, capacity and capabilities

Resources here are defined in line with Bridoux (2004) as well as Barney (1991) in
Kraaijenbrink, Spender and Groen (2009), as all assets, capabilities, organisational
processes, firm attributes, information, knowledge and more, which are controlled by the
firm that enables it to conceive and implement strategies that improve its efficiency and
effectiveness. They consist of tangible assets which are made up of financial and

25
physical resources; and intangible assets which are made up of the firm‟s intellectual
property, reputation and organisational culture (Bakhru and Gleadle, 2005).

Bakhru (2005) stated that a company‟s capabilities should be built with various
resources to acquire competitive advantage, including human resources such as special
skills, knowledge, motivation, communication and interactive abilities within the
organisation; intangible resources, including technology, reputation and culture; and
tangible resources comprising of financial as well as physical resources, including
infrastructure.

Various management models can be used to assess organisational capacity and its
competitive advantage. These models include, but are not limited to, the Resource-
Based View (RBV), Porter‟s Five Forces Model, and the Relationship between
Resources, Capabilities and Competitive Advantage (RBRC&CA) model (Fenton-
O‟Creevy and Stapleton, 2007). The RBRC&CA model assumes that all organisations
possess unique bundles of resources, but it is how these resources are used that
determines the competitiveness of the organisation. According to Rumelt (1991) in
Viney and Gleadle (2005), resources and capabilities of an organisation are the main
source of its competitiveness. Whilst Porter‟s Five Forces model is used to assess the
external environment in relation to the internal analysis of the company, the RBV as well
as the RBRC&CA model assess the company‟s internal capabilities.

The Resource-Based View (RBV) model is used to explore how an organisation

achieves competitive advantages with its resources. Either the RBV or the RBRC&CA
model can also be used as a supplement to Porter‟s Five Forces model. The RBV can
also be used to assess how resources can be interlinked and combined to achieve
competitive advantage (Bakhru, 2005).

One of the criticisms of RBV is that it is difficult to identify those resources and
capabilities which are considered to be valuable. Bakhru and Gleadle (2005) stated in
their book that, according to Barney (1991), the RBV assumes that organisations differ

26
from each other in respect of their resources and capability, and that the productive
resources and capabilities cannot easily be transferred from organisation to
organisation without cost. Bakhru and Gleadle (2005), in support of Barney (1991) and
Szulanksi (2003), stated that the RBV assumes that the company‟s resources should
possess five characteristics to give the company a competitive advantage: valuable,
rare, inimitable, non-substitutable, and in limited supply. The RBRC&CA model, on the
other hand, assumes that resources should confer competitive advantage when they
are inimitable, durable, relevant and appropriate (Fenton-O‟Creevy and Stapleton,
2007). However, in Bakhru (2005), Peteraf (1993) suggested four conditions underlying
sustained competitive advantage, which include superior resources heterogeneity within
an industry, ex-post limit to competition, imperfect source to competition and ex-ante
limits to competition. Most recently, according to Bridoux (n.d.), a study by Sampler
(1998) revealed that many resource based approaches have been focusing a lot more
on intangible resources such as knowledge and information.

In their article, Kraaijenbrink, Spender and Groen (2009) pointed out eight criticisms
of the RBV, five of which are considered useful as the variables; boundaries and
applicability are more clearly specified. The other three cannot be dismissed as they
“cling to an inappropriately narrow neo-classical economic rationality … and do not
sufficiently capture the essence of competitive advantage, neither statically or
dynamically” (Kraainjenbrink et al., 2009: 3).

However Jarrett (2009) recognised the various limitations and critiques of the RBV and
Porter‟s Five Forces Model, and suggested they should be supplemented with
additional tools such as a relationship between resources, capability and competitive
advantage model in order to analyse the company‟s resources holistically. This model
illustrates that in order for a company to operate efficiently and achieve a competitive
advantage which will ultimately contribute to economic growth, all its resources have to
complement one another and be strategically combined in the most efficient and cost
effective manner (Bridoux, 2004).

27
 3.3.3 Competition and competitive advantage

A firm needs to know its exact competitive position in relation to its competitors. This
requires both an internal and external assessment of its environment in order to
determine its sources of competitive advantage (Porter, 1985).

According to Porter (1985), competition is at the core of the success or failure of any
organisation. For any business to be successful and profitable it needs to possess a
competitive advantage, as well as a competitive strategy that enables it to compete with
other organisations. Bidroux (2004) described competitive advantage as the superior
differentiation and lower costs by comparison with the marginal competitor in the
product market. This means that an enterprise has a competitive advantage if it is able
to create more economic value than the marginal competitor in its product market.
However, Bidroux argued that competitive advantage does not automatically lead to
higher performance in relation to other competitors. Viney and Gleadle (2005) added
that any competitive strategy should consider the potential, resources and capabilities
available to the firm; the nature of the external environment available to the
organisation; and the objectives of the key stakeholders.

Bidroux (2004) stated that firms can take any kind of action they deem fit to improve
efficiency and competitive advantage in relation to their competitors. In so doing, they
may, amongst others, use their resources to decrease buyers‟ willingness-to-pay for
rivals‟ products; or leverage their resources to hurt competitors and affect prices in the
product market. However, it is not always in the firm‟s best interests to behave
aggressively toward competitors, as cooperation may sometimes be more beneficial .

Porter‟s Generic Strategy is commonly used and helpful for organisations to understand
potential sources of competitive advantage, and is therefore widely implemented.
Porter (1985) argued that the collective strength of the five forces determines the ability
of an organisation in an industry to earn, on average, rates of returns on investments in
excess of the cost of capital (Fenton-O‟Creevy and Stapleton, 2007). Viney and
Gleadle (2005) stated that various authors, including Kotha and Vadlamini (1995) as

28
well as Hambrick (1983), also support Porter‟s generic strategy. However, despite the
vast support thereof, several researchers also criticised Porter‟s typology for its
conceptual limitations, arguing that his generic strategies are not collectively exhaustive
and are thus unable to adequately describe the strategies. This includes Mintzburg
(1998) in Viney and Gleadle, who questioned its simple notion of low cost and
differentiation in the current corporate environment, which is characteristic of increased
global competition and technological change.

Furthermore, according to Miller and Dess (1993) as well as Sandberg (1986) in Viney
and Gleadle (2005), Porter‟s generic strategies are not truly generalisable in that none
of the strategies are truly generic; they do not permit segment differentiation and do not
allow for organisations to utilise differing strategic approaches in the different
product/market segments in which they operate. For these reasons, according to Viney
and Gleadle, Porter‟s original analysis is now often broadened to include potential
combined strategies of integrated cost leadership and differentiation.

On the other hand, McGrath (2013) stated that Porter‟s Five Forces Analysis and other
models that help analyse the competence of the firm are important ideas, but argued
that they are all based on a single dominant idea that the purpose of strategy is to
achieve a sustainable competitive advantage as the most fundamental concept, which
is no longer relevant for more and more companies. McGrath disproved Porter‟s
generic strategy model to analyse the competitive advantage of the firm, and suggested
a different approach called the „playbook‟ for strategies where different leadership
behaviours need to be deployed in businesses with different levels of maturity. This
approach is based on a set of assumptions as opposed to earlier assumptions that gave
the useful frameworks and tools which have been used for the past several decades.
The strategy playbook is based on the ideas of transient competitive advantage –
where, according to McGrath, things work differently now and the way of competing is
no longer sustainable. McGrath (2004) further argued that the resource allocation
process is perhaps the most significant way to influence what gets done and who does

29
it in the organisation, saying that firms need to think of the customer rather than on
supply and demand for the job to be done.

Viney and Gleadle (2005), on the other hand, were of the view that interrelationships
amongst business units can have a powerful influence on competitive advantage as
they may benefit from shared activities, which is the impact that corporate strategy
should have on competitive advantage. When it comes to rail, however, Amos (2004)
stated that it is very different from any other organisation. Amos suggested
collaborations with other modes as a way to respond to competition. This implies
physical connections with container hubs, logistics centres, river ports and seaports
looking for markets where connectivity of rail with other modes will improve service
and/or reduce costs.

3.4 Conclusion

This chapter examined the views of different authors and sources on the issues around
road and rail. It provided a background of the nature of transport with a specific focus
on freight, and discussed the dynamics of freight rail in relation to road freight, with a
few examples from different countries with similar situations. A review was also done
on the use of different models, which will be used to assess the capacity and
competitive advantage of a company later in this study. This will enable the researcher
to understand them and select the most appropriate models with which to assess the
TFR‟s capacity in line with the research topic.

30
CHAPTER 4: RESEARCH METHODOLOGY

4.1 Research design concepts

4.1.1 Introduction

A research design is the plan and a structure for investigation, prepared to obtain
answers for the research questions. It is an overall programme for the research and
includes an outline of what the investigator will do, from writing hypotheses and
assessing their operational implications, to the final analysis of data (Cooper and
Schindler, 2011).

This aim of this research is to assess the feasibility of the implementation of the policy
to change the movement of goods by road to rail. The objectives of this study were to
assess the capacity of TFR to successfully implement the road to rail policy and the
feasibility thereof; to determine whether the implementation of road to rail will lead to
freight rail efficiency, competitiveness, reliability and sustainability; and to establish the
industry‟s reaction towards the shift from road to rail and their willingness to integrate
with rail.

4.1.2 Quantitative and qualitative approaches to research

According to Coldwell and Herbst (2004), quantitative research involves the

collection of primary data from large numbers of individual units, frequently with the
intention of projecting the results to a wider population. It seeks explanations and
predictions that will generalise to other people and places, and is intended to
establish, confirm, or validate relationships, as well as to develop generalisations
that contribute to existing theories.

31
Cooper and Schindler (2011) described qualitative research as a method that
involves looking at characteristics or qualities that cannot easily be reduced to
numerical values. The researcher aims to examine the many nuances and
complexities of a particular phenomenon and starts with an open mind, immersing
themselves in the complexities of the situation and interacting with their
participants.

For the purpose of this research the qualitative approach was selected as it was the
most appropriate. It enabled the researcher to conduct an in-depth exploration and gain
an understanding of the issues around the road to rail project and how the industry feels
about the issue.

4.2 Population

According to Coldwell and Herbst (2004), a population can be a group of people, items
or units under investigation. As a population can be very large, impractical and
uneconomical to collect information from, a sample of the population can be used
instead of the whole population.

A sample is a representative portion of the population whose properties are studied to

gain information about the whole population, which enables the researcher to gather
information faster (Coldwell and Herbst, 2004).

Sampling is the process of selecting a representative part of the population for the
purposes of determining the parameters or characteristics of the whole population
(Coldwell and Herbst, 2004). It is used in research due to factors such as financial
limitations; time constraints; the impracticability of collecting information from every
single unit of the population, and inability to reach the whole population. The sampling
techniques available are probability sampling and non-probability sampling.

32
According to Saunders, Lewis and Thornhill (2009), there are two methods for
drawing a sample, namely random sampling and quota sampling.

The population for this research was the whole freight industry in South Africa, but
mainly rail freight. It is a very large population which consists of various institutions, the
main ones being the DoT as the transport policy maker; the Department of Public
Enterprise (DPE) – Transnet‟s shareholder; TFR as the custodian of all rail freight
services in South Africa; the Road Freighters; freight users; and experts in the transport
field in South Africa. Each of these organisations is very large individually, which made
it impractical to collect information from every single unit in the population. A sample of
the population was therefore used, from which information was collected for this
research.

Non-probability sampling was selected as most appropriate sampling technique due to

limited resources and time. With this technique the researcher was able to select
anyone within the population group who was in a position to provide the relevant
information. The quota sampling technique was used which allowed the researcher to
select participants in certain categories or with select characteristics.

The participants selected for the interviews were ten key role players from the TFR and
DoT, as well as stakeholders from the freight industry who are responsible for handling
or involved in the road to rail issues in their respective organisations. This decision was
due to factors such as the limited time within which to complete this research; the
impracticability of collecting information from every single unit of the population; and
inability to reach the whole population. The sample was made up of people leading the
road to rail programme, who were in a position to provide the researcher with first-hand
information on their views and decisions.

4.3 Data collection methods

33
In this research interviews were conducted to collect primary data. Secondary data was
also gathered by scrutinising existing documents and reports on the same topic. This
enabled the researcher to supplement the information collected through the interviews.
There are three types of interviews, namely structured, semi-structured and
unstructured interviews (Leedy and Ormrod, 2010). For this research, unstructured
interviews were used. These are informal and more like every day conversation with no
pre-set format. They are normally open ended, flexible and free flowing. The questions
are not pre-set, but the researcher normally has certain topics to cover which gives the
interview some structure and direction (Coldwell and Herbst, 2004). The use of this
type of interview enabled the researcher to prompt and probe for answers and to gather
valid and reliable data that were relevant to the research question; to the objectives of
this research; as well as to gather in-depth general information which gave a better
insight of the subject matter. The researcher started by conducting the interviews,
followed by documentation review which entailed scrutinising existing written material in
the public domain and material provided by some interviewees.

4.3.1 Data collection instruments

As mentioned in the preceding paragraphs, this research is qualitative and used

unstructured interviews with open-ended questions to collect primary data. A
documentation review was also conducted to collect secondary data. The questions
were strategically designed for unstructured interviews and the questions were
designed based on the research objectives to allow the interviewees to freely explore
and share their thoughts around the topic. This enabled the researcher to ensure that
the interviewees provided responses that addressed the research objectives and
therefore the topic of the research. With these questions the researcher was able to
conduct in-depth interviews and probe to better understand the issue. An audio
recording device was used to record the interviews, with permission from participants.
On average the interviews took 45 minutes each.

34
The lists of questions for the unstructured interviews are attached as Appendix A of this
document; there were two sets of questions for two different groups. Group 1 consisted
of TFR and DoT as the operators and custodians of freight rail. Group 2 consisted of
different stakeholders in the freight industry. The reason for dividing the population into
two groups was because during the first few interviews, both the DoT and TFR
interviewees provided more facts during the interviews as opposed to the industry
stakeholders who provided more views and opinions on the matter. The questions
therefore had to be structured differently but with a level of consistency across both
sets. Follow up questions were also asked to balance the two sets of questions to
ensure consistency.

4.3.2 Data analysis

Qualitative Data Analysis (QDA) is the range of processes and procedures whereby a
researcher changes the qualitative data that have been collected into a form that can
easily be explained, understood or interpreted about the people and/or issue being
investigated; it is based on an interpretative philosophy (Lewins, Taylor and Gibbs,
2010). As previously indicated this research is qualitative, therefore the data analysis
was qualitative and a thematic analysis approach was used.

Thematic analysis is a method for identifying, analysing and reporting patterns or

themes within the data; it organises and describes the data set in rich detail. There is
no clear agreement about what thematic analysis is and how to go about doing it; it is a
method which works both to reflect reality and to unravel the surface of reality. For this
reason Braun and Clarke (2006) suggested that it is important that the theoretical
position of a thematic analysis is made clear.

35
With this approach the researcher identified a number of codes which are reflected in
the textual data. This entailed identifying, analysing and reporting patterns which were
turned into codes. These codes were organised and grouped as themes as suggested
by Braun and Clarke (2006). The main purpose of coding was to make connections
between different parts of the data and to allow the researcher to identify what the
respondents were trying to say. The data was therefore collected through interviews
using open ended unstructured questions. The responses were recorded and later
transcribed using an audio recorder. The transcripts were organised and analysed
using the thematic analysis and patterns and consistency in the data were analysed,
producing codes which were then themed. The researcher used the themes as
headings to analyse the responses from the interviews. The complete process followed
to develop the codes and themes is listed as Appendix C.

4.4 Validity and reliability

Validity determines whether the research truly measures that which it was intended to or
how truthful the research results are. Researchers generally determine validity by
asking a series of questions, and will often look for the answers in the research of
others (Golafshani, 2003). According to Coldwell and Herbst (2004), there are two
types of validity: internal and external.

For the purpose of this research, triangulation was used where multiple data sources
were compared in search of common themes to support the validity of the findings. In
this regard the thick description strategy was used by describing the situations in
sufficiently rich detail so readers can draw their own conclusions from the data
presented (Leedy and Ormrod, 2010).

Reliability is concerned with the credibility of the findings of the research and refers to
the extent to which the obtained scores may be generalised to different measuring
occasions, measurement/test forms and measurement/test administrators (Wellman et

36
al., 2005). Saunders et al. (2009) added that reliability refers to consistency, and is
concerned with the robustness of the questionnaire as to whether it will produce
consistent findings at different times and under different conditions.

In terms of validity for this qualitative research, the contents of the questions were
tested and re-tested to check the extent to which the questions provided adequate
coverage of the investigation as a whole. In order to determine the reliability of this
research, relevant questions were asked as to whether the evidence and conclusions
would stand up to the closest scrutiny, and ensured that whichever measurements were
used, it would produce the same results to anyone who may decide to do the same
research. Therefore, as Leedy and Ormrod (2010) suggested, the researcher used the
interrater reliability approach to measure the extent to which two or more individuals
gave the same results about the issues under investigation. The responses were
compared to the responses from different interview participants and ensured that all the
information collected was adequately recorded and referenced accordingly (Saunders et
al., 2009).

4.5 Ethical considerations

Research ethics are standards that guide the moral choices of the researchers‟
behaviour and their relationships with the participants of the research. The importance
of ethics in research is to make sure that no one is harmed or suffers adverse
consequences from the research activities (Cooper and Schindler, 2011). In order to
safeguard all participants involved in this research, the researcher ensured that:

 The reason, purpose and relevance of the research was clearly explained, and it
was guaranteed that a copy of the dissertation would be made available to
participants if required;
 No pressure was used in any way to obtain information from participants;

37
 For every interview the researcher provided a signed confidentiality letter, from
both UNISA and the researcher, which ensured that the data collected was used
solely for the purpose of this research;
 Due recognition was given in appreciation for participants‟ contributions; and
 All participants were given as much information about the research as possible
before involving them.

38
CHAPTER 5: RESEARCH RESULTS

5.1 Chapter overview

This chapter consists of a short profile of the interviewees; the results from the primary
data collected from the interviews; interview questions and answers, an assessment of
TFR‟s capacity; as well as an analysis of the findings. Both TFR‟s internal and external
environments were assessed to establish its capacity and competitive position in its
industry. This was made possible by investigating existing documentation in the public
domain, as well as documentation provided by experts and TFR themselves to the
researcher.

The responses from the interviews facilitated the development of codes and themes
were allocated to them in order to facilitate the analysis of the information collected from
all interviewees (refer to Appendix D). This ensured that all the responses were
adequately categorised so that the research questions were answered.

Upon acceptance of the interview by the participants, the researcher emailed each of
them a brief summary of the research topic, together with the list of questions for the
interview, giving them the opportunity to familiarise themselves and apply their minds to
the issue beforehand. Before each interview started, the researcher requested
permission from the participants to record the interviews. The recorded interviews were
transcribed to facilitate analysis and were archived for safe keeping future reference.

The researcher divided the interviewees into two groups. Group 1 was TFR and DoT as
custodians of rail freight, whilst the other was the freight industry at large. There were
thus two sets of questions for these different groups, although each participant was
interviewed individually. The reason for the two groupings was that the researcher
realised that during the first few interviews, TFR and DoT were providing more facts

39
regarding the shift from road to rail as opposed to the industry which could only give
their views and opinions.

The section to follow contains the questions and responses from the interviews. Each
question has the respondents‟ answers for that particular question allocated to it. This
was done to enable the researcher to easily compare the different responses from the
different interviewees and to holistically analyse the information gathered from every
interview for the same questions. It will also enable the reader to follow all the
responses provided by all the respondents for each of the questions asked.

The two sets of questions are provided under Appendices A and B of this document.
This allows the reader to follow the line of questions asked and see the slight
differences between the two sets of questions.

5.2 Brief profile of interviewees

1. Ms Nisha Jones

Ms Jones is an Executive Manager at Transnet Freight Rail.

2. Ms Mathlodi Senyatsi

Ms Mathlodi Senyatsi is the Director: Logistics Infrastructure at the National

Department of Transport and is currently acting Chief Director: Freight Logistics.

3. Mr Ravi Nair

Mr Nair is the General Manager: Steel and Cements Business Unit of TFR.

40
4. Mr Prema Govender

Mr Prema Govender is a Senior Advisor: Climate Change Mitigation at the Deutsche

Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. His area of responsibility
includes energy efficiency, transport and waste to energy. The GIZ is currently
conducting research on the Social Impact of the Road-to-Rail Policy.

5. Dr Jan Havenga

Dr Havenga is an Associate Professor with the Department of Logistics at Stellenbosch

University. He is the Director: Centre for Supply Chain Management, Department of
Logistics. Dr Havenga is also a member of the Editor Panel and Reviewers of the
Journal of Transport and Supply Chain Management. He is an experienced market
researcher; macro-logistics researcher and consultant; strategic and change
management specialist in corporate strategy; and a marketing expert. He also
specialises in practical strategy applications on a macro level and the role of macro-
strategic decisions on logistics and supply chains.

6. Mr Norman Mbazima

Mr Mbazima is the Chief Executive Officer of Kumba Iron Ore. Kumba Iron Ore is a
major client of TFR.

7. Mr Frikkie Burger

Mr Burger is currently the Manager: Growth & Optimisation: Logistics at Kumba. He is

responsible for the future expansion projects of the Iron Ore Export Channel and
represents the logistics function on all internal growth projects that require export
capacity to coordinate the liaison with Transnet for capacity. Mr Burger is also

41
responsible for Asset Optimisation for logistics and drives optimisation initiatives for the
Iron Ore Export channel (joint initiative with Transnet).

8. Mr Abrie De Swardt

Mr De Swardt is the Managing Director of Abrie De Swardt & Associates. He is a well-

respected leader in the logistics and supply chain management industry in Southern
Africa. He has more than 22 years of experience in the fields of marketing and supply
chain management, including manufacturing, procurement, warehousing and
distribution. His extensive experience encompasses the entire supply chain discipline
from the buy to the sell side. He holds various management qualifications, including a
MComm from the Stellenbosch University.

9. Mr Max Braun

Mr Braun is currently the Chairperson of the Annual Transport Legislation Workshop

and a team member of the CSIR/US National Freight Logistics Survey. Previously he
held several senior management positions in the vehicle manufacture and retail
industries, including responsibility for large vehicle workshops. He studied advanced
transportation management at NW University in Chicago, Illinois, and holds an
advanced diploma in transport management from UJ. He has lectured at Stellenbosch
University‟s Transportation Centre, the Department of Transport Economics at UJ and
WITS University‟s Materials Handling Department, and regularly writes for FleetWatch
and other publications on a variety of transport and related topics. He is affiliated to
IRTE, SARDA and PPECB.

10. Patrick O’Leary

Mr Patrick O‟Leary is the Editor of FleetWatch.

42
5.3 Interview questions and responses

5.3.1 Questions and responses: TFR and DoT (Group 1)

The responses from all the participants are quoted directly from the interviewees and
are placed under each question. This approach enables the reader to easily see all the
responses that all participants provided to the same question, and makes it simpler to
see the consistency of answers or lack thereof for each question. Some of the follow-up
questions are also included.

1. The proposed policy (The National Rail Policy – Green Paper) talks about the
intention to shift from road to rail, and I understand that TFR is embarking
on a revitalisation programme to ensure that the move is successful, but
how do you propose the shift itself to be rolled out? Is there going to be
some legislative instrument which will prohibit the road transporters from
carrying the freight naturally fitted for rail? If not, how?

Mathlodi Senyatsi

“…Currently as you see in the newspapers Transnet is waiting for locomotives, you
know, from China and they‟ve made restructure CAPEX for the period of ten to twenty
years. So our review then will look into those things and see, okay would it work for us.
Yeah, so, so from a policy perspective that‟s how then the roll out would be made. We
would, we would look at what Transnet has invested to date. So our interactions with
the industry, they, they are for the idea that your rail friendly cargo needs to move to rail.
However Transnet needs to be ready with that and that, from where I‟m sitting I think it

43
would require some kind of legislative framework…you have regulations in terms of how
that needs to be. So yes some kind of a mandate that says to us, you know, from this
day government has pronounced that certain commodities…Sometimes market forces
work best in certain instances. But sometimes you need some kind of government
intervention. Some kind of regulation and, and, and let me, let me substantiate why I
say that. For an example we expect our state owned entities and in this instance
Transnet and our Transnet Freight Rail. Their responsibility is not only to focus on their
commercial aspect. They are also expected, they are also expected to look at the
social aspects. So their responsibility is socio-economic. Right, now a lot of times as
government we… the mandate for our state owned entity is to look at the commercial
side but also at the social economic aspect. So a lot of times without, if we don‟t
monitor our state owned entities we tend to see them not, you know, pulling their weight
when it comes to socio-economic aspect… I think when it comes to them being
competitive and being a global player, that‟s fine. I think you can leave that aspect... but
when it comes to your socio-economic aspect government needs to come in and make
sure that they, they, they contribute to that otherwise then the responsibility of
government, of ensuring that we, we develop our most rural areas would not happen…”

Nisha Jones

“…we don‟t provide end to end services. We always need a collect cargo from a point
(inaudible) we collaborate with private enterprises. How can we work together
remember of consideration when one (inaudible)…container need to be connected from
the customer which will be brought to the siding route to put on the train and then the
cargo comes back to the (inaudible) we need to get back off the siding from delivery so
there is also a role for the (inaudible) look at the road, how deep the damage is on the
road…”

44
Ravi Nair

“What we are looking at here, Judith, is we, we don‟t want to go and force a road to rail
shift by, by way of legislation… You know government wants a very competitive
economy. Whilst we are government owned we need to compete equally out there with
customers. So we want to earn our right to move traffic from road to rail by purely our
service offerings, our solutions, our service levels that we are going to commit to. Our
investment in our resources, in our people and so forth and we want to leave it up to the
customers to decide…”

2. What kind of support and/or objections are you getting from the industry?

Mathlodi Senyatsi

“I must say that… with the road industry there‟s a bit of a grey area in the sense that we
have an association called the Road Freight Association… They‟ve indicated to us that
even sometimes government is notorious of not consulting thoroughly with what they
want to do. So I think we are very conscious of making sure that we get that buy in
…as truckers, we are their biggest culprits when it comes to deteriorating the
infrastructure, the road infrastructure. They do admit to that, you know. So for them
their biggest cry to government was that if you can make sure that Transnet is ready,
you know, when the shift is about to happen or when we are negotiating the shift then
they, they are happy. Because for them what they‟ve said is that moving their cargo by
road is expensive… So I can say they, they do support the shift from road to rail…”

45
Nisha Jones

“We are getting support and we demand collaboration (inaudible) the industry is
beginning to see the benefit of it.

Ravi Nair
“…we have not seen any explicit objections coming through from the industry. What we
observe at the moment is, surprisingly is that a large number of players in the industry
are knocking on our doors to sign up, cooperation agreements with us… We are even
getting enquiries from the industry in the support and the commitment of the industry
wanting to invest in rail wagons, in locomotives and so on and so forth. In some cases
is a bit… people are a bit anxious and they want to see things happening quicker.”

3. In today’s business environment, time and speed is of utmost importance. In

most cases people prefer to pay more for faster and more efficient services.
To what extent can freight rail gain competitive advantage in that regard?

Mathlodi Senyatsi

“I think government needs to make sure that we make the proper investment on the
freight rail for infrastructure and for the locomotives. Both our wagons and our… what
do they call them, the ones that pull the, the wagons. But yeah, so if, if we do proper
investment then, then freight will, will gain competitive advantage because at the
moment the biggest draw, drawback or the biggest challenge with, with freight rail is that
they cannot compete with road when it comes to speed and time. Solely because of the,
the, the infrastructure that is old. Infrastructure that is, in some instances that has been
vandalised and, and…locomotives that are old. The signalling system that is old as
well. So once we make proper investment on those elements then freight rail will gain

46
its competitive element, advantage. But also, I think with government intervention as
well, with the pronouncement or the rolling out of the shift from road to rail, that will
assist as well for them to gain the competitive advantage.”

Ravi Nair

“From a rail point of view I think on the assets side we are improving our investment in
assets, not just new assets but also how we maintain the current existing old assets.
There are new ways and means that our Engineering Division is working on in terms of
how they improve the reliability and the availability of the current assets… We have
invested a lot of new technologies to have real time monitoring of our trains…all of this
is targeted at making sure that we deal with time and speed because that is of utmost
importance; running longer trains, bigger consignments, is going to assist us in terms of
competitive advantage and this will assist also the customers in terms of what type of
stockpiles do they need to keep at the port. ”

4. Is the implementation of road to rail going to be successful?

Follow-up question: what do you have in place to ensure the success thereof?

Mathlodi Senyatsi

“It has to be successful. It‟s not a matter of yeah or no. No, it has to be successful.
Because of the challenges that we are now faced with and I think maybe using this
classical example of our road network it will explain my conviction that it has to be
successful. From a policy perspective I‟ve mentioned the three policy documents that
as a department we are looking at. It‟s the National Freight Logistics Strategy. It‟s the

47
draft Rail Policy and it‟s the draft Road Freight Strategy in making sure that rail, freight
rail in particular is sustainable and it‟s reliable.”

Nisha Jones

“Yes, it is going to be successful. Freight rail has been around for about 150 years, so
is a successful business… Our business model and principle is the most important
underpinning factor of the sustainability on the road to rail and the help of the
collaborative relationships...”

Ravi Nair

“I want to say that I am firmly of the view that the road to rail is going to be
successful…we are going to have to make sure that there are no delays on our
investment in locomotives, our investment in wagons, our investment in technology, our
investment in infrastructure, our investment in people, our investment in Lean Six
Sigma, no room for delay…on the operational side, daily meetings, operational
meetings at the shop floor…have implemented a schedule railway concept in TFR and
we are working towards, in the next few months, where we will even issue a timetable to
customers”.

5. One of the major challenges for TFR is capacity. What progress has been
made since the implementation of the MDS?

Mathlodi Senyatsi

“Capacity in the sense of their…their wagons, rail wagons capacity when it comes to the
infrastructure, remember when I mentioned they need to upgrade their signalling and all

48
that. …if you read in the newspapers recently, well not recently but when, when DPE,
the Minister of DPE or, or the…CEO of Transnet, Brian Molefe, every time when he
talks to what, what improvements or what they‟ve done to date when it comes to making
sure that they deal with capacity he will always mention this programme of new
locomotives coming in. But also they are prioritising infrastructure rehabilitation and
upgrading for their long haul.”

Follow up question: Do you think within seven years a lot more will be achieved?

Mathlodi Senyatsi

I think something must happen. I don‟t want to say a lot but it will be good if a lot
happens. … But right now nothing really in terms of that movement that, that road is, is
carrying. No honestly nothing tangible that you can see except for this coordinating role
that is now played by the Minister of Economic Development with the SIPs, the Strategy
Infrastructure Project. That‟s where we would see the, the changes. I think for now the
concentration is more on the infrastructure that we have. Remember the City dip that I
talked about. …So I think right now we, we, we will only see the infrastructure
investments and, and obviously after that then we‟ll see the operations now starting to
change.”

Nisha Jones

“…We also have to communicate with the industry; we need to express our interest in
terms of doing business with us, so we check the industry what type of services do you
want and what type of volume of capacity do you need for us to make provisions for you
for hopefully for a long period of time. We‟ve have a lot of industry interest so we gave
the market what (inaudible) so in terms of rail friendly cargo we say the projected
demand will be satisfied in time, we have the MDS and the roll out of the infrastructure

49
upgrade, so the capacity will be there for the cargo that will be attracted to rail.” You
must remember, the time for investment and the time for deploying infrastructure, it
takes time, with our MDS we are on track but we have all that information on our
website (inaudible) for the duration of the MDS”.

Ravi Nair

“On the people side we have done a workforce planning model that determines the
people and the skills and the competencies and the numbers of people that we need
over the next seven years of our MDS…training and development; strategy and
mentoring and coaching strategy in the organisation that we have implemented…started
a number of programmes to automate many part of the business…started investing
heavily in our locomotives, in wagons, in infrastructure…we have a very serious safety
programme that we have implemented in Transnet Freight Train.”

6. What integration strategies is TFR implementing?

Mathlodi Senyatsi

“The operators are only coming in to operate on the infrastructure. So we felt for them
then to compete we need to level the playing field. Therefore one proposal was to then
do a vertical integration.”

Nisha Jones

“…The feasibility of road to rail is very sustainable, we just have to collaborate with each
party so we all remain in business. The reason why we need to close relationships with
(inaudible) to continue to work closely, (inaudible) the car gets to a cargo (inaudible) we
would not provide a solution unless we know we have capacity, do we will not load

50
cargo on rail and send it to a port to sit stranded at the part and what that means is that
the cargo cannot be handled because capacity is not there. We need to make sure
when we talk to customers, for a cargo we do it simultaneously, make sure the
colleagues at the port knows about it, the NPS Authority that‟s the landlord, know about
it, so we know what they are working on and they know what we are working on –
whichever way it does not matter what, what matter is that we know exactly who we
working with so that together we can prepare for the cargo and make sure the cargo is
not stranded. So we make sure that we have collaborative relationships with the sister
companies and we talk to each other all the time. We have to make sure we work
together and not compete with each other.”

Ravi Nair

“…we have set up strategic initiatives with all our large customers on the major corridors
so that our customers can integrate their expansion programmes with our programmes.”

5.3.2 Questions and responses: Industry stakeholders (Group 2)

1. How receptive is the industry to the road to rail programme and how willing
do you think they are to integrate with freight rail?

Prema Govender

“The industry is certainly receptive to road to rail. However there are, there are
components within the industry. The smaller distributing agencies who use road still
find road to be far more effective. Quicker in terms of time and loss of goods and
breakage is also minimised. From a, a, if there‟s going to rail freight they‟re keen on it

51
but it‟s got to be efficient in terms of time. It‟s got to make sure that the goods are
expeditiously moved from, from rail onto the smaller vehicles, which they don‟t see
happening yet and they don‟t believe that the industry, you‟ll hear from them when,
when they speak to you. But all in all they are saying there is a need. Recognise the
need. They see the value of it and they do want to make it. Then it‟s the type of goods.
And then the issue then is saying what do we do with the smaller type of goods and we
think that the smaller type of goods still has opportunities for, for freight.”

Dr Jan Havenga

“The railway is still not too happy about being a step away from the client which, in this
case, what it would mean if you think about a service like this with Imperial, Imperial will
own the chain and Imperial will sell a logistics solution to, let‟s say for instance, a Tiger
Brands and an Imperial is the logistics service provider who will contract the railway to
do the long haul and they will do the short haul. Now, not everybody likes that approach
on the railway side…but people are beginning to understand that that type of solution is
also necessary and also joint venture; this can also be done by joint venture with a third
party logistic service provider that puts this whole thing together. So I think there are lot
of positive feelings about this but I also think it is borne out of necessity because of
things that we‟ve been predicting now for many years. Whether it is feasible and
whether people are positive about the railway, or whether people think that it is
executed in the correct way, that‟s a different question, we will get there but more or
less everybody is for it.”

Norman Mbazima

“Very receptive in my view. The reason being, the first and foremost industry is, by and
large, are not worried about whether the freight is going by road or it is going by rail. It
is a question of how quickly the goods can get to the destination and what cost. Those

52
are the main factors that industry worries about. At the more senior levels the industry
does realise the effect of freight on the road, on the infrastructure, on the system and so
on and so forth. So there is some, in addition to the pure cost and time aspect, there is
a feeling that the right to do is to put the bulk freight on the rail. There‟s that feeling and
I think the CEOs will be willing to push that in that direction. So I think that‟s where we
are.”

Frikkie Burger

“My understanding is they are keen to do it, or they are prepared to do it. I get the
impression but I think obviously they will also want to protect their interests in this whole
business. So I think my view, the way they look at it, is to say yes. When you talk
about integrate they see it as okay but rail can do the long hauls, let‟s say Jo‟burg to
Cape Town, Jo‟burg to Durban but then the freight will do the short distribution around
Jo‟burg, around Durban, around Cape Town, those type of things. I think there is
certainly the industry would be because I think everybody sees the need for it in a
sense, because everybody says our roads are suffering and we need to keep the trucks
off the road for some reason. But I think Transnet or the rail operator needs to give
them comfort that there will be business at both ends. Then I think it can work.”

Abrie De Swardt

“It is different between what‟s in their heads and what‟s in their hearts. I think in their
hearts they know – let me rather rephrase that, in their heads they know it has to be
done because it is important from a, especially as from a cost point of view but in their
hearts they don‟t want to do it because (1) they don‟t have the necessary time in
Transnet‟s ability to deliver, the necessary services and secondly, from a service
provider point of view, they stress because it will potentially take away business to
provide a service that will potentially then be lost to Transnet.”

53
Max Braun

“The commodities like iron ore, coal, chrome and so on, these are things that should be
on rail and not on road. So those things I think would be very, very welcome indeed.”

Patrick O’Leary

“I think the road transporters would be very receptive and I think an indication of that is
already that there are Memorandums of Agreement, or Understanding, between both
the Imperial Group and Transnet, as well as Unitrans and Transnet…my concerns
would be the cost effectiveness and efficiency of rail because at the moment the whole
manufacturing system around the world has changed.”

2. What concerns do you have about the proposed shift? Do you know of any
other group in favour or against this shift?

Prema Govender

“No. On the contrary my understanding, if you speak to because we worked with both
industries through the Road Freight Association. They have their concerns. They still
see that…and their concern is what I was saying to you earlier on. The issue…is the
security of the good being transported; the speed at which the goods; the cost
efficiency; it has to go back there. We have to increase rail. Internationally you‟ll see
rail freight, especially for the bulk goods and all of that, have, are, are quite significant.”

54
Dr Jan Havenga

“The first problem I have is maybe not so much a concern as a problem that I
understand why the problem is there, if I can put it that way…I think there is a portion of
poor management of the railways up to, I would say more or less when Maria Ramos
took over. I think Maria Ramos started to steady the ship and then things started to get
better and after her I think it got better all the time and the leadership there got better all
the time and the company got itself sorted out. So up to the middle 2000s I think there
was a management problem. The other reason is maintenance. There was no
maintenance of the railway and that started in 1986 when De Villiers‟ report on the
restructure of Transnet was released. There was a decision not to invest too heavily in
the railway… Now I think they are solving the technical problem, they are solving the
investment problem…”

“…The thing that bothers me is that the domestic intermodal stuff is still not receiving
enough attention and with that I mean this is the stuff that‟s on the corridors; this is the
Durban/Cape Town/Johannesburg freight. This is the process through that goes
between the three cities and the chemicals and fast moving consumer goods and so on.
I want us to move faster with that and to get going on that but they have, I think it is
probably in the railways it the third priority. It is not the first or the second and that‟s the
concern I have is that there is not enough work being done to solve that…but because
these things are hard to turn around, I would like the people who are busy with it to stay
with it. So I will be very upset if Brian goes and I am scared that this might be on the
cards again. So I am hoping and praying… if he had to go, they have to appoint
somebody from outside again and so on, if he goes. It is better to keep that
management stable. Yes, if he goes and they put Siya in his job that might be okay, but
I want them to keep that management stable. It has been working so let it go on
working. That‟s the only thing that worries me…There are all those organisations and
they altogether have also formed some part of a grouping. Many of the people I speak
to in all of these associations they are very positive about this, all of them. I talk to the
Shipper‟s Council, the Consumer Goods Council, all of them are positive about this.

55
They are not always positive about its feasibility, not all of them will be positive about
Point 4. There are some really negative feelings about the ability to execute this but
everybody would believe that it is important.”

Norman Mbazima

“I think it is very simple. There is a lot of freight right now that moves by road and which
ideally you could move that kind of thing by rail. It is really a question of where you‟ve
got bulk materials, heavy materials trying to put them on the train.”

Follow-up question: What concerns do you have about the proposed shift? Do you
know, or do you have any concerns as Anglo, as Kumba, about the shift?

Norman Mbazima

“No, not really, my concern is whether it is going to happen and how soon it is going to
happen, what kind of processes etc. are being put in place to make it happen. So my
concerns are more with implementation than it is with the concept of what we are trying
to do. The implementation is not only about pieces of equipment etc., it is about people,
how they think and so forth. So that‟s where my concerns sit.”

Follow-up question: Do you think thus far they have already done a little bit to make
the industry confident?

Norman Mbazima

“They have done a little bit but they still haven‟t done a lot. …we think that the will is
there to make this happen. The coal sector for example. They announced that they are

56
going to do a 60 kilometre line to Majuba and that‟s positive, but in the end you have to
see people with machinery sitting, trying to build the line – the construction team going
there. To see the action on the ground, yes because all the planning we can talk about,
all the good vision that we have we can talk about, but until you see somebody holding
a pick or a shovel doing something...”

Frikkie Burger

“…the concerns that I personally would have about this would be whether, because
right now the big concern is the fact that a container train takes three or four days,
instead of a truck that goes overnight. It is basically the operations of the service
provider, of Transnet, on this which the people are complaining about. I think that is the
one aspect and the other one is some of the admin around it and that is clearing the
paperwork, documentation in the port to get goods released and things like that that
takes a bit of time. It seems like, especially an operator like a Transnet, will have to be
very good with that bit and assist to make sure that the goods are released quickly so
that the train can leave, those types of things. Where it seems like the private operators
on the trucks have got a very good system to be quick with the release and for the truck
to leave. So the concern from my side would be the operator, the state owned
enterprise Transnet, can they do it efficiently…?”

Follow-up question: Ever since they started implementing that, have you noticed any
improvement?

Frikkie Burger

“Look, in our business certainly we can see it because they are tracking the
performance very much better I would say than previously. So literally there is a huge

57
focus on that because obviously the Marketing Demand Strategy is calling for some
investments of R300 billion in rolling stock and all sorts of investment”

Follow-up question: It is a seven year strategy; do you think they will achieve much by
the end of the seven year period?

Frikkie Burger

“If they implement yes, if they implement, but my concern is everything takes longer.
They have now suddenly placed the orders for this huge number of locomotives. Some
two weeks ago there was this big announcement but it is taking too long. Part of it, from
our perspective, is an expansion of the iron ore export capacity but since we‟ve been
studying that, and they are still studying it, there is no final decision what to implement
in terms of an expansion capacity. The latest now is 2022 for the expansion to happen.
So it is already beyond seven years if you think about it. So a lot of these big decisions
take very long for them to implement. That‟s why I am not too optimistic that they will be
successful in seven years. No, it will take longer because they are too slow in their
decision making, for sure.”

Abrie Swardt

“Yes it could be but we are now talking about something that doesn‟t happen overnight;
we are talking about a huge subject that takes an awfully long time to determine. And I
think there‟s perhaps a third aspect and that is Transnet‟s own understanding about
whether they should be in wholesale or retail. So they, certainly in my experience,
operate cranes but with all due respect the specific service providers, the big ones
especially, like Imperial and Barloworld, Unitrans have a different perspective way to
logistics. They are truly integrated, they have that experience. I don‟t believe that
Transnet has that experience.”

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Max Braun

“Yes, a number, because there is a lot that has to be done from the TFR side in terms
of, it is just the right shot. There is the question of what priorities are they going to have,
TFR.”

Patrick O’Leary

“My concerns would be the cost effectiveness and efficiency of rail.”

3. In your opinion is the shift from road to rail what the freight industry in
South Africa needs now? Why?

Prema Govender

“…This is exactly what is needed now. It should, it was needed some years ago.
Transnet will tell you that but I think we, if we don‟t do anything now we‟ll have a crisis
on our hands with the growth in road freight…and congestion. But from an
environmental point of view South Africa is signatory to the Kyoto Protocol and one of
the target areas for reduced, reducing carbon emissions is in the transport industry and
if we focus on freight, shifting freight to rail, then there would be significant reduction in
greenhouse gas emissions. So it is certainly the right time from an environmental
perspective. And the second reason for the right timing is that now is the time to bring
about efficiency given the global economic downturn.”

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Dr Jan Havenga

“…two big things. The one is the fuel price and the other one is environment… the
problem with the fuel price is, because our demand, because we would say but wait a
minute, let‟s say something goes wrong and the oil price goes up five times, we would
think but now the whole world has got a problem. The second point is the risk; it is an
imported commodity that we require to keep our logistics industry going where we have
250 years‟ worth of coal in this country. So rather than running this economy on
imported diesel, we can run this economy on our own coal. When you say it like that
you just realise how critically important it is.”

Norman Mbazima

“It is. It is what it needs now. South Africa, unlike many of the other Southern African
countries, is quite endowed with rail infrastructure. You can go to almost any province
and there‟s rail. If you go to Zambia where I come from, there is one rail from top to
bottom and that‟s it, but South Africa has got quite an extensive rail network. Therefore,
this kind of move should be really quite feasible, quite possible and South Africa has
been building, as you know, a very good road system and for this to be balanced it will
be the best way to ensure the long term viability of both systems. So I think now is the
time.”

Follow-up question: What in your opinion would be the government‟s role in this to
make it happen? Do they need legislation to shift from road to rail?

Norman Mbazima

“I think it is a role to encourage rather than to legislate because when you get down to it
there is a lot of regulation already about axle loads and things like that. So for me it is

60
encouragement. There is a lot of freight that is government freight already by itself. So
they could be quite a catalyst in this by saying our own freight, this type of freight, is
going to be on the rail. But I think more than anything else, what could make this work
is the government‟s infrastructure programme on the rail. In other words, rehabilitate
the rail, put in more locomotives, put in more rolling stock, and improve the efficiency of
the general freight division of Eskom.”

Follow-up question: Would you say that Transnet Freight Rail capacity at the moment
is up to scratch to implement the road to rail?

Norman Mbazima

“No, I don‟t think so.”

Follow-up question: Do you think they are going to be there in the next seven years
that they say in their Marketing Strategy?

Norman Mbazima

“Yes. I don‟t think so now, but I think that we have seen huge improvements in
Transnet in the last couple of years. In our line, in iron ore lines for example, we are
struggling to keep up with them. In previous years they used to struggle to keep up with
us. We would have iron ore and it would be sitting there at the mine because we can‟t
get enough trains or enough wagons. Now it is the other way around. They are saying
can I send another train tomorrow? No, no please we haven‟t got enough, which is
fantastic, very, very good. So I think they will get there.”

61
Frikkie Burger

“My view no, certainly not, they are not there because they don‟t have the rolling stock,
they don‟t have the – I would say even some of their existing rail infrastructure in terms
of rail lines, the maintenance of this, the yards and so on, is not where they should be.
So they are working on that, they are investing in that, there‟s a lot of focus on that but
they don‟t have, certainly as we speak today, enough locomotives. You can see that
they are keen to do something but again, like I said earlier on, the other one is there
decision making and the implementation is slow because these locos that they have
ordered now will take another 18 months to two years to start implementing them. Then
they might have enough locos but I am not sure because they will have to be very
proactive.”

Abrie De Swardt

“We need to be able to integrate between the different modes but we also need to
develop effective intermodal solutions, meaning that seeing this transfer of goods
between modes we have to integrate more effectively between road, rail, the ports and
we have to create the necessary inland ports. So it really has a logistic system that has
to be fixed at a macro level, aspects such as, for example, whether to use Durban or
Maputo as a port. I think there is this fear as a country that we will lose traffic to our
neighbouring country and we should, because that is in some instances the right
solution.”

Max Braun

“Yes, I think they are making progress but tell me, someone like me, which I would like
to know more about is exactly where is the focus going to be… I think there are very,

62
very definite challenges for them in terms of getting ready for a major move towards
general freight.”

Patrick O’Leary

“…They also indicated that they had the money, but they are now gearing up, if you look
at it they have made those big locomotive orders, they are gearing up their rolling stock.
…now they have to move and gear up the sidings and all those types of things that
have all gone to waste over the years. I think my concern is how fast they can do that
and I don‟t think they are going to do it very fast. So I think we‟ve still got a long way
where road is going to be critical to the South African economy, road transport, but I do
think the vision of Transnet is on the right track and it certainly seems like they have the
money. …With Just in Time being the system, companies need those goods now and
they want them fast and they want them on a cost effective basis and that is what
worries me about rail; how fast can they get the goods to people compared”.

4. What are your views on its feasibility? What are your views on TFR’s
capacity to implement the road to rail?

Follow-up question: In today‟s business environment time and speed is of the

utmost importance. In most cases people prefer to pay more for faster and more
efficient services. To what extent can freight rail gain competitive advantage in
that regard?

Prema Govender

“Competitiveness would be a key issue, I think. But I think Transnet‟s got the capability
to, to do it. However that being said they have to do certain things internally to get up

63
and do it more on a, more, on a more, competitiveness, competitive based. Certainly
those three things I said to you. Security, time and cost would be the basis on which
Transnet would, would, feasibility would succeed. And they‟re going to show that to
industry. I think they need to, to do that. Institutionally they‟re not there yet. They got
to do certain things to bring in the kind of skills. One that gives competitive edge which
they still think more in terms of a government perspective rather than a, private sector
perspective in terms of cost and, and return. That being said the skills I‟ve seen then,
engineering skills are there, there but the business skills need to be improved.
Transnet‟s got good strong management skills but strong management skills from a
perspective of administration. I think they have the capability…if they run it more on
business terms then, then they would get, they will quite well…but they need to look at it
in an integrated transport perspective. And then be able to work out the logistics.”

Follow-up question: Do you think they will be there within the seven years of the
strategy?

Prema Govender

“Well they set the target for seven years then. Yeah and they should, and I think with
the, the chief executive of Transnet putting pressure on there, I think he‟s a good guy. I
think he‟s got the leadership capabilities. So I‟m positive in that sense. It just comes
back down to the operational level and where, where they‟ll be able to roll it out.”

Follow-up question: Is there a need for government to pass a piece of legislation

instructing the shift from road to rail?

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Prema Govender

“No. I think market forces dictate that. I think that might be the worry around regulation,
too much regulation and then, it can strain the economy.”

Dr Jan Havenga

“I think it is getting there. I was extremely negative 15 years ago. In the late „90s I was
very, very negative and I was negative up to when Maria Ramos took over in the
Transnet side. I think when Maria Ramos took over in the Transnet side the
management at TFR itself – I think it was still called Spoornet then – was still a little bit
shaky and there were some issues and problems. I think that has improved vastly in
the last five years or so, I think especially from 2006/2007 it has really improved and I
talk to the people there, I see a massive focus on making this work. They believe to
invest now again in engineering skills. They are bringing the railroad engineering type
of skills back into the railway. So I think in many respects they can make it work and I
already see. …You know the railways for many years, probably for two decades, they
tanked up at 180 million tons. They could never get beyond 180 million tons, that was
sort of the limit. So, all the growth in transport was taken out by road. That has
suddenly jumped to 200 million tons. Just 180 million and suddenly 200. So that‟s a
massive growth and I see improvement on the coal line, I see improvement on the iron
ore line. In the last two or three years there has been a huge amount of positive
reporting, from zero to Hero. …I think the only thing that we need to resolve in this
country is the whole story about gauge, standard gauge and narrow gauge. …But
because these things are hard to turn around, I would like the people who are busy with
it to stay with it. So I will be very upset if Brian goes and I am scared that this might be
on the cards again.”

Follow-up question: Until now, do you think the industry is still a bit reluctant, still
don‟t have enough confidence in the way to come?

65
Dr Jan Havenga

“No…I think it is improving a lot and I think it is like any exponential type of thing. It is
extremely low but from a very low base I can see much more positive but it takes
times…but it will take people time to realise that, but it is getting there. It is better than
three years ago, much better, there‟s no doubt.”

Mr Norman Mbazima

“It has a very good chance of being reliable. Why do I say that? Firstly I did say that
they have the infrastructure in terms of the rails and their ability to go to the industries
and to go to all the provinces etc. etc. That‟s a very good starting point to be able to
effect this. Secondly, as I said, Transnet itself has become more efficient and more
forward looking and better financed, etc. etc. So I think the capacity to be able to do
this is good. Thirdly, as I said, it‟s manatox. So if you can get your goods from X to Y
as quickly and at the right cost, you will take that route and especially for bulk things.
Moving metals for example, you must do so and it makes sense. So if the economics
work and the logistics work it is going to be successful.”

Frikkie Burger

“They will be but it will be on, I would say, delegated point-to-point routes,
Johannesburg to Durban, maybe Johannesburg/Cape Town, specific routes. I don‟t
think, as a general statement, they will run between a small town here and a small town
there. I doubt whether they will do it but big centres where they have big distribution
yards where they can handle bulk containers, I think that can work and I think they will
be because that is one way in which they can do it fairly easily. I get the impression that
there‟s a political will but also a company will within Transnet to do that. So I have faith

66
that they will do it but partially. I don‟t think they will do it fully, as general let me say, all
over the so-called general freight business rail network. They will do it on dedicated
corridors in my view.”

Abrie Swardt

“We know it isn‟t. Why would they be investing all this money in buying new locos and
maybe it is not the only game…It is not only locos, it is rolling stock and it is everything
else…”

Max Braun

“I don‟t think it is an advantage at all…for me to put it down again, collect it, correct it
and deliver to wherever it is going, pick it up and put it down again and it is not as easy
as delivering from door-to-door in a commercial vehicle or truck. So we‟ll have to
see…Integration and collaboration strategies…well something is very positive and very
definitely happening there. By receiving an MoU with the Imperial Group and the
Barlow Group logistically and I think that is the way in which one needs to look at Rail‟s
comeback into freight because this is looking at an intermodal concept…”

Patrick O’Leary

“They don‟t have any advantages I don‟t think because at the moment it doesn‟t come
anywhere near road. …We have got to really get our transport systems very
competitive and that means an intermodal co-operation between various transport
modes. …If they can get it in place and we can get the intermodal going but they‟ve got
to get their rolling stock up and running, it has got to be efficient, the sidings have to be
efficient and their staffing has to be efficient, and of course their costs have to be

67
competitive. …You cannot actually get it as fast as road, it is impossible and that is
where intermodal co-operation can come in, such as the Railroader.

5.4 Assessment of TFR’s capacity

5.4.1 Introduction

According to the Development Bank of Southern Africa (2012) Transnet Freight Rail‟s
(TFR) Performance has been declining which has caused a detrimental impact on the
economy. To address this crisis, government, through the Department of Transport,
decided to intervene by developing the National Rail Policy (still a Green Paper), which
amongst others calls for a shift from road to rail. To this effect, TFR, as the National
Rail Agency, developed the MDS specifically to revitalise the current model of freight rail
transport, to narrow the gap between what customers demand in terms of freight to be
transported and to ensure that the rail system has the capacity to provide such a service
(Development Bank of Southern Africa, 2012).

In the preceding section the researcher reported on the results of interviews which were
used as a tool to collect primary data to answer the research question.

In the following section the researcher discusses an independent investigation held into
TFR‟s capacity to assess its ability to successfully implement the road to rail
programme. This was done in order for the researcher to assess TFR‟s ability to
become efficient and competitive within its industry. The investigation entailed a
detailed assessment of both the external and internal environments of TFR. For the
purpose of this research the researcher decided to use three models, namely the
Relationship between Resources, Capability and Competitive Advantage Model,
Porter‟s Five Forces Model and the Overall Model of Change.

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 5.4.2 TFR’s resources and capacity

According to Fenton-O‟Creevy and Stapleton (2007) all organisations possess unique

bundles of resources, but it is how these resources are used that determines their
competitiveness. The RBRC&CA model was used to establish what resources TFR
possesses and whether they guarantee competitive advantage when applied. A
company‟s resources consist of tangible and intangible assets, as well as human
resources. Together these form the capabilities of the company and can be used to
develop strategies with which to achieve competitive advantage (Pierce and Robinson,
2003).

Figure 3: The Relationship between Resources, Capability and Competitive

Advantage Model

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 Organisations‟ Capabilities

According to Transnet (n.d.), Transnet Freight Rail operates using a scheduled railway
philosophy. This encompasses operating trains in accordance with an Integrated Train
Plan (ITP), which is appropriately resourced to optimise capacity through careful
deployment of assets to extract efficiencies, with the aim of improving operational
efficiency and customer service delivery. They also make use of the principle of
extraction of operational efficiencies towards globally accepted benchmarks. This is
embedded in all operations practices, using the Lean Six Sigma philosophy aimed at
continuous improvement, value extraction and operational excellence.

The Transnet Rail Engineering (TRE) also does TFR‟s research, repairs, building and
maintenance. The School of Rail is a well benchmarked, adequately designed and fully
equipped to train specialists unique for rail. It has also the capacity to train their own
train drivers and train control officers (Transnet Annual Report, 2013). The SoR is able
to provide various specialised rail related training, including signalling training, which is
the only one of its kind in the whole of Africa, ensuring a competitive advantage in
relation to other African countries. This is all done with the resources they possess, as
stated in the paragraphs below.

 Tangible Resources

Financially, TFR‟s revenue for the year ending March 2013 increased by 15,0%. The
MDS resulted in these strong financial results, with revenue of R50.2 billion and a
record level of R28,5 billion capital investment (Transnet Annual Report, 2013). R201
billion was injected into Transnet Freight Rail towards its MDS in order to expand its rail
infrastructure and create capacity, as well as increase cargo volumes (Freight Rail,
n.d.). R18,277 million was allocated to improve the export operations and services of
iron ore and manganese plus several other investments.

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The physical resources of TFR are composed of 20 500 km of freight railway network,
including 1 500 kilometres of heavy haul lines for export coal and export iron ore and 3
928 kilometres of branch lines; over 2 255 locomotives; 71 036 wagons; 132
engineering depots; seven factories; and various offices spread all over the country.
However, not all of the depots are conveniently and strategically located in areas where
most activities take place (Transnet Annual Report, 2013). In addition to these
resources, TFR is increasing capacity by purchasing new locomotives. They have
recently placed an order for 1064 locomotives worth billions of Rand (Munshi and Allix,
2014). Of these locomotives 359 and 232 are from China South Rail and China North
Rail respectively, whilst the other 240 and 233 will be supplied by global manufacturers,
namely Bombardier and General Electric respectively. Munshi and Allix further stated
that Transnet‟s aim with these orders is to increase the general freight volume from 82.6
million tonnes to 170 million tonnes by 2019. Mathlodi Senyatsi observed that Brian
Molefe, Transnet‟s CEO, makes sure to constantly brief the public of their commitments
towards improving capacity. Furthermore, Ravi Naire indicated that not only is capacity
in terms of additional locomotives being addressed, but TFR is also prioritising
infrastructure rehabilitation and upgrading for their long hauls.

 Intangible assets

Technology – The Transnet Rails Engineering (TRE) unit is equipped with capacity to
conduct Transnet‟s own research in various areas of freight rail. There is also a sub-
unit within the School of Rail which is responsible for benchmarking against various
countries, including but not limited to, China, Brazil and Russia. The School of Rail also
develops talented employees with specific and unique technical and scientific skills; and
it is also equipped to provide numerous training courses in the telecommunications field,
including radio, transmission, cabling training and computer software field (Annual
Report, 2013).

Reputation – TFR carries the same brand and logo as Transnet. The notion behind the
brand is led by growth, innovation, vibrancy and passion, which represent the

71
stakeholders, society and employees who are the reason for TFR‟s existence (Transnet
Freight Rail, 2013). Having had the opportunity to interview some of the top
management of TFR, it is apparent that they take the meaning of their brand with pride.

Culture – TFR introduced various initiatives to ensure a change or improvement in

organisational culture to enhance employee satisfaction, sense of belonging,
responsibility and accountability (Freight Rail Today, 2012).

 Human Resources

Specialised skills – TFR‟s School of Rail ensures that the required human resources are
equipment with the necessary specialised skills through training and development.
However, there are skills constraints in engineering, project management and technical
expertise according to the Transnet Annual Report (2013). Furthermore, there are also
shortages in operational critical skills, including strategic safety management, risk
assessment, auditing and accident investigation (Furter, 2013).

Communication and delegation – The Group CEO (GCEO) appoints the Group
Executive Committee (GEC) in consultation with the Board, which is responsible for
coordination and co-operation within the Transnet Group, as well as for planning and
monitoring. The GEC consists of eight committees. In addition to the GEC each
operating division has its own executive committee, consisting of the CEO of the
division, the CFO and all the general managers.

The Board delegates authority to the GCEO who in turn delegates to the GEC and other
governance structures within the organisation. This delegation of authority applies to all
employees, including the operating divisions. There are certain matters, however,
which have been explicitly reserved for the Board. The CEO of TFR is delegated with
the day-to-day running of TFR (Transnet Freight Rail, 2012).

72
Motivation – There are programmes to reward and recognise good work as motivation
for employees (Nair, 2014).

5.4.3 Competitive advantage

In order for TFR to be successful with its road to rail implementation programme it
needs to be efficient, competitive and sustainable. The researcher used Porter‟s Five
Forces Model to assess TFR‟s competitive advantage in its industry. This model
suggests that a company‟s industry consists of new entrants, suppliers‟ power, buyers‟
power, threats of substitution and competitive rivalry. By assessing the powers of the
difference variables as provided in Porter‟s Five Forces Model, one is able to assess the
strength of competitiveness of a company in relation to its industry and whether it has
any chance of success and profitability (Bakhru, 2005). As such the application of this
model on TFR revealed the following results:

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 Figure 2: Porter’s Five Forces model

Source: O‟Creevy and Stapleton (2007)

 Supplier‟s power - It was established that TFR depends on the TRE, another
operating division of Transnet, for almost all its operational requirements (Transnet
Freight Rail, 2012). However, TFR also depends on Eskom for electricity and
SASOL for fuel (Creamer, 2010).

 Threats of new entry – Entry barriers in the freight rail industry are very high.
Building infrastructure and purchasing rolling stock is costly and does not attract private
investors due to the amount of funding required, which is why Transnet is state-owned.
There are no other freight rail companies in SA which guarantees TFR a monopoly,
however road freight is a strong competitor of TFR‟s in the freight industry.

 Competitors / substitute – TFR is a monopoly in terms of being the only freight

rail company in SA, however it is not a monopoly in providing freight transport; TFR‟s
inability to provide sufficient capacity to meet the demands of the freight industry for
74
long hauls and bulky goods gives room for road transporters despite their higher cost.
There is no substitute except for the road transporters.

 Buyers‟ power – Buyers demand cost effectiveness and efficiency. Despite

TFR‟s prices being lower than roads, customers will go with roads due to the inability of
rail to provide sufficient capacity.

 Rivalry amongst existing firms – The fact that road freight is currently competing
with rail transporting rail friendly cargo is considered to be rivalry. Road has the
advantage over rail on speed.

5.4.4 Change

The implementation of the MDS will inevitably bring changes, some by choice and
others by the nature of the process. TFR‟s readiness for change will be assessed by
looking at its organisational culture, structures and communication flows.

According to Jarrett (2009), change should be in the individuals‟ interests as well as the
organisation‟s but will only be successful if all involved are prepared for it. The
researcher used the Overall Model as a tool with which to investigate the readiness of
TFR, as suggested by Jarrett. This was to establish the problems associated with the
changes in TFR which were necessary for its revitalisation, and whether these changes
will in fact stick.

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 Figure 3: The Overall Model
Source: Jarrett (2009)

 Environmental dynamics – TFR consists of both external and internal

environments. Change at TFR was triggered by the demand in the industry for
additional capacity of freight rail for bulky and long haul transportation. TFR responded
with the MDS in order to stimulate economic growth, as mandated by government
through the National Rail Policy to revitalise the freight rail through the MDS (Transnet
Freight Rail, 2012). For the MDS Y to be effective, TFR needs to ensure that it creates
appropriate structures which are equipped with a conducive culture, which will form a
strategic capability with which to improve performance and ultimately competitive
advantage (Jarrett, 2009).

 Strategic leadership – The environmental dynamics of TFR compel its

management to exert strategic leadership to manage its cultural dynamics, as well as to
coordinate its structures with which to build competitive advantage and achieve the
objectives of the MDS, which is ultimately economic growth.

 Cultural dynamics – The culture of TFR is described in their culture charter as a

vibrant family-like culture, with a focus on mentoring, nurturing, and doing things
together, as well as being controlled with a focus on efficiency, stability and doing things
right (Transnet Charter, 2008). These characteristics resemble those of Clan and

76
Hierarchy types of cultures. The combination of these two types of culture results in high
morale amongst employees and efficient service delivery.

 TFR Structure – In terms of Schedule 3 of the Public Finance Management Act,

1998 (PFMA), Transnet and its subsidiaries, including TFR, are classified as National
Public Entities. Its governance structure is composed of the following:

The Board – Transnet has a Board of Directors which consists of 15 members, two of
whom are executive directors - the Group Chief Executive Officer (GCEO) and the
Group Chief Financial Officer (GCFO). The members are appointed by the
shareholders‟ representative - the Minister of Public Enterprises. It consists of five
committees which also serve as the control structures of the organisation.

The Group Executive Committee – The GCEO appoints the Group Executive
Committee (GEC) in consultation with the Board, which is responsible for coordination
and co-operation within the Transnet Group and for planning and monitoring, This GEC
consists of eight committees. In addition to the GEC, each operating division has its
own executive committee consisting of a CEO for the division, a CFO and all the
general managers.

Delegation of Authority Framework – The Board delegates authority to the GCFO, who
in turn delegates to the GEC and other governance structures within the organisation.
This delegation of authority applies to all employees, including the operating divisions.
There are certain matters, however, which have been explicitly reserved for the Board.
The CEO of TFR is delegated with the day-to-day running of the company.

77
 Figure 4: Governance structure of TFR

5.4.5 Development of codes and themes

After becoming familiarised with the data collected through the interviews, the
researcher developed the initial codes by organising the data into meaningful groups.
An example of this process is illustrated in table 1 below.

After all the data was coded and collated, the codes were sorted into potential themes.
This process involved identifying interesting aspects in the data items, including
repeated patterns and different relationships between codes, between themes, and
between different levels of themes. This process is illustrated in figure 1 below.

Having developed the first level of themes, the researcher proceeded to identify which
could be combined and which could be held individually. This led to a final set of
themes as illustrated in figure 2 below: The process followed is listed as Appendix C.

78
This table contains a portion of the complete table with the developed codes and
themes. The complete table is not included in this report due to its size; however it can
be made available should it be required.

Table 1: Examples of few extracts with codes and themes

 “…so yes some kind of a mandate Need for legislation Legislation

that says to us, you know, from
this day government has
pronounced that certain
commodities.

 “One of the major challenges for Capacity is a Capacity

TFR is capacity” drawback of rail

 “...and I think an indication of that Competitiveness

is already that there are Existence of
Memorandums of Agreement, or collaboration of rail Feasibility
Understanding, between both the with road operators
Imperial Group and Transnet, as
well as Unitrans and Transnet…”

 “My concerns would be the cost Concerns about Feasibility

effectiveness and efficiency of rail efficiency and cost
because at the moment the whole effectiveness of rail
manufacturing system around the
world has changed.”

79
 “They don‟t have any advantages Rail has no Competitiveness
I don‟t think because at the advantage over road
moment it doesn‟t come anywhere
near road.”

Figure 5: Initial thematic map showing seven themes

80
 Figure 6: Developed thematic map showing five main themes

5.5 Finding and analysis

5.5.1 Introduction

For the analysis, the process listed in Appendix C was followed. After conducting the
interviews the data was sorted and organised. Thereafter the extracts were coded,
themes were developed from the codes and a theme map was also developed. This
resulted in five themes, namely: legislation, receptiveness, competitiveness, capacity
81
and feasibility. This was followed with the assessment of TFR‟s capacity. For the
purpose of this research these themes represent the following:

1. Legislation: The views of different interviewees about the need for legislation to
implement the road to rail programme.

2. Receptiveness: The feelings and perceptions of the road to rail programme in the
freight industry and the willingness for integration of railway with other transport
modes

3. Competitiveness: The competitive position of TFR based on its resources and

capabilities in relation to other freight operators in the freight industry.

4. Capacity: The current and future status of TFR‟s tangible and intangible resources
to implement the road to rail programme.

5. Integration and feasibility and integration: The willingness to integrate rail with
other transport modes and the possibility of the success or failure of the road to rail
programme.

5.6.4 Analysis of the interview responses

Legislation

In responding to this question, two interviewees in Group 1 (Ms Senyatsi was the
exception) indicated that there is no need for a legislative instrument to dictate the shift
from road to rail. The same question was also asked to the other set of respondents as
a follow-up question, who stated that they do not believe a legislative instrument is
necessary, but rather the shift should be left to market forces. Mr Prema Govender, for

82
example, stated that too much regulation can strain the economy, whilst Mr Norman
Mbazima was of the view that the role of government in this regard is to encourage
rather than to legislate.

All interviewees from Group 2 expressed reservations against any legislative instrument
being used to implement the road to rail; they suggested that it should be left to market
forces using government‟s encouragement rather than legislation. The author
observed negative facial expressions at the mention of legislative instruments, and is of
the view that the introduction of such instruments would have been destructive, as the
industry would have seen the shift from road to rail as more of a forced and imposed
shift in favour of government‟s beliefs and wishes. This would have caused more harm
than good for TFR.

It therefore became clear to the author that the roll-out of the road to rail is intended to
be left to market forces. TFR is also of the view the move from road to rail should be
left to market forces and not legislated. They seem determined to revitalise the
company in order to achieve efficiency, competitiveness and sustainability. The aim is
to allow the industry to gain confidence in freight rail and eventually move to rail over
time.

Furthermore, from the interviewees it is clear that South Africa is in desperate need of
an efficient, reliable and sustainable freight rail system, as they all expressed the need
for one and gave reasons for this. Amongst the reasons provided include the fuel price
which makes everything more expensive especially when the majority of goods are
transport by road; to road damages and congestion; as well environmental issues and
of the global economic downturn. All of which, when ignored, can lead to serious
economic disaster.

83
Receptiveness of the road to rail in the freight industry

In responding to this question all three interviewees in Group 1 showed confidence and
a sense of satisfaction that there is no real objection with regards to moving from road
to rail. TFR and government seem very positive and confident that this is not only what
the industry but what South Africa needs. They also seem realistic enough to admit that
a lot still has to be done in terms of capacity and efficiency in order to convince the
industry of TFR‟s new reliability. However, the author is of the view that TFR and DoT
are not fully aware of the extent of scepticism the industry feels around the feasibility of
the implementation of road to rail. From what the respondents in Group 2 explained,
the industry at large welcomes the idea of road to rail and they believe it is overdue.
They believe and seem excited that a lot is now happening, in terms of focus and
investment to increase capacity. However they are still not confident that TFR will pull it
off when it comes to speed, efficiency and reliability within the seven years stated in the
MDS. The author is of the view that failure to fully recognise and understand these
elements may lead to overconfidence on TFR‟s and DoT‟s parts, which will lead to a
lack of confidence in the industry and jeopardise the success of road to rail.

All of the interviewees in group 2 were of the view that the industry at large is quite
supportive of the shift from road to rail with the exception of one interviewee. From this
it is clear that the industry, including the road freighters, recognise the need for this.
This recognition stems from necessity, says Dr Jan Havenga, although not everybody
likes the road to rail approach, people are beginning to feel positive about it now. This is
borne out of necessity because of issues the people of this country have been
predicting for many years and therefore only very few people in the country do not
agree with the move from road to rail.

Furthermore, as previously explained, all interviewees in group 2 the expressed

keenness with regards to the shift from road to rail road. The author observed the
confidence with which most of the Group 2 interviewees expressed with regards to

84
TFR‟s ability to implement road to rail. However, whilst they indicated the need and
accept the idea of shifting from road to rail, there seems to be some degree of
scepticism regarding its feasibility. The industry believes that Transnet is making good
use of the R201 billion dedicated to revitalising freight rail, that they have strong
managerial skills from an administrative perspective and has made some progress in
terms of capacity thus far, however the feeling in the industry is that TFR tends to think
more in terms of a government perspective rather than a private sector perspective.
They also feel that although TFR has already made some improvements and are better
now than three years ago, it is still not enough to instil confidence in the industry when it
comes to efficiency, cost effectiveness, security and reliability. The author could sense
from all the interviewees that this is the general feeling within the industry, hence the
scepticism. The industry‟s main plea is for efficiency, cost effectiveness and reliability.

Competitiveness of rail

In terms of rail‟s competitiveness, Ms Senyatsi seemed confident that once the issue of
capacity is addressed with regard to infrastructure and rolling stock, TFR should be able
to achieve competitive advantage. Ms Jones added a different view around speed vs.
safety and the various benefits of freight rail for long haul and bulk. She argued that for
TFR safety is their main concern, not necessarily speed. Ms Jones further explained
that speed becomes less of a disadvantage if one compares the higher tonnage that rail
is capable of carrying at a much lower cost and with less road damage than road freight
which is only able to carry a limited amount of goods faster but with much higher cost
and higher road damages. She proceeded to explain that it is not only costly for the
owners of the goods but for South Africa as a whole, due to road damage and
escalation of prices. Ms Jones mentioned the example of the train accident in Italy
which derailed as a result of speed.

However, whilst safety is a very important element in terms of transportation in general,

the industry seems to expect much more from rail than just safety as a main priority. As

85
explained in the preceding paragraphs, the industry worries about efficiency, cost
effectiveness, security and reliability. In order for rail to be of commercial value for them
it has to offer those elements. This was supported by almost all the interviewees in this
research. It is clear from these interviews that the industry‟s need is for a combination
of efficiency, cost effectiveness, reliability, safety, security and speed; not just one
aspect. Failure to recognise this may lead to a mismatch of rail supply and demand,
thereby limiting the potential success of the shift from road to rail.

Capacity

All interviewees seemed confident that the issue of capacity improvement in terms of
locomotives is being addressed. In her response, Ms Senyatsi indicated that both
government and TFR are making progress in terms of capacity and alluded to the fact
that a number of locomotives have already been ordered, some of which have already
been delivered to TFR and orders for additional locomotives have just been placed. Mr
Nair added that it is not only capacity in terms of additional locomotives being
addressed, but TFR is also prioritising infrastructure rehabilitation and upgrading for
their long hauls.

Moreover, the industry seems very aware and positive with regard to the investment
TFR is making toward adding, rehabilitating and maintaining the rolling stock and
infrastructure. This instils confidence in the industry.

Furthermore, the assessment of TFR‟s physical resources revealed they are fairly well
off financially. In terms of the physical resources, they also seem well equipped. It has
impressively long railway lines and a huge number of locomotives, however they are not
sufficient to meet the demand for freight rail and not all of them are in operational
condition. Although this issue is currently being addressed, with locomotives being
purchased, rehabilitated and maintained, it will take time until all rolling stock are

86
delivered and in good operational condition to become effective and considered as a
source of competitive advantage for TFR.

In terms of human resources, the assessment revealed that, in the main, TFR has no
major problems with human capital resources; in fact it has great organisational
capabilities. However, its organisational structure seems long and complex. This
results in centralised and slow decision making process and does not empower
management at lower levels to take initiative and make certain decisions. Instead, it
gives them little responsibility and accountability, which enhances delays and time
wastage. Furthermore, the shortage of operational critical skills in strategic safety
management, risk assessment, auditing and accident investigation is a major risk for an
organisation that is striving to improve efficiency.

Technologically TFR should not have major challenges because TRE and SoR,
amongst the divisions of Transnet, ensure that training and research are performed
in-house as and when necessary (Annual Report, 2013). This can be regarded as a
source of competitive advantage.

In terms of TFR‟s intangible resources, the author observed that its top management
view the image and meaning imbedded in their logo with pride. However, it became
evident to the author during the various interviews with the industry that being a state-
owned entity, it has become marked by the general perception that government entities
are slow in decision making and are inefficient and unproductive. Such a perception
has damaged the image of TFR and enhanced scepticism about the feasibility of the
move from road to rail in the industry, especially during this stage of the turnaround
programme.

With regard to competitive advantage, when applying Porter‟s Five Forces TFR seems
to have an advantage within its industry. This is because it is a monopoly in terms of
being the only freight rail in the country; there are very high entry barriers to the freight
rail industry; the demand for the services is very high; and there are no competitors
other than road freight. However, that is not sufficient to achieve complete competitive

87
advantage in order to become successful with its road to rail implementation
programme, TFR also needs to be efficient, cost effective, reliable and sustainable. At
this stage, none of these elements can be attributed to TFR and therefore there is no
competitive advantage.

In terms of change, the assessment revealed that there are signs of low morale. This
happens when resistance to change is present due to a lack of awareness. This could
be detrimental for an organisation going through a major turnaround implementation
strategy.

Feasibility and integration

All respondents in this category recognised the need for integration between TFR and
its sister companies, such as the National Ports Authority and the road freighters, as
well as logistic service providers. The various agreements with some of the road
freighters such as with Barloworld and Imperial Logistics are amongst some of the
examples which will make the road to rail to succeed. Like other interviewees, Ms
Jones also expressed the need to keep close relationships with counterparts and
working together. This is in line with what Amos (2009) suggested, i.e. that railway
freight managers should rather assess the opportunities not to replace, but to co-
operate and partner with other modes, as well freight forwarders and logistics services
providers. Failing this they will become disconnected from the final markets, and
become price-takers from middlemen.

Furthermore, despite integrated alternative to road and rail competition was never
developed due to the rapid deregulation of freight transport in South Africa, there is now
a desire and efforts from TFR, DoT and the industry to change that. In fact, private
partners also expressed interest in participating in such a solution through both direct
investments and cooperation using licensed technology such as RoadRailer. Therefore,
TFR‟s recognition of the need for collaborative relationships will not only guarantee the

88
successful implementation of road to rail, but also guarantee itself a chance to become
efficient, reliable, sustainable and successful in its industry.

Despite the scepticism with regard to efficiency, cost effectiveness, speed and time, all
interviewees believe that the road to rail project is doable, that it is desperately needed
in the South African economy, and that Transnet has the ability to make it happen.
Moreover, the industry is also very realistic in understanding that it is not an overnight
game; it is a hard task to turn around and will take a lot of time, focus and effort to get to
where freight rail is intended to be. Although according to the interviewees TFR is
institutionally not yet where freight rail needs to be, the author observed a degree of
faith from them that should both the government and TFR continue to focus and invest
in freight rail as they started to do with the MDS, as well as take a more business-like
approach, they can pull it off successfully.

5.6.5 Summary

It is evident that TFR has capacity challenges and there are concerns from the industry
regarding the feasibility of the implementation of the road to rail programme. However,
there is evidence that they are turning the situation around. There is a huge degree of
effort and commitment from DoT and TFR to revitalise freight rail. There is also a high
level of faith, confidence and support from the industry to make the road to rail
programme work as well as to integrate with rail. This is a positive sign that road to rail
can become a success.

89
CHAPTER 6: CONCLUSION

The objective of this research was to establish whether the implementation of the road
to rail project is feasible. To find the answers, the author conducted research using
unstructured open ended questions to collect primary data and conducted a
documentation review to independently assess TFR‟s capacity to implement the road to
rail programme. This was done by assessing and analysing both TFR‟s internal and
external environments using appropriate models.

Having interviewed various stakeholders in the freight industry and having assessed
TFR‟s capacity, the author was able to establish where TFR is now and where it is
going in terms of the road to rail programme.

When assessing TFR‟s capacity, the author observed that TFR put a lot of effort into
turning the organisation around using the MDS as a tool. Despite this programme and
schemes in the Human Capital unit, not much is being done in terms of raising
awareness to guide employees through the process. As a result, TFR still experiences
various challenges, including low morale, job insecurities, resistance to share
information, and high absenteeism attributed to sick leave. This problem was raised by
TFR itself (Freight Rail Today, 2012).

Furthermore, whilst much effort is being put into improving and increasing efficiency and
capacity, commitment towards changing the organisational culture is very low. The
author is of the view that, because the MDS actions go beyond the scope of the existing
paradigm of TFR, it requires members of the organisation to spread and share their
core beliefs or their accepted ways of operating. If not, resistance to change becomes
evident and as such, the strategy becomes jeopardised causing strategic drift
(Schoemer, 2009).

In terms of operations, this research revealed that freight rail‟s state of decline and lack
of competitiveness is not necessarily due to poor management alone. As Dr Havenga

90
stated, it was due to various factors including the constituents of the previous
government who wanted railway lines to connect to each and every agricultural farm,
the deregulation of the freight transport in the 1980s; the lack of investment in freight rail
for over two decades; and the lack of maintenance of infrastructure and locomotives.
These had a detrimental impact not only on the freight industry, but to the economy of
the country as a whole.

Furthermore, this research also revealed that Government recognises the challenges
associated with the problem and is determined to turn the situation around through
Transnet‟s MDS. To this effect, TFR has for the last two to three years been working
steadily to improve capacity to achieve what is needed to revitalise freight rail and alter
the state of decline by encouraging the shift from road to rail.

The author observed that the industry is very receptive to the road to rail programme,
there is a great amount of focus and investment to revitalise freight rail, there is ample
support from government, and South Africans want to see the shift from road to rail to
become a reality. This was observed during the various interviews undertaken for this
research and through government public pronouncements. However, the interviews
also revealed that the stakeholders understand that the shift from road to rail is not an
overnight project. It is widely accepted that it will take time, effort and financial
resources. Adding and improving capacity and revamping the entire infrastructure will
not necessarily guarantee efficiency, cost effectiveness and sustainability, or a
successful shift from road to rail. TFR still has to achieve cost effectiveness, efficiency,
safety, security, reliability, and global competitiveness. These are the elements which
will determine competitiveness and sustainability for freight rail. Furthermore, speed
and timing as well as door-to-door services are also important in freight transport, a
strength that freight rail does not currently possess. The author concluded that when it
comes to competitiveness within its industry, TFR will not be able to achieve. If TFR is
to succeed, the best is to collaborate and cooperate with roads and other third parties,
rather than compete with them.

91
Furthermore, during the capacity assessment the author also observed that TFR is
experiencing a capacity shortage. It was also observed that TFR is vigorously
addressing the problem through their Market Demand Strategy and has made good
progress thus far. In addition to capacity which they are currently working on, they also
have other resources such as capabilities and human capital to successfully implement
the road to rail programme. It can therefore be concluded that, despite the various
concerns, should TFR address these areas as per the recommendations in the
preceding chapter, TFR can become efficient, reliable, profitable and globally
competitive. It can therefore be concluded that TFR has a good chance of succeeding
in its endeavours to shift from road to rail in the long run.

92
CHAPTER 7: RECOMMENDATIONS

In the preceding section it was concluded that TFR has a good chance of successfully
implementing the road to rail project. However, there are concerns in the industry that
need to be considered and addressed to ensure this. The following recommendations
will assist TFR in their journey to success:

TFR efforts to increase the rail provision of capacity through the MDS should be
sufficient for now and going forward to the next 20 to 30 years, as Dr Jan Havenga
suggested during his interview. However, as the economy grows so will the demand for
freight rail. TFR should therefore also start thinking and planning for additional gauge,
broader tracks and building cases for a core network, especially between the three main
cities of Johannesburg, Cape Town and Durban.

In terms of management, a turnaround of an organisation of this size with this extent of

degradation will probably take longer than desired. It is therefore recommended that
the current management stays on to ensure stability and continuous progress without
interruption and delays. Furthermore, in striving for efficiency and profitability, TFR
should think less in terms of a government perspective, and more like a competitive
business in a free market system which is conscious about costs and returns.

TFR should involve intermodal collaborations though joint ventures and integration with
other modes, as well as third party logistic service providers. This will enable them to
improve market reach without increasing network length. Furthermore, TFR should also
concentrate a lot more on collaboration and intermodal cooperation rather than striving
for pure competitive advantage, which might not necessarily be possible to achieve. In
fact, as Amos (2004) and Ilie (2011) suggested, integration is another way in which rail
can respond to competition by seeking better connections with them rather than
competing with them.

Because TFR„s quest is for countrywide service delivery, there should be integration
between rail operations and rail tracks. This requires that the branch and main lines be

93
seen as an integrated system and not in isolation. Therefore uneconomic branches
should also be invested into because they serve as feeders for the main lines. In this
regard, vertical integration - separation of infrastructure from operations, is ideal for
TFR. However this industry consists of very few highly specialised and highly integrated
role players which could lead to strong relationships, cooperation and quasi-
reintegration. TFR should therefore be wary that this can also limit the role of market
forces and inhibit competition. It is also recommended that TFR should only specialise
in those fields where it can provide services tailored to the needs of customers at
competitive prices.

In order to enhance cost efficiency, TFR should first investigate the totality of the whole
railway activity; their traffic costing methods, pricing policy, future financial validity as
well as their level of support for public expenditure.

TFR also needs interventions to introduce flexibility to accommodate smaller

businesses to utilise the freight rail services for their consignments. This would
encourage competition within the industry and enhance economic growth.

Furthermore, Government should create and encourage a regulatory environment that

makes it easier to form public private partnerships. It should also encourage freight rail
users to have more confidence in the freight industry and the South African economy,
and invest more in their expansion programmes in order to enhance economic growth.

The DoT, in consultation with the Department of Finance, must take the responsibility
for and ensure that appropriate user-cost to external costs and the cost of damages to
the road infrastructure is fully recovered from commercial road vehicle users, without
cross-subsidisation with private light vehicles.

Moreover, in terms of change it is recommended that, because of the inevitable

changes derived from the implementation of the MDS, TFR must manage these
changes accordingly. Using the Change Kaleidoscope Model will enable TFR to
successfully diagnose such changes in order to manage them accordingly and ensure

94
the successful implementation of the strategy. Failing this, resistance to change will
become evident and as such, the MDS strategy may become jeopardised.

It is further recommended that TFR should apply the cultural web model to spread
awareness about change and ease the process of change resulting from the
implementation of the MDS toward the shift from road to rail programme. This will
reduce the existence of uncertainties and low morale while increasing efficiency and
productivity.

The development of an effective change management plan designed to deal with all the
factors including the resisting of change factors is of utmost importance and therefore
recommended. Such a plan should include addressing the following communication
concerns: how and where to access the necessary information, information about the
project, how and why it needs to happen, and how it is going to affect everyone in the
organisation.

Introducing the matrix structure would be beneficial for TFR as it will best support the
implementation of the MDS. This structure emphasises closer horizontal as well as
vertical linkages and collaborations between teams and individuals. This will ease
decision making process and avoid the danger of bureaucracy, silos and
ineffectiveness.

Furthermore, in order for the MDS to produce positive results TFR needs its own people
to champion the strategy. TFR should therefore increase employee empowerment
using the four organisational ingredients, namely: Sharing information about the
organisation‟s performance with front-line employees, rewards based on the
organisation‟s performance, knowledge that enables employees to understand and
contribute to organisational performance, and power to make decisions that influence
organisational directions and performance. This would empower TFR‟s employees to
take initiative, shoulder more responsibilities and become accountable for their actions.

95
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APPENDICES

Appendix A: Table 2: Interview questions for DoT and TFR: Group 1

No. Question
1. The proposed policy speaks about the intention to move from road to rail,
and I understand that TFR is embarking on a revitalisation programme to
ensure that the move is successful, but how do you propose the shift itself to
be rolled out? Is there going to be some legislative instrument which will
prohibit the road transporters from carrying the freight naturally fitted for rail?
If not, how?

Follow up question: Do you think that, after all the upgrading and investment
on locomotives the rollout could be left to market forces or rather a mandate
from government?

2. What kind of support and/or objections are you getting from the industry?

3. In today‟s business environment, time and speed is of utmost importance. In

most cases people prefer to pay more for faster and more efficient services.
To what extent does freight rail can gain competitive advantage in that
regard?

4. Is the implementation of road to rail going to be successful? What

measures are in place to ensure sustainability and reliability of freight rail in
the long run?

5. One of the major challenges for TFR was capacity, where are you now in
terms of capacity, and what progress have you made since the
implementation of MDS

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6. What integration strategies is TFR implementing?

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Appendix B:

Table 3: Interview questions for the industry: Group 2

No. Question

1. How receptive is the industry about the road to rail programme and how
willing do you think are they prepared to integrate with freight rail?

2. What concerns do you have about the proposed shift? Do you know of any
other group in favour or against this shift?

3. In your opinion is the shift from road to rail what the freight industry in South
Africa needs now? Why?

4. What are your views on its feasibility? What are your views on TFR‟s
capacity to implement the road to rail?

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Appendix C:

Table 4: Phases of thematic analysis

Phase Description of the process

1. Familiarise yourself Transcribing data (if necessary), reading and re-reading

with the data the data, noting down initial ideas.

2. Generating initial Coding interesting features of the data in a systematic

codes fashion across the entire data set, collating data relevant
to each code.

3. For themes Collating codes into potential themes, gathering all data
relevant to each potential theme.

4. Reviewing themes Checking in the themes work in relation to the coded

extracts (Level 1) and the entire data set (Level 2),
generating a thematic „map‟ of the analysis

5. Defining and naming On-going analysis to refine the specifics of each

themes theme, and the overall story the analysis tells;
generating clear definitions and names for each
theme

6. Producing the report The final opportunity for analysis. Selection of vivid,
compelling extract examples, final analysis of selected
extracts, relating back of the analysis to the research
question and literature, producing a scholarly report of the

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analysis.

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Appendix D

Table 5: Example of the initial coding developed for this research

Extract codes
“…we don‟t provide end to end services. We always need a 1. weakness in rail to
collect cargo from a point (inaudible) we collaborate with provide complete
private enterprises. How can we work together remember of service
consideration when one” 2. recognition of need of
collaboration

“What we are looking at here, Judith, is we, we don‟t want to 1. No need for
go and force a road to rail shift by, by way of legislation… legislation.
You know government wants a very competitive economy.
Whilst we are government owned we need to compete 2. confident in the
equally out there with customers.” market forces

“…We have not seen any explicit objections coming through 1. Road to rail is
from the industry. What we observe at the moment is, welcome in the
surprisingly is that a large number of players in the industry industry
are knocking on our doors to sign up, cooperation
agreements with us”

“Now, not everybody likes that approach on the Railway 1. Not everyone
side. … but people are beginning to understand that that welcomes the road
type of solution is also necessary and also joint venture; this to rail is needed
can also be done by joint venture with a third party logistic
service provider that puts this whole thing together” 2. Need for working
together

“Very receptive in my view. The reason being, the first and 1. Concerns in the
foremost industry is, by and large, are not worried about industry about

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whether the freight is going by road or it is going by rail. It is feasibility of road to
a question of how quickly the goods can get to the rail
destination and what cost. Those are the main factors that
industry worries about.”

“I think the road transporters would be very receptive and I 1. Industry welcomes
think an indication of that is already that there are road to rail
Memorandums of Agreement, or Understanding, between
both the Imperial Group and Transnet, as well as Unitrans 2. Concerns about cost
and Transnet…my concerns would be the cost effectiveness effectiveness and
and efficiency of Rail because at the moment the whole efficiency of rail
manufacturing system around the world has changed.”

“My view no, certainly not, they are not there because they 1. No confidence about
don‟t have the rolling stock, they don‟t have the – I would the current status of
say even some of their existing rail infrastructure in terms of rail
rail lines, the maintenance of this, the yards and so on, is not
where they should be. So they are working on that, they are 2. Industry aware that
investing in that, there‟s a lot of focus on that but they don‟t investments is taking
have, certainly as we speak today, enough locomotives” place

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Appendix E

Table 6: Themes and codes

No. Themes Code

1. Legislation LEGIS
1.1 Regulation LEGIS – REG
1.2 Deregulation LEGIS – DEREG
1.3 User pay LEGIS – USRP
1.4 Market forces LGIS – MRKTFRC

2. Receptiveness RECEPT
2.1 Communication RECEPT – COM
2.2 Industry support RECEPT – IND.SUP
2.3 Collaboration RECEPT – COL
2.4 Intermodal cooperation RECEPT – INT.MOD
2.5 Confidence RECEPT – CONF
2.6 Faith RECEPT - FAITH

3. Competitiveness COMP
3.1 Time COMP – TIME
3.2 Speed COMP – SPD
3.3 Cost effectiveness COMP – CSTEFTV
3.4 Safety COMP – SFTY
3.5 Reliable COMP – REL
3.6 Security COMP – SEC
3.7 Market Forces COPM – MKTFRS

4. Capacity CAP
4.1 Rolling stock CAP – ROLSTOC

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4.2 wagons CAP – WGNS
4.3 Financial CAP – FIN
4.4 Human resources CAP – HR
4.5 Double track CAP – DBLTRC
4.6 Skills CAP – SKLS
4.7 Capability CAP – CAPB
Infrastructure CAP – INF

5. Feasibility FEAS
5.1 Efficiency FEAS – EFFIC
5.2 Cost effectiveness FEAS – CST.EFECT
5.3 Sustainability FEAS – SUST
5.4 Reliable FEAS – REL
5.5 Safety FEAS - SFTY

113