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South Africa’s transport industry is going to undergo a ‘radical’ transformation with the introduction of a Transport Economic Regulator (TER), which will regulate the pricing of access to the country’s highways, airports, ports, and rail.

The new regulator will work in a similar fashion to NERSA, the energy regulator, which sets electricity tariffs and grants licences to generate and transfer power.

According to the Department of Transportation, the goal of the new regulator will be to ‘level the playing field’, especially in regards to ports and rail. What this means in the real world is that an independent regulator will soon determine the cost of using the country’s railways and ports, which are largely controlled by Transnet at the moment.

“Aside from price controls, TER, which will take over from the Ports Regulator, will also have more of a say over its predecessor when it comes to terminal operations and concessioning and service licencing agreements.”

The mandate of TER will see it balance the requirement for state transport entities such as Transnet to recover its costs while also ensuring that the services it provides are priced reasonably for businesses.

For example, the roadmap states that rail is a high fixed-cost network that will only pay its expenditures if it transports a large volume of products. However, many potential rail consumers would rather use the road network and will only migrate to rail if prices are competitive. It could then be a case that if every customer is charged the same price, these price-sensitive customers will switch to the road.

The roadmap sees a scenario where not all users are paying a price that covers the fixed costs (in order to maintain volumes on the network,) and price-insensitive customers are, in effect, subsidising the more price-sensitive ones.

This treatment may be perceived as “unfair”, but price-conscious users will benefit in the long run since it improves the network’s financial viability.

The Economic Regulation of Transport (ERT) Bill, which establishes the new regulator, is likely to be promulgated before March 2024, and would speed up the formation of TER. This act will bring about big changes, with TER taking over the functions of various governmental organisations.

“In road and airports, economic regulation functions which are currently largely entrusted to the Minister of Transport, as per the South African National Roads Agency Limited Act, the National Roads Act and the Airports Company Act, will now be conducted at arms-length by an independent regulator, with the aviation Regulating Committee rolled into the TER.”

Aside from the creation of the Infrastructure Manager, there are also plans to establish a rolling stock leasing company through a joint venture with Transnet Engineering.