Economic Regulation of Transport Act 6 of 2024

Introduction

On 6 June 2024 the President assented to the Economic Regulation of Transport Act (the Act). The Act seeks to bring about significant and positive changes in the South African transport sector by creating a more co-ordinated and transparent regulatory framework. This legislation aims to create a coordinated and transparent regulatory framework across all modes of transport, including road, rail, maritime, and aviation, both for passengers and freight.

Creation of the Transport Economic Regulator (TER)

The Act provides for the creation of a Transport Economic Regulator (TER). The TER is a public entity mandated with overseeing the economic regulation of the entire transport sector. It is therefore intended to cover all modes of transport including road, rail, maritime and aviation. The Department of Transport has called for the nomination of suitably qualified persons to serve on the board of the TER and the closing date for nominations is 16 September 2024. In what may be regarded as an endeavour to safeguard the independence of the board of the TER, the Minister of Transport (the Minister) is required to appoint the 6 non-executive members of the board of the TER from a short list of candidates compiled by a panel of experts on governance and public policy. The Board is mandated to appoint similarly qualified persons (i.e. with experience in economics, law, accounting, engineering or the transportation industry) as chief executive officer and as executive officers of the TER.

Functions of the TER

Historically, price regulation in South Africa's transport sector was fragmented, with separate regulations for ports, airports, and roads. The Act consolidates these frameworks under the TER, making it the sole price-regulating authority across the transport sector. This centralization is aimed at tackling limited competition and protecting consumers from potential exploitation through unfair pricing practices. The TER will have the authority to set price controls, monitor tariffs, and ensure transparency and justification in pricing.

Beyond price regulation, the Act provides for several consumer protection mechanisms including ensuring fair and non-discriminatory access to transport facilities or services. It further provides for the resolution of complaints against regulated entities in relation to unreasonable refusal of operating licenses, failure in meeting service standards attached to a price control and other anti-competitive conduct. Decisions made by the TER can be appealed or reviewed to the newly established Transport Economic Council, offering a structured pathway for dispute resolution.

Economic regulation of rail

One of the most anticipated impacts of the Act is on South Africa’s freight rail sector, historically dominated by Transnet Freight Rail (TFR). Previously, Transnet controlled tariffs for rail infrastructure usage, but the Act opens the door for the TER to regulate access to these critical assets.

In particular, the Act envisages that the Minister of Transport may determine that the Act applies to rail infrastructure and facilities and that once so determined, the TER must determine the cost of and means of access to such rail infrastructure and facilities.

Under the Act, the Minister of Transport has the authority to apply the Act’s provisions to rail infrastructure and facilities. Once in effect, this could empower private rail operators as well as entities currently reliant on Transnet for the transport of bulk commodities to access the price regulation and consumer protection mechanisms established by the TER, levelling the playing field and potentially enhancing competition within the sector.

A roadmap for the future

In keeping with the National Rail Policy, adopted by cabinet during March 2022 and the subsequent Roadmap for the Freight Logistics System in South Africa, government appears to vigorously embark upon the rail reform journey. An interim Infrastructure manager has already been created within the auspices of Transnet. Its task is to assume ownership, control access and allocate capacity to private train operating companies on the country’s rail infrastructure.

Whilst a draft network statement has been published and in relation to which public comments were submitted, private rail operators will undoubtedly await the gazetting of the final network statement prior to deciding whether an investment into private trains will be feasible. The network statement will detail crucial aspects such as the terms and conditions of access, initial tariffs, and other operational guidelines, which are vital for assessing the feasibility of entering the market. It is anticipated to be published soon having regard to a recent statement by Transnet that the process for third-party access will commence in September 2024.

Although the Act’s commencement date is yet to be set by presidential proclamation, its promulgation represents a crucial step towards transforming South Africa's transport sector into a more efficient and competitive landscape. By streamlining regulation, enhancing consumer protection, and fostering private sector involvement, the Act has the potential to catalyze economic growth and elevate the country's transport infrastructure to meet global standards.