Patel gives rail network and ports a lifeline in last act as minister

To foster collaboration, the plan is to grant exemptions to agreements that are generally prohibited

Former South African Trade, Industry, and Competition Minister Ebrahim Patel, who has decided not to return to government after the May 2024 elections, has introduced significant proposals aimed at revitalizing the country’s struggling rail and port infrastructure. These proposals, published on June 18, 2024, just a day before his term officially ended, aim to allow industry players to form agreements that are typically prohibited under the country’s competition laws. This move is expected to reduce operational costs and improve efficiency within these critical sectors.

The draft block exemption regulations, open for public comment, permit certain cooperative activities among companies in the rail and port sectors. The exemptions primarily address challenges such as high operational costs and inefficiencies by relaxing specific competition law rules. These exemptions apply under limited circumstances where collaboration is deemed necessary to address these industry challenges​ (Afriwise)​​ (Ground News)​.

South Africa, boasting the most extensive rail infrastructure in Africa, has faced severe declines in both rail and port capacities. The collapse of Transnet, the state-owned logistics company, significantly impacted the country’s economic output, prompting the establishment of the National Logistics Crisis Committee. This committee underscores the importance of private sector involvement in rehabilitating the nation’s logistics infrastructure​ (Ground News)​.

The proposed regulations exempt certain types of agreements and practices among firms in the rail and port industries from sections 4(1) and 5(1) of the Competition Act, which pertain to anti-competitive conduct. For the port industry, exemptions cover activities related to port capacity, traffic flow, and the management of port facilities. For the rail industry, exemptions include coordination on the repair and maintenance of rail lines, sharing of locomotive capacity, and supporting dedicated rail services​ (Skillings Mining Review)​.

However, the exemptions do not permit cartel conduct, such as price-fixing, collusive tendering, or market allocation. Companies must seek written confirmation from the Competition Commission to ensure their agreements fall within the scope of these regulations, with the Commission required to respond within 30 business days. Moreover, firms are advised to maintain detailed records of meetings, agreements, and all exchanges of sensitive information to ensure compliance​ (Skillings Mining Review)​.

The public has been invited to submit comments on the proposed regulations within 15 days of their publication. After considering these comments, the Department of Trade, Industry, and Competition, in consultation with the Competition Commission, will finalize and implement the regulations​ (Afriwise)​​ (Skillings Mining Review)​.

This initiative by Patel marks a significant step toward addressing the critical issues faced by South Africa’s rail and port sectors, aiming to foster collaboration and improve operational efficiency while ensuring compliance with competition laws.