Jun 25, 2010
© Reuse this
Molebatsi: Both Eskom and Transnet have massively underspent their investment targets.
Creamer: I don't like underspending, Caesar. You know, we had this great figure of R787-billion of infrastructure over three years. This was put into the framework for South Africa's response to the international economic crisis.
They used words like we must implement this on an expedited basis, but then there is culling by stealth. You know, they don't even tell us that they are underspending their budget. Now you look at Eskom who just reported an 18% underspent, which is R15-billion, and Transnet nearly a R3-billion underspend, which is like 16% of the budget.
What is happening is that when these projects roll-out they don't tell us that they are not going to spend this and we now see the situation with the construction industry wanting to quickly go outside the country and get business because what was envisaged that would come through hasn't come through.
We know that there is a lot of legal wrangling particularly with these State-owned enterprises and we've seen CEO problems there, but they mustn't allow this to get in the way of the targets they have, because we have got this unemployment position in South Africa. We need to create wealth as well.
Molebatsi: I have to ask you Martin, I think sometimes I want to understand why? Is it because they don't have the capacity to put out tenders?
Creamer: Well, you know, you have got this very blurry situation with tenders all of a sudden not coming out. You have almost got a project paralysis that people are worried about because 2010 we got those World Cup projects going because of the firm deadline, so we can do it. Let's see everything like a World Cup project.
Molebatsi: Transnet is trying to breathe new life into South Africa's under-used branch lines with private sector help.
Creamer: Again, we have got this under utilisation of existing capacity where wealth and jobs can be created. Transnet is really a large-scale mover of freight, a pipeline operator and a rail and port operator. What it wants to see with the underused branch lines is the involvement of private sector, so it has asked for people to register interest in actually talking over these branch lines.
We are talking about 7 300 km of branch lines. That is like 35 % of the total 20 000 km. Less then half of that is actually operative. So, there is a 55% dormant situation and because they do the big hub-to-hub work, they want other people to express interest and for smaller operators to come in and take over these branch lines or bundles of branch lines so that we can get this transport infrastructure moving again, which always stimulates economic activity.
They also know that among this 7 300 km of branch lines, there are branches that they are also interested in. That is why they want to have the Cabinet approve the private sector participation, which the unions are not that happy about.
On these lines where Transnet still see some value, they can partner the private sector, without just letting the private sector doing it on its own. But, on many of the smaller ones they want the private sector take over and even take over stations where there can be a lot of innovation.
Molebatsi: Do we have enough engineering muscle in this country, especially railway engineering, because as far as I know there is one university that has got a seat, one of the lectureships where people are actually encouraged to go into railway engineering in particular. But, do we have enough of those?
Creamer: If they haven't got enough capacity they must shout, you know, they mustn't do cutting by stealth, because we want to know early.
Molebatsi: Transnet says that it is determined to move coal into a growth trend after years of missed opportunity.
Creamer: We have had this missed opportunity that Transnet is now determined that they are going to have the capacity to move more coal. I mean, we were doing very well until about 2005. Then the rail side of it did not come to party and we only exported 61-million tons of coal last year, where as the port capacity is at 71-million tons.
That is private sector owned and you have got the State side of it. The rail not coming to the party to get sufficient coal. Now, the private sector port has already pushed up its capacity to 91-million tons and we are still talking in the 60-million ton level from the rail side.
This is a wealth opportunity lost, a job opportunity lost again. Transnet is saying that, yes, they will take the blame for some of this. Obviously when there is uncertainty on rail the coal companies also don't come to the party.
So, they also need to that and they want the coal companies to be confident as the iron-ore are where they work on a take or pay basis. If Transnet wants to put another R15-billion into augmenting this coal line, which is one of the potential money spinners for Transnet, but they want the coal miners to come in on a take-or-pay basis as the iron-ore people do.
Then I think we will go ahead with much more coal exports hopefully one day matching the port capacity, which is an existing 91-million tons, but unfortunately we are still talking in the 68-million ton level from a rail point of view.
Molebatsi: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he'll be back with us at the same time next week.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned....
The Automotive Production and Development Programme (APDP) will need to change substantially post 2020, says Metair Investments South African operations COO Ken Lello. “We must not make tweaks. We have to change. What we are doing is not sustainable.”
Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit. He warns that possible interest rate hikes in the US may see capital being pulled from...
The Dispute Resolution Centre at the Bargaining Council for the Civil Engineering Industry (BCCEI) is now open to handle party-to-party disputes. The BCCEI represents the interests of all level four to nine Construction Industry Development Board companies.
Communications technology firm Ericsson sub-Saharan Africa head Fredrik Jejdling says the company’s commitment to sustainability and corporate responsibility has been integrated into all facets of its operations, which has provided it with sustainable revenue...