Jun 25, 2010
Construction|Engineering|Port|Africa|CoAL|Engineering News|Eskom|Mining|Mining Weekly|PROJECT|Projects|Transnet|Africa|South Africa|Transport|Caesar Molebatsi|Infrastructure|Iron Ore|Iron-ore|Martin Creamer|Rail|Engineering News|World Cup
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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)
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