Oct 26, 2012
New template, new tension?Back
Africa|Design|Environment|PROJECT|Rolling Stock|rolling-stock|Africa|Equipment|Maintenance|Technology|Blade Nzimande|Rail|South Africa
© Reuse this
South African Communist Party secretary-general Blade Nzimande has again criticised the way BEE is being pursued, saying there is a risk of creating a class of ‘compradors’, or black capitalists who owned shares in companies they could not run and who supported the maintenance of ‘semicolonial’ economic structures.
It will be interesting to see, therefore, whether the empowerment model being pursued by the State-owned Passenger Rail Agency of South Africa (Prasa), which is at the beginning stages of a multibillion-rand fleet procurement process, has the potential to offer a new template.
On the face of it, the process looks strange, even disingenuous. That is because the broad-based black economic-empowerment (BBBEE) request for proposals has been separated out from the tender for the design, manufacture and maintenance of new commuter trains for delivery from 2015.
In other words, the empowerment process is being conducted in parallel to the main equipment tender, for which seven companies and consortia submitted bids by the September 30 deadline.
That means that the winning rolling-stock supplier would hold 70% of the project delivery company, with the BBBEE equity participants holding the 30% balance.
The proponents say the separation of the two elements is informed by a desire to ensure a genuinely broad-based empowerment structure that is decoupled from the technology offering. Under the scheme, Prasa would insist that 10% of the 30%, or 33% of what is available for empowerment equity, is held by an employee trust, to benefit staff below the senior management level. The balance would be divided between black businesses active in the rail industry (10%), passive black investors (7%) and an educational trust (3%).
Critics of the separation argue that it will lead to a “forced marriage” between the winning rolling-stock supplier and the winning BBBEE bidder. They add that the arrangement could well lead to a partnership that is even more short-term in nature than early-generation BEE deals, which saw partners flip their shares at the earliest opportunity.
The proponents, however, assert that there are sufficient legal and contractual instruments available to ensure that the preferred technology supplier and the preferred equity partner forge a workable, long-term partnership around the project, which could ultimately involve an investment of R123-billion and the purchase of 7 200 passenger coaches by 2035.
They also argue that the 65% localisation stipulation will provide considerable scope for black businesses keen to participate as suppliers to the Prasa fleet renewal programme. In other words, black business is being told to not simply aim to become passive holders of shares in a project company, but rather to invest in real businesses that are able to supply into what is poised to be a multidecade project.
The jury will no doubt be out on whether this new approach will result in broad-based participation and industrialisation, or whether it will create untenable tensions between international suppliers and the domestic partners that had no part in selecting.
Edited by: Terence Creamer© Reuse this Comment Guidelines (150 word limit)
Other Editorial Insight News
Recent Research Reports
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.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...