Oct 26, 2012
New template, new tension?Back
Africa|Design|Environment|PROJECT|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
Article contains comments
Recent Research Reports
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...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
JSE-listed real estate investment trust (REIT) Rebosis Property Fund achieved a distribution growth of 8.1% to 99.45c per linked unit in the financial year ended August 31, despite volatile market conditions.
A low-cost, inflatable incubator won this year’s international James Dyson design award, which aims to encourage and inspire the next generation of design engineers.
The World Bank released its ‘Doing Business 2015: Going Beyond Efficiency’ report last month and ranked South Africa 43 out of 189 global economies for its ease of doing business, with Singapore topping the rankings.
Air Products South Africa officially launched its R300-million Eastern Cape air- separation unit (ASU), at its new manufacturing facility in the Coega Industrial Development Zone (IDZ), earlier this month. It is the second facility that Air Products launched in South...
BMW South Africa (SA) has signed a power purchasing agreement with energy company Bio2Watt. The offtake partnership will bring renewable energy to the carmaker’s Rosslyn plant, north of Pretoria.