Jul 10, 2012
Too early to review R300bn capex plan despite poor economic outlookBack
Engineering|Port|CoAL|Pipelines|Ports|Road|Transnet|Transnet Port Terminals|State-owned Freight Logistic|Brian Molefe|Iron Ore|Rail|Pipelines
© Reuse this
CE Brian Molefe stressed, though, that the investment plan would not immediately respond to cyclical changes, owing to the fact that the programme was designed to cater for the growth of the business over a 30-year horizon.
Therefore, even under a worst-case scenario Transnet would continue to invest, with a “stress test” having indicated that, at most, R50-billion would be lopped off the capex plan should there be a period of sustained low growth.
In 2011/12, the group spent a record R22.5-billion, which was 3.7% up on the R21.5-billion invested in 2010/11. However, it was below the budget of R25-billion set for the period.
Molefe said the group still planned to invest a record R31.2-billion on railways, ports and pipelines during the current financial year, notwithstanding weaker market conditions in a number of areas.
Under the plan, capex was poised to rise steadily to a peak of R56-billion in 2016/17 and be funded through a combination of internal cash flows, as well as debt funding of about R85.5-billion.
“Whether we revise it as a result of market conditions it is still too early to say,” Molefe said, adding that, should conditions change materially, it would respond by either decreasing or adding to the programme.
“But what you must remember is that this capex programme is not about short-term cycles in markets. It’s a long-term capex programme, a 30-year capex programme, that we will try and execute in seven years.”
Transnet Freight Rail (TFR) was poised to absorb the lion’s share of R201-billion, followed by Transnet National Ports Authority (R47-billion), Transnet Port Terminals (R33-billion), Transnet Pipelines (R11-billion) and Transnet Rail Engineering (R4-billion).
The objective was to facilitate a dramatic increase in volumes across its businesses as well as support a transition from road to rail.
During 2011/12, rail volumes breach the 200-million-ton level for the first time on the group’s history, with general freight volumes rising 9.9% to 81-million tons, export coal volumes increasing by 8.8% to 67.7-million and iron-ore volumes surging 13.2% to 52.3-million tons.
The number of containers moved by rail increased 21.5% to 762 760 twenty-foot equivalent units (TEUs), from 627 825 TEUs, which allowed TFR to growth its market share to 34% from 30.9% in 2010/11.
At the ports, Transnet Port Terminals increased average moves per gross crane hour (GCH) by 8.1% to 26.6 GCH from 24.6 GCH in the previous period, which Molefe likened to a golfer improving his or her handicap by one stroke. “It may look trivial . . . [but] it takes a whole lot of activity to play just one shot less than the last time.”
Group revenue rose 20.9% to a record R45.9-billion, while earnings before interest, taxes, depreciation and amortization increased by 19.8% to R18.9-billion. However, profit for the year was lower at R4.12-billion, from R4.2-billion in the previous financial year, owing to higher depreciation, taxes and finance costs.
Molefe said the performance set a solid platform for Transnet to execute its R300-billion market demand strategy.
However, Public Enterprises Minister Malusi Gigaba called on the group’s board to address the area of customer service as a matter of priority, saying it impinged on the country’s global competitiveness.
“Notwithstanding the positive financial results I remain concerned about the enduring efficiency challenges within ports and rail, most notably the General Freight Business,” Gigaba said in a statement.
“It would be a fair expectation that considerable gains in efficiencies and volumes should have been achieved following the substantial R94.7-billion capital expenditure programme over the last five years.”
Significant emphasis should be placed on the area of customer service, with Gigaba describing the current quality of service as “unsatisfactory”.
He said customers remained unsatisfied about “high tariffs, unreliability, unpredictability and operational inefficiencies”.
“As the shareholder representative of this company, we have once more reiterated and underscored Transnet’s mandate to lower the cost of doing business,” Gigaba said.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Energy News
Updated 42 minutes ago Government’ proposed Medium and Heavy Commercial Vehicle Automotive Investment Scheme (MHCV-AIS) is unlikely to have any real impact on Isuzu Trucks South Africa’s automotive assembly business, as the monetary benefits of the incentive would be too insignificant to...
Recent Research Reports
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.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
The board of UD Trucks Southern Africa (UDTSA) has announced the resignation of MD Jacques Carelse. Long-time UD employee, corporate planning and marketing GM, Rory Schulz, has been appointed as acting MD while the process started to appoint a new MD. The Japanese...
There is a need to start planning another pumped storage scheme in South Africa. Much work has already been done at a site in the Limpopo province and the project was very close to being put out to tender at one stage. In 2008/9 the National Energy Regulator of South...
The Coega Development Corporation (CDC) is preparing to leverage its strategic coastal position to develop the Eastern Cape economy through proposed aquaculture development zones (ADZs), with a proposed R2-billion project aiming to contribute $278-million to the...
Completion of the ongoing construction of the 102 km Zomba–Jali–Phalombe–Chitakale road, in southern Malawi, has been extended from June to December 15 because of persistent rains and difficulties in paying the contractor. The project is being undertaken by Kuwait's...
The Malawi government has awarded South African firm Fischer Consortium the contract to upgrade the Malawi Road Traffic Information System. The Directorate of Road Traffic and Safety Services at Malawi's Ministry of Transport and Public Works says Fischer...