Jul 10, 2012
Too early to review R300bn capex plan despite poor economic outlookBack
Engineering|Port|CoAL|Export|Pipelines|Ports|rail|Road|Transnet|Transnet Port Terminals|Service|State-owned Freight Logistic|Brian Molefe|Iron Ore|Iron-ore|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 Intellectual Property Law News
Alcatel-Lucent has organized in early July its Technology week in Nigeria. The Alcatel-Lucent Technology Week took place at a three-day event in both Lagos and Abuja. The event was well attended by over a hundred professionals from Nigeria ICT ecosystem....
If you were asked to imagine a computer network, the image that springs to mind would probably be one of a pristine office setting, where networking equipment is kept behind spotless glass doors in a dust- and temperature-controlled environment. But what of the real...
The Southern African Vinyls Association announced that Belgotex Floors has become the Association’s first official license holder of the Vinyl. product label – a mark of excellence that signifies the product complies with best practice as prescribed by SAVA’s Product...
Updated 5 hours ago World-renowned fuel cell scientist Dr Sharon Blair would like to see South Africa supply 25% of the global demand for fuel cells by 2020, stating that the country has a tremendous opportunity to develop the industry and capture a share of the growing sector. However,...
Updated 6 hours ago Public Enterprises Minister Lynne Brown should table an uncensored contract agreement between Eskom and one of its coal suppliers owned by the Gupta family, the Democratic Alliance (DA) urged on Wednesday. The Sunday Times reported on September 13 that Gupta-owned...
Updated 6 hours ago Cosatu's provincial general secretary, Tony Ehrenreich, had strong words for government and higher income groups as union members marched to Parliament on Wednesday. “We want them to tax the people who live in Clifton and Sea Point,” he demanded, saying workers...
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 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 infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
Black-owned investment holding company Sphere Holdings plans to raise a further R1-billion in the coming months in support of its strategy to become a leading black industrial enterprise, which could ultimately seek a listing on the JSE.
Energy analyst and EE Publishers MD Chris Yelland warned recently against excessive optimism regarding timescales for the proposed construction of new nuclear power plants (NPPs) in South Africa. He was speaking at a Nuclear Roundtable in Johannesburg. “I think we...
Malawi’s Lilongwe Water Board (LWB) is inviting eligible bidders to prequalify for the board’s efficiency improvement works, which will be implemented as part of the E24-million Lilongwe Water Resources Efficiency Programme. LWB CEO Alfonso Chikuni explains that...
CROATIA, AN EU MEMBER BUT NOT A TDCA MEMBER On July 1, 2013, Croatia officially became the twenty-eighth member of the European Union (EU). Despite Croatia’s accession into the EU, it is yet to become party to the Trade, Development and Cooperation Agreement (TDCA)...
The Council for Scientific and Industrial Research (CSIR) has announced that its new Inundu airborne electronics testing, evaluation and training pod had made its first test flight on September 10. The successful flight was undertaken from Lanseria International...