http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.30Change: -0.09
R/$ = 11.09Change: -0.03
Au 1226.91 $/ozChange: 9.65
Pt 1342.00 $/ozChange: 10.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Apr 10, 2012

Transnet’s R300bn capex plan shifts focus from maintenance to expansion

Back
Transnet CE Brian Molefe explains the group's R300-billion Market Demand Strategy in an interview with Engineering News Editor Terence Creamer. Camera Work: Nicholas Boyd & Duane Daws. Editing: Darlene Creamer.
Natal|Port|Africa|CoAL|Locomotives|Pipelines|Ports|Projects|Road|System|Transnet|Transnet Port Terminals|Africa|Europe|China|South Africa|Richards Bay Coal Terminal|Energy|Logistics|Maintenance|State Freight Logistics|Northern Cape|Western Cape|Brian Molefe|Infrastructure|Iron Ore|Rail|Locomotives|Pipelines
Port|Africa|CoAL|Locomotives|Pipelines|Ports|Projects|Road|System|Transnet|Transnet Port Terminals|Africa||||Energy|Logistics|Maintenance|||Infrastructure|Iron Ore|Rail|Locomotives|Pipelines
natal|port|africa-company|coal|locomotives|pipelines-company|ports|projects|road|system|transnet|transnet-port-terminals|africa|europe|china|south-africa|richards-bay-coal-terminal|energy|logistics|maintenance|state-freight-logistics|northern-cape|western-cape|brian-molefe|infrastructure|iron-ore|rail|locomotives-product|pipelines
© Reuse this



State freight logistics group Transnet says it will shift its capital expenditure (capex) focus over the coming seven years from maintenance expenditure to expansionary investments and spend R300-billion on rail and ports projects across South Africa over the period.

During the previous seven-year investment cycle the group spent R180-billion, with the lion’s share of that capex directed towards dealing with serious maintenance backlogs. In fact, even during 2011/12, 63% of the R25-billion invested was directed towards maintenance activities.

But in officially unveiling the State-owned company’s (SoC’s) new investment thrust, dubbed the Market Demand Strategy (MDS), CE Brian Molefe stressed that the balance would change between 2012/13 and 2018/19, with 58% of the R31-billion to be invested in 2012/13 to be directed towards asset and infrastructure expansion programmes.

Over the full seven-year period, around 60% of the R300-billion would be directed towards expansion projects, including a plan to procure an additional 1 000 locomotives, the tender for which would be issued later this year.

The bulk of the capex, R205-billion, would be directed towards railways projects, which had been designed to raise volumes moved to 350-million tons a year from the 202-million tons achieved in the year to March 31, 2012 –the first time in the group’s history that Transnet Freight Rail (TFR) had breach the 200-million-ton mark.

COMMODITY SPIN-OFFS

Undergirding the rail volume growth aspiration was a plan to materially raise the capacity of TFR’s key commodity lines, including:

- increasing coal volumes by 44% from 68-million tons last year to 98-million tons by 2018/19, which would be above the 92-million-ton-a-year nameplate capacity for the privately owned Richards Bay Coal Terminal, in KwaZulu-Natal;
- raising the capacity of the iron-ore export channel from Sishen, in the Northern Cape, to Saldanha, in the Western Cape, by 57%, from 53-million tons to 83-million tons; and
- increasing the capacity of the general freight business (GFB) by a material 113% from 80-million tons currently to 170-million tons a year by the end of the period.

Should GFB achieve such volume growth, its market share against that of the road hauliers would rise from around 15% currently to 35% by the end of the period, with the group anticipating yearly container growth of 8.4%.

These rail investments, Molefe said, could transform TFR into the fifth-biggest rail utility globally. They could also consolidate South Africa’s position as key thermal coal exporter to China and Europe and as the fourth-largest exporter of iron-ore to China and guarantee its position as the world’s leading exporter of manganese.

The R80-billion to be invested into the port system (R47-billion for the Transnet National Ports Authority and R33-billion for Transnet Port Terminals) should also enable the SoC to increase its container handling capacity by 76%, from 4.3-million twenty-foot equivalent units, or TEUs.

Should the investment programme proceed as planned, group revenue over the period would surge by 178% over the period from R46-billion to R128-billion, while earnings before interests, taxes, depreciation and amortisation could rise by an even larger 258% from R19-billion currently to R68-billion by the end of the period.

It could also facilitate the creation of some 15 000 new direct jobs, raising Transnet headcount from 59 000 to around 74 000 by 2019. By the capex's programme's peak in 2016/17, some 588 000 job opportunities could also be generated directly and/or indirectly.

The MDS will be funded primarily off the SoC’s own balance sheet. However, Molefe stressed that Transnet would still need to raise about R100-billion from the domestic and international debt capital markets, development finance institutions, export credit agencies and in the form of corporate paper between now and 2019.

ABOVE-INFLATION TARIFF INCREASES

He also confirmed that the group was budgeting tariff increases of 2% above consumer price inflation (CPI) over the period to partly fund the capex programme.

While the proposal would offer some certainty, it would again raise debates about whether monopoly businesses should be allowed to effectively prefund their capex using tariffs. The National Energy Regulator of South Africa had resisted previous attempts by Transnet Pipelines to do just that, after potential competitors objected, noting that they were not in a position to do likewise.

Molefe also acknowledged that the suggestion was likely to stimulate economic debate about the wisdom of diverting money from the consumer, which was the current driver of South Africa’s relatively weak economic expansion, to Transnet’s investment programme.

“The debate that we are going to have to have with economists is whether the South African economy can afford to take out of ‘C’ [consumption] the CPI plus 2% and give it to us for ‘I’ [investment],” Molefe mused.

“Our argument is that it should be possible, especially in an economy that does not save. It should be possible without very adverse consequences to the economy,” he added, while accepting that some might view the argument as “cynical”.

An equally interesting spin was presented regarding what appeared to be a relatively paltry the role for the private sector within the R300-billion capex programme.

Molefe argued that one-third, or R100-billion, of the investment was open to private sector participation through its borrowings programme. “They can become part of the action by buying Transnet bonds with their excess cash, rather than taking the risk of the investments directly,” he said, noting that the private sector was currently hoarding more than R520-billion on their balance sheets.


“So, one-third of the R300-billion is, in a round about way, a private sector participation. Because through the bond exchange and participating in bilateral loans, the private sector can put their cash into this programme . . . and we will guarantee the returns on that cash.”

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Economy News
Sacci CEO Neren Rau
The South African Chamber of Commerce and Industry (Sacci) on Friday expressed concern about the marked increase in crimes against business, evident in the 2013/14 crime statistics released by the South African Police Service (SAPS). Sacci CEO Neren Rau said the 13%...
Contrary to some earlier projections, the world's population will soar through the end of the 21st century thanks largely to sub-Saharan Africa's higher-than-expected birth rates, United Nations and other population experts said on Thursday. There is an 80%...
South Africa's rand weakened against the dollar on Thursday, falling to a 7-month low after respected Reserve Bank Governor Gill Marcus said she would not renew her contract when her five year term ends in November. Government bonds weakened alongside the currency,...
Article contains comments
More
 
 
Latest News
Updated 15 minutes ago The Independent Communications Authority of South Africa (Icasa) has called on interested parties to lodge written representations in relation to Vodacom’s proposed R7-billion buy-out of converged communications network operator Neotel within 21 days. Icasa outlined...
Updated 1 hour 7 minutes ago Industry body, the Wireless Access Providers’ Association (Wapa) has released a draft position paper on licenced and licence-exempt spectrum, the former of which allows service providers exclusive access to certain spectral frequencies, enabling them to deliver...
Updated 1 hour 54 minutes ago A high-level delegation of government representatives, led by President Jacob Zuma, will this week attend a series of events organised by the Open Government Partnership (OGP), scheduled to take place on the margins of the sixty-ninth United Nations General Assembly,...
More
 
 
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
MANUFACTURING CAPABILITY Reliable Transformers designs and manufactures dry-type and oil-filled power and distribution transformers up to 3.5 MVA
While Ekurhuleni-based transformer manufacturer Reliable Transformers currently designs, manufactures and tests its products according to the SANS 780 specifications for distribution transformers and other applicable transformer specifications, it is working towards...
GHAREEB SAAD Kaspersky Lab products contain strong heuristics engines that monitor suspicious file execution to detect attacks
Global endpoint security solutions company Kaspersky Lab has introduced new measures to prevent cyber criminals from accessing sensitive data, alongside its malware-signature and heuristic device analysis detection methods. Threats to mobile devices have increased...
MICHAEL FLETCHER Real-time information available to government when citizens use publicly funded Wi-Fi networks will enable it to communicate with citizens and provide services
To ensure uptake and a positive impact, Wireless Fidelity (Wi-Fi) networks in cities must be provided at schools, community centres and commercial centres to enable citizens and government to access information that will improve access to and delivery of services....
Eco-estate Monaghan Farm, located near Lanseria airport, north-west of Johannesburg, has taken a new approach to modern living and sustainability with its 517 ha development, dedicated to farm living.
Forklift and lift-truck distributor Goscor Lift Hi-Reach launched the Genie SX-180, the tallest self-propelled super boom in Africa, in Johannesburg last month. “As the official distributor of the well-known Genie range of equipment in Southern Africa, we are pleased...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks