New venture to make diesel locomotives in SA for local, African markets

25th June 2012 By: Keith Campbell - Creamer Media Senior Deputy Editor

The production of Electro-Motive Diesel (EMD) railway locomotives in South Africa is set to recommence following the announcement on Monday of a joint venture (JV) between US railway products and services company Progress Rail Services and EMD (part of the Caterpillar group) and Barloworld. The programme will involve a “significant” but undisclosed investment in South Africa by the US company.

The timescale for the re-establishment of an assembly plant in South Africa has also not been divulged. Various options are being evaluated. “We could move pretty quick” said Progress Rail Services and EMD CEO Billy Ainsworth at Barloworld corporate offices in Sandton, north of Johannesburg.

Although some components will be imported, localisation will be a key part of the programme. “Our goal is to do as much as we can in South Africa.” He cited Brazil as an example, where the first locomotives off the new Sete Lagoas assembly plant (in the state of Minas Gerais) have a local content approaching 50% – the aim is to increase this to at least 60%.

The company plans to benefit from the fact that a number of South African companies already form part of the supply chains of other Caterpillar group companies. “We’ll be able to leverage the Caterpillar supplier network in South Africa,” he affirmed.

Although Barloworld is a well-established partner of Caterpillar, Ainsworth made a point of stating that the South African company had not been selected because of this relationship.
Rather, it was because of the infrastructure, knowledge and skills that Barloworld could bring to the JV.

“We’re not just a locomotive company and we’re not coming to South Africa just as a locomotive company,” he stated. “We have a very broad net. Customers can come to us for one-stop shopping.” The company is divided into two divisions – locomotive and railcar services and engineering and track services (the latter including signalling).

Nor is South Africa the only target market. “It’s really going to serve sub-Saharan Africa,” explained Ainsworth.”We like Africa. We look at Africa and see lots of opportunities. Interest rates are low. Inflation is under control. It’s an area that makes sense to invest in, over a long time.”

Earlier in the twentieth century EMD, then part of the General Motors group, produced locomotives in South Africa, but withdrew from the country as a result of anti-apartheid sanctions. Some 800 EMD locomotives were supplied to South African operators. Many are still in operation.

Meanwhile, Sibani Mngomezulu has been appointed as CEO of Electro-Motive Diesel Africa.

“We have every confidence that under Sibani’s leadership the Electro-Motive Diesel Africa team will realise their vision of becoming the rail solutions provider of choice in South Africa and the region,” commented Barloworld CEO Clive Thomson.