There is genuine concern that State-owned engineering services company Transnet Engineering (TE) could undermine private South African businesses seeking to supply railways equipment not only to Transnet Freight Rail (TFR) but also into the rest of Africa.

These concerns stem from fears that the bigger Transnet group could cross-subsidise the unit in a way that results in unfair pricing in export markets. It’s an argument that has merit and one that should be taken seriously – hopefully, TFR will also play some part in keeping TE honest.

That said, there are also some genuinely positive signs emerging as a result of the freight logistics group’s decision some years back to position TE as a leading African manufacturer of locomotives and wagons.

When former CEO Maria Ramos was given the freedom, in 2004, to dispose of noncore businesses, it was not immediately clear whether the engineering business would survive. However, it soon became apparent that any disposal could leave the larger group vulnerable, particularly in light of major capital and maintenance requirements. As a result, Transnet Rail Engineering, now TE, was officially incorporated into the streamlined company.

With that certainty in place, TE embarked on a strategic repositioning designed, initially, to improve its service to TFR. However, it was also earmarked as the main vehicle through which South Africa would attempt to rebuild its railways engineering capabilities.

Misgivings remain, but news that TE has now received orders to assemble locomotives that US group General Electric (GE) will sell to other customers in Africa is cause for some optimism.

TE is assembling 30 C30ACi diesel-electric locomotives at its Koedoespoort facility, east of Pretoria, and has entered into a partnership with the US multinational to jointly market the product across the region. The locomotives are being built on the same production line established to assemble GE locomotives for TFR, which has bought 143 C30ACi loco- motives in recent years.

TE CEO Richard Vallihu reports that there is a “great deal of interest” in the product, while GE South Africa president and CEO Tim Schweikert argues that the TE platform also makes sense for GE from an economic, quality, delivery and cost perspective.

It will be interesting to see whether TE can expand on this repertoire, particularly as it gears up to assemble locomotives being supplied by China South Rail and Transnet moves into the business end of a tender adjudication for a further 1 064 locomotives.

To achieve maximum benefit, though, it is going to be important for TE to crowd in rather than crow out private enterprises – companies that are also starting to see some real growth opportunities in the rest of Africa.