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Rail sector moves to deal with ‘mismatch’ between localisation promises and delivery

13th May 2016

By: Terence Creamer

Creamer Media Editor

  

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The railways sector and government have agreed to the creation of a framework to improve the monitoring and implementation of localisation commitments associated with multibillion-rand investments being undertaken by both Transnet and the Passenger Rail Agency of South Africa (PRASA).

Discussions involving the Rail Road Association (RRA), the Department of Trade and Industry (DTI), the South African Bureau of Standards (SABS), Transnet and PRASA will begin in earnest during this month, following a two-day industry summit, which took place in Gauteng in April.

RRA CEO Bongani Mankewu tells Engineering News that the intention is to establish a new localisation framework by midyear, which has the support of the operators, the original-equipment manufacturers (OEMs), as well as domestic suppliers. Such a framework is viewed as necessary in light of the current “misalignment” between policy instruments designed to raise levels of local content in the sector and actual outcomes.

Mankewu argues that, despite railway rolling stock having been specifically designated for local procurement, the results have been mixed, while sentiment among domestic suppliers has remained weak, notwithstanding the major investment commitments by the two State-owned operators.

In 2015, Transnet spread a R50-billion contract for the procurement of 1 064 new electric and diesel locomotives across four suppliers, including General Electric South Africa Technologies, China South Rail Zhuzhou Electric Locomotive, Bombardier Transportation South Africa and China North Rail Rolling Stock South Africa. The two Chinese companies have since merged.

Business Day has reported that SABS has not yet received satisfactory information from some OEMs to enable it to complete a local content verification of the Transnet programme. In response, Transnet has stressed that the enforcement of local content obligations is a DTI responsibility.

However, the utility says it is taking “concrete steps” to ensure that development of the local engineering and manufacturing industry is prioritised. A special subcommittee of the executive committee, chaired by CEO Siyabonga Gama, has been set up to, among other things, monitor delivery of local content obligations.

In 2013, meanwhile, PRASA awarded a R51-billion contract to the Gibela consortium to supply 600 X’Trapolis Mega commuter trains over ten years. The first 20 commuter trains are being built at an Alstom facility in Lapa, Brazil, with the balance to be assembled at a R1-billion new facility, which is being developed at a site in Dunnottar, near Nigel, in Gauteng.

In addition, both Transnet and PRASA have announced various other railways investments, from maintaining or expanding the network to the purchase of new freight wagons.

However, supplier confidence remains depressed and has also not been buoyed by the African Union heads of State recent decision to nominate South Africa as the continent’s rail engineering manufacturing hub. “We are just not getting the results,” Mankewu says, suggesting a serious “mismatch” between the policy objectives and outcomes on the factory floor.

A committee, involving both suppliers and operators, has been established to finalise the terms of reference for a new structure, which will oversee the implementation of localisation across the sector.

Once finalised, an assessment will be done of the localisation progress being made by the various OEMs, whereafter “proactive” interventions will be rolled out to address problem areas.

“We want to be more proactive, because the next step is the payment of penalties, which really won’t help in building the domestic industry,” Mankewu says.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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