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Transnet prepares to resume locomotive procurement to close gap left by halted 10-64 programme

Transnet CEO Portia Derby

Transnet CEO Portia Derby

11th April 2022

By: Terence Creamer

Creamer Media Editor


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Transnet CEO Portia Derby has confirmed that the State freight logistics group is preparing to procure a significant number of locomotives again, after having halted purchases under the “irregular and unlawful” R50-billion ’10-64’ programme.

Derby tells Engineering News that, while a settlement agreement has been reached with General Electric, processes are still under way to secure settlements with China North Rail, China South Rail and Bombardier Transportation.

Transnet has taken delivery of 595 locomotives arising from the 2015 contract, representing 56% of the original order for 1 064 diesel and electric locomotives.

The procurement was halted in 2019 after irregularities and alleged corruption were unearthed, much of which was confirmed through evidence provided to the Judicial Commission of Inquiry into State Capture.

Transnet announced that it would be seeking “just end equitable settlements” with the four original equipment manufacturers.

General Electric was awarded a contract to supply 233 of the 465 diesel locomotives ordered, while China North Rail was contracted to supply the 232 balance. China South Rail was awarded a contract for 359 of the 599 electric locomotives ordered, with Bombardier Transportation to supply 240.

Derby says she is optimistic that settlements will be reached with the remaining three original equipment manufacturers and of proceeding with a new procurement process to close the capacity gap left by the fact that it could no longer proceed with the 10-64 programme.

The new tender is, thus, likely to be for at least 400 new locomotives and will be issued once all the necessary approvals have been secured.

Derby says every effort will be made to avoid the corruption, as well as the mistakes associated with the 10-64 procurement, including its lack of standardisation across the fleet.

Locomotive procurement, together with slot sales to third-party railway operators, is viewed as part of a broader strategy aimed at increasing the volume of freight that is moved on rail in South Africa.

The system has the theoretical nameplate to transport 250-million tons yearly, but volumes have never breached 226-million tons and have slumped in recent years as the service has been disrupted by both Covid and high levels of cable theft.

Volumes fell to 184-million tons in the 2020/21 financial year and while the figures are yet to be audited for 2021/22, it is likely that another decline will be reported.

The fall is partly attributed to the age and performance of the locomotive fleet, of which 77% was available for service as of March.

Of the fleet available for service currently, 57% is from the legacy fleet, while the remainder is from the newer fleet, including locomotives procured as part of the 10-64 programme and pre-10-64 procurement.

Derby says no decision has been taken regarding technology, stressing that electric locomotives should not be precluded simply because of the ongoing scourge of cable theft.

“There is no running away from it, we have to deal with the theft of cables,” Derby avers.

She also highlights that there are technical reasons why diesel locomotives cannot be used on certain parts of the network, including in certain tunnels.

While both technical and human security solutions are being introduced across the network, Derby believes at least part of the solution lies in ensuring that the rail is densified, including through the sale of slots.

“If we have trains running on a regular basis, the opportunity for theft will decrease.

“Once the long intervals between one train and the next is reduced, the risk factor for the thieves of either being caught or being killed rises dramatically,” she says, adding that the sale of slots will also introduce new entities with a direct interest in ensuring that cable theft is curbed.

Transnet has launched a bidding process for 16 rail slots, which will be sold ‘voetstoots’ to third-party operators for a period of two years on a take-or-pay basis. A bid submission date of May 31 has been set and Transnet expects to announce the winning bidders on June 30.

However, several potential participants have raised serious questions about the design of the slot-sale process, particularly the two-year limit, which is seen as insufficient in light of the capital costs involved in buying the locomotives and wagons required to take up a slot.

Six slots have been advertised on the underperforming container corridor between Durban and City Deep, while a further ten slots are being made available on the ‘southern corridor’ to East London, in the Eastern Cape, including two slots that could open rail access for automotive cargoes to and from Pretoria, in Gauteng.

Derby tells Engineering News that the slot sale is part of an evolving strategy of opening up the freight logistics system to private operators, particularly in those areas where capital and “dynamism” is required to improve performance.

The strategy, she stresses, is not privatisation nor based on any ideological notion that public ownership automatically leads to inefficiency.

“Private sector participation (PSP) is a commercial response to the current context and constraints.”

Besides the rail slot sales, Transnet is also seeking partners, which are expected to be selected in June, for the Durban Container Terminal (DCT) Pier 2 operation, as well as the Ngqura Container Terminal (NCT), in the Eastern Cape.

The introduction of a private terminal operator at DCT Pier 2 is part of the group’s broader vision for a “super terminal” at the Port of Durban by 2032, while the NCT initiative is designed to galvanise the much-discussed plan for using the port as a trans-shipment hub.

In addition, “at least ten companies” have responded to a request for qualification for the construction of a manganese terminal at the Port of Ngqura and Derby says the next phase of the procurement process should begin soon in line with an expectation that a preferred bidder be identified by October.

The terminal needs to be in place by 2025, which is the deadline for the closure of the existing terminal in Gqeberha.

Other PSPs are likely to be pursued across other mined commodities, including iron-ore, chrome and magnetite, as well as in agriculture and gas.

A ‘Framework for Joint Investment and External Partner Selection’ is in the process of being finalised in conjunction with the Department of Public Enterprises and will include the process that Transnet will follow when receiving unsolicited PSP offers.

Derby says that the guiding principle, for now, is to pursue partnerships where Transnet lacks the resources and capacity to invest.

“Given all of the problems and backlogs we have currently, what we are trying to do is separate out what we must be fantastic at, and then focus on that,” she explains.

Particular attention is, thus, being given to raising the performance of the key commodity corridors, while improving the port and rail infrastructure required for both Transnet and private operators to perform, including the construction of the new Point Terminal, in Durban.

“We will then bring in partners in the areas where just in terms of the space, the time, the money, the energy, we are not able to do the rebuilding that is necessary ourselves.

“It’s fluid and dynamic and we will review the position on a continuous basis.”

Edited by Creamer Media Reporter



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