Name and LocationTransnet’s Market Demand Strategy (MDS), South Africa.

Client
Transnet.

Project DescriptionTransnet will shift its capital expenditure (capex) focus over the coming seven years from maintenance expenditure to expansionary investments on rail and port projects across South Africa.

The expansion of South Africa’s rail, port and pipeline infrastructure is expected to result in a significant increase in freight volumes, especially in commodities such as iron-ore, coal and manganese.

It will also lead to a significant modal shift from road to rail.

The bulk of the capex, R201-billion, will be directed towards railway projects, which have been designed to increase freight volumes to 350-million tons a year, from the 202-million tons achieved in the year to March 31, 2012.

Supporting the rail-volume growth aspiration is a plan to materially increase the capacity of Transnet Freight Rail’s key commodity lines, which includes:
• Increasing coal volumes by 44%, from 68-million tons last year to 98-million tons by 2018/19, which will 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 by a material 113%, from 80-million tons a year currently to 180.3-million tons a year by the end of the period.

The capital to be invested in the port system (R47-billion for the Transnet National Ports Authority and R33-billion for Transnet Port Terminals) should also enable Transnet to increase its container handling capacity by 76%, from 4.3-million twenty-foot equivalent units (TEUs), to 7.6-million TEUs.

ValueThe cost of the MDS is estimated at R300-billion, including R201-billion for railways, R47-billion for harbours, R33-billion for port terminals, R11-billion for pipelines and R4-billion for rail engineering works.

The MDS will be funded primarily by Transnet’s own balance sheet. However, Transnet will still need to raise about R100-billion from domestic and international debt capital markets, development finance institutions, export credit agencies and in the form of corporate paper between now and 2020.

DurationSeven years to 2020.

Latest Developments
In accordance with the MDS and Transnet’s aim of shifting traffic from road to rail, significant capital has been invested in assets to support general freight traffic growth.

All of the 100 Class 43 new diesel-electric locomotives have been delivered and accepted into operations. The project was accelerated, resulting in the delivery of locomotives two months earlier than planned. The programme to acquire an additional 43 diesel locomotives is progressing ahead of schedule, with 20 locomotives having been delivered and accepted into operations. To date, R3.2 billion has been invested in the acquisition of the Class 43 locomotives.

Transnet concluded a contract for the supply of 95 electric locomotives for general freight at a cost of R2.7-billion, which will further support operational performance, reliability and the overall energy efficiency of the rail service. The delivery of locomotives is expected to start in February 2014. The capital investment for the acquisition of these locomotives amounted to R269-million for the 2012/13 financial year.

The acquisition of wagons to support the MDS volume growth projections was approved at a total cost of R2.1-billion and required the manufacture of 2 481 wagons during the year. Wagon types built included automotive wagons, flatbed wagons for rail containers, and CR-type wagons for transporting mineral and mining products, such as manganese, chrome and coal, for domestic consumption.

R3.1-billion was invested in interventions to sustain the company’s infrastructure. Upgrades to the general freight network included the replacement of 284 km of rail and 403 km of ballast screening. In addition, 383 661 sleepers and 167 turnouts were replaced. To maintain the condition of existing rolling stock at acceptable levels, R3.7-billion was invested in the upgrade and overhauling of wagons and locomotives

Additional investment in rolling stock was allocated to the Port of Port Elizabeth and numerous infrastructure projects have been completed to enable the growth of export manganese through this port.

The yard safety automation projects at Bayhead, Ermelo and Beaconsfield yards have been completed to use technology to reduce human error and improve efficiency, setting the scene for further roll-out of this technology at 14 other yards.

Further, the Orkney-Vierfontein branch line, linking the North West and Free State provinces, was reinstated.

Key Contracts and Suppliers
None stated.

On Budget and on Time?Too early to state.

Contact Details for Project Information
Transnet spokesperson Mboniso Sigonyela, tel +27 11 308 2458, cell +27 83 463 7701 or email mboniso.sigonyela@transnet.net; or Transnet group corporate and public affairs, Viwe Tlaleane, tel +27 11 308 2384, cell +27 83 979 0707, fax +27 11 308 2465 or email Viwe.tlaleane@transnet.net.