State-owned Passenger Rail Agency of South Africa (Prasa) is in the final negotiations with its preferred bidder, the Cabinet-endorsed Gibela Rail Transportation consortium, comprising French multinational Alstom and local engineering company Actom, for the first phase of the R51-billion contract.
Auditing and advisory firm KPMG led the feasibility study and is now the lead financial and commercial adviser for the procurement stage of the contract, as well as the joint lead on the project’s localisation advisory team.
This is according to KPMG head of global infrastructure and projects group DeBuys Scott, who adds that Prasa and the consortium are concluding the financial transaction, whereby Prasa hopes to replace its entire fleet with 7 200 units over two phases within 20 years, at an expected cost of R123-billion.
During the first phase, 3 600 passenger trains will be designed and constructed for Prasa. Phase 1, starting in 2015, will take ten years and the second ten-year phase will begin in 2025.
The rolling stock fleet replacement project marks the first time that an entire stock fleet, in South Africa, is being replaced by new rolling stock. About one-third of the current fleet – more than 5 000 units – cannot be repaired economically.
As part of the contract, the successful bidder will establish and equip a new factory to design and manufacture new rolling stock for Prasa.
Scott estimates that it will take about two years for the factory to be built and expects the first new trains to be completed by the last quarter of 2015.
He says the rolling stock fleet replacement project will break new ground with regard to localisation and industrialisation, as the new factory will enable South Africa to establish a rail industry.
“A rail industry doesn’t exist in the country and, therefore, the monitoring of and ensuring that localisation does take place are vital. That’s why a team was established to advise on the impact of localisation through this project. A total of 65% of the contract must be localised for the duration of the project,” Scott says.
The project will not only employ local people but will also enable South Africa to build and supply its own rolling stock. This will ensure safer rolling stock that is supplied more quickly, Scott adds.
Further, as the biggest economy on the continent, he says, South Africa’s export potential for passenger rail into Africa is huge and, once a rail industry is established, this will improve the manufacturing sector of the country.
Scott believes that it is a positive time in the local transport industry, as different modes of transport are being invested in. “The long-term economical benefits will be great and will, in turn, impact positively on the country’s long-term development.”
South Africa is a developing country and there is development in every sector, which requires investment, he says. Therefore, there needs to be a balance between spending and getting the best value for money, which requires prioritisation on spending.
However, Scott says, through transport projects such as Prasa’s, foreign exchange is brought into the country.
“There are also more international investors entering the South African market, bringing their skills base to the country and transferring these skills to South Africa’s workers. It’s a long-term benefit for us,” Scott states.
Further, he says, while transport projects are not as severely affected by the strikes, stability is needed, as the country’s currency has weakened, which has had a direct impact on the acquisition of the trains for Prasa.