The engineering unit of State-owned freight logistics group Transnet has set a target of securing 40% of its revenue from third-party orders by 2021, which would represent a material increase from current levels of around 12%.

The bulk of Transnet Engineering’s R10-billion in yearly revenues is currently derived from Transnet Freight Rail (TFR). However, newly appointed chief advanced manufacturing officer Thamsanqa Jiyane tells Engineering News Online that the unit has been restructured to improve its prospects of securing non-TFR work.

It has set up four customer-facing business units – locomotives, coaches, wagons and maintenance – and has consolidated its internally focused wheels, rotating machine and foundry businesses to support its facilities in Cape Town, Pretoria, Germiston, Bloemfontein and Durban.

The strategy is designed to enable Transnet Engineering to transition from being an in-house engineering service provider to an original equipment manufacturer (OEM) of locomotives, passenger coaches and wagons, as well as a leading African provider of maintenance, repair and overhaul (MRO) services.

The company has already invested approximately R300-million in the research and development (R&D) of its so-called Trans-Africa Locomotive, which will be officially unveiled by the end of August.

The product, which is designed for operation in shunting yards and branch lines, has been designed “from scratch” by the utility’s R&D unit, which is housed at the Council for Scientific and Industrial Research, in Pretoria. Transnet Engineering employs some 500 engineers, across disciplines, who are working on the light diesel locomotive, as well as other products and solutions.

Jiyane reports that it intends partnering with other established OEMs on the development of a heavy-haul offering, owing primarily to the large R&D expense associated with such locomotives, which runs to billions of dollars.

The intention is to begin static testing of the Trans-Africa Locomotive in the coming three months and to start marketing the solution in parallel with the dynamic-testing phase, which is expected to continue for up to nine months.

Designed to operate at a maximum speed of 100 km/h, the locomotive will be marketed to mining companies, as well as other African utilities, with one mining company having already expressed an interest in buying up to 12 of these locomotives.

Separately, Transnet Engineering is in advanced talks with four African countries establishing MRO facilities to perform local maintenance services. Feasibility studies are currently under way and Jiyane is optimistic that its first non-South Africa MRO facility will be set up in a Southern African Development Community country during 2017.

Jiyane, a mathematics and science teacher by training, before turning his academic and career attention to logistics and business and joining Transnet in 2001, says the platform for the OEM strategy has been laid through the supplier development spinoffs associated with TFRs recent locomotive purchases.

NO LOCAL-CONTENT ‘CRISIS’

He, therefore, believes the current localisation commitments associated with the purchase of 1 064 diesel and electric locomotives from four foreign suppliers could provide a major further stimulus for Transnet Engineering and the rail-engineering sector more generally.

Transnet has divided the R50-billion contract 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.

Jiyane is aware of simmering unhappiness with the performance of some of the OEMs against prescribed local-content thresholds, which are 60% for electric locomotives and 55% for diesel. However, he says it would be premature to suggest that the programmes were failing, noting that the OEMs were still gearing up to begin with the domestic portion of manufacture and assembly.

“I don’t believe there is a crisis,” he adds, while acknowledging that the OEMs are having some challenges with the component designations outlined for localisation by the Department of Trade and Industry (DTI) and the National Treasury.

“However, there is a strong commitment from all sides to ensure delivery on the local-content commitments.”

This was in line with sentiments expressed by Trade and Industry Minister Dr Rob Davies recently, who insisted that, while there were challenges, government was determined to ensure that the minimum local content thresholds in rail were achieved.

Processes were also under way to ensure that the South African Bureau of Standards (SABS), which will verify local content on behalf of government, receives the information it requires to complete its assessment.

In addition, the Rail Road Association, the DTI, the SABS, Transnet and Passenger Rail Agency of South Africa have agreed to create a framework for improving the monitoring and implementation of local-content commitments associated with the country’s multibillion-rand rail investments.