Business
South Africa Upgrades Port, Rail Infrastructure To Boost Exports
Rail Infrastructure Upgrade
To get goods to and from the ports requires a strong, modern rail system and two thirds of Transnet’s Market Demand Strategy is geared toward rail infrastructure and “rolling stock,” which have suffered as a result of decades of underinvestment.
In fact, Transnet Freight Rail has one of the largest locomotive acquisition programs in the world. The company is buying and building thousands of locomotives and equipment, as well as expanding their port-rail resources and shifting cargo from road to rail – which reduces the cost of doing business and carbon emissions.
Although they are a state-owned company, Transnet points out that their outside funding initiatives are on the strength of their financial position. Last year they raised $1.34 billion and during the current year they are targeting another $1.4 billion from a range of sources.
Transnet recently announced a loan agreement with Nedbank, with a guarantee from US Export-Import Bank. The funding is for 53 of the 143 diesel locomotives they have built with US-based General Electric. The funding is in two stages. The first, concluded last year, was for the initial 47 locomotives, and the new agreement is for the remaining 53 locomotives.
Keeping it local, the locomotive acquisition program has stringent supplier development requirements that range between 54 percent and 65 percent, which means the General Electric diesel locomotives were actually built at Transnet’s engineering facilities in Koedoespoort, east of Pretoria.
An additional 95 electric locomotives have been contracted to a consortium led by China South Rail’s Zhuzhou Electric Locomotive Company. That award stipulated that only 10 of the locomotives be built in China, with the rest – like the GE agreement – to be built at Transnet’s engineering facilities.
Last March, Transnet said it had signed a “groundbreaking” $5 billion financing agreement with the China Development Bank, deepening the country’s relations with China. China South Rail, meanwhile, is hoping for an additional contract to supply the additional 599 electric and 465 diesel locomotives Transnet has already budgeted for.
In all, Transnet has obtained approval to acquire 1,064 diesel and electric locomotives at an estimated total cost of $3.5 billion. Transnet has also invested roughly $920 million a piece in the maintenance and overhauling of locomotives and rail cars.
