R40bn coal line

Finweek English Edition - - INVESTMENT -

not be in­cluded in the R310bn Mar­ket De­mand Strat­egy (MDS) first un­veiled by Pres­i­dent Ja­cob Zuma in his 2012 State of the Na­tion Ad­dress.

Transnet’s MDS casts a rel­a­tively wide net in that it also sets down plans for the ex­pan­sion of ports and new port equip­ment, as well as in­vest­ment in in­fra­struc­ture for South Africa’s iron ore and man­ganese in­dus­tries.

It also put aside funds for the coal freight ex­pan­sion of an ex­ist­ing rail­way line from Thabaz­imbi in the Lim­popo province to Richards Bay. At the mo­ment, the rail­way has a 4m tons a year (mtpa) ca­pac­ity, but the plan is to ex­pand it to 23mtpa by 2018.

Isn’t that enough given the rel­a­tive paucity of new coal pro­duc­tion com­ing on stream, es­pe­cially as the coal price at be­tween $70 and $75 per ton – nearly half its lev­els of three years ago – is hardly en­cour­ag­ing of new in­vest­ment.

Gama says that ex­pan­sion is ac­tu­ally a re-fit of a gen­eral freight line that he wants to re­vert again to gen­eral freight. The R30bn-R40bn sum is ac­tu­ally for a brand new line ded­i­cated wholly to coal.

Pub­lic-pri­vate part­ner­ships are not easy mar­riages to form – a point Gama ac­knowl­edges. “There is al­ways the prob­lem that peo­ple have the cash, but when we meet them, and the is­sue of pay­back time is dis­cussed, they never come back,” he said.

Typ­i­cally, State-owned en­ter­prises work on much longer in­vest­ment re­turns than the pri­vate sec­tor. The State also sup­ports pol­icy – in this case the growth of the black-owned ju­nior coal min­ing sec­tor – whereas pri­vate ven­tures want to know if the wor­thy cause will ac­tu­ally make money.

Still the pri­vate sec­tor has been en­cour­ag­ing of Transnet’s reach­ing out. The Cham­ber of Mines said that it had es­tab­lished “. . . a work­ing group to look into how the pri­vate sec­tor could par­tic­i­pate in the in­vest­ment pro­gramme”.

“We have started some rudi­men­tary dis­cus­sions with Busi­ness Lead­er­ship SA and some [mem­bers] have ex­pressed in­ter­est in it,” said Gama. “We would like to pilot some­thing.”

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