Rail­way projects in Africa by Africa

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

WBHO, the listed con­struc­tion and en­gi­neer­ing group, is tar­get­ing rail con­struc­tion projects on the African con­ti­nent.

This emerged at a Competition Tri­bunal hear­ing last week about the pro­posed merger be­tween WBHO Con­struc­tion and Faku Fam­ily En­ter­prises (FFE) with Grindrod Rail Con­struc­tion South Africa (GRC SA) and Grindrod Rail Con­struc­tion Com­pany (GRCC), which are part of the listed in­te­grated logistics ser­vice sup­plier Grindrod.

The tri­bunal ap­proved the merger with­out con­di­tions.

Lindiwe Khu­malo, ap­pear­ing for the Competition Com­mis­sion, said there was a three-year re­straint of trade be­tween the par­ties and the ge­o­graphic scope of the re­straint was the con­ti­nent of Africa, in­clud­ing Mau­ri­tius and Mada­gas­car.

Khu­malo said the com­mis­sion had as­sessed the re­straint and found it was rea­son­able.

How­ever, Medi Moke­una, a tri­bunal panel mem­ber, ques­tioned if it was rea­son­able for the re­straint to ap­ply to the whole of Africa.

Op­por­tu­ni­ties

David Col­man, the di­vi­sional fi­nan­cial di­rec­tor at WBHO Con­struc­tion, high­lighted that they were cur­rently work­ing in 12 or 13 African coun­tries but had more than 50 to 60 rail op­por­tu­ni­ties through­out Africa that they were track­ing.

Col­man said these op­por­tu­ni­ties could lead to WBHO Con­struc­tion expanding into 20 to 30 other coun­tries in Africa. How­ever, he said only one or two rail op­por­tu­ni­ties were closed each year. “They are ex­tremely rare to get awarded and we track them for over two or three years. That is why it’s very im­por­tant to not only look at the coun­tries that GRCC is work­ing in, but all the op­por­tu­ni­ties we have been track­ing and spend­ing money on for the last two years.”

An­drei Wes­sels, the chair­per­son of the tri­bunal panel, said the ac­quir­ing and tar­get firms ap­peared to have dif­fer­ent views on the po­ten­tial growth in this mar­ket.

Col­man said a lot of in­fra­struc­ture had to be built in South Africa and there was a com­ple­men­tary re­la­tion­ship be­tween the civil and rail­ways side of these op­por­tu­ni­ties.

He said WBHO Con­struc­tion’s new re­la­tion­ship with FFE es­tab­lished GRC SA as a 51 per­cent black-owned com­pany, which would al­low them to cap­i­talise on ten­der op­por­tu­ni­ties in South Africa is­sued by Transnet, the Pas­sen­ger Rail Agency of South Africa, Sa­sol and Eskom.

Col­man added that WBHO had been ac­tively look­ing deeply into Africa, such as Ethiopia, Ivory Coast, Zam­bia and Uganda, and had as­sem­bled con­sor­tiums that in­cluded the De­vel­op­ment Bank of South­ern Africa “as Africa In­cor­po­rated”.

Kenn Ver­ster, the head of cap­i­tal projects at Grindrod, said Grindrod was pri­mar­ily a freight logistics busi­ness and its orig­i­nal strat­egy for buy­ing into GRCC was to use the in­ter­nal con­struc­tion ca­pa­bil­ity for an op­por­tu­nity they saw both in South Africa but more around the African con­ti­nent to de­velop logistics in­fra­struc­ture.

In terms of the trans­ac­tion, WBHO Con­struc­tion will ac­quire 87.5 per­cent of GRCC from Grindrod Hold­ings and FFE the bal­ance and ac­quir­ing a 51 per­cent stake in GRC SA on com­ple­tion of the ac­qui­si­tion.

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