Transnet goes local for express delivery
THERE is a lot more than the mere supply of railway engines to Transnet’s massive and unprecedented order for more than 1 000 new locomotives.
This is the third major order Transnet has made for new locomotives as it continues to implement its R307-billion market demand strategy.
New rail projects are springing up across Africa as countries and mining companies repair their railway systems or build new lines. Times are good for the world’s relatively few locomotive and wagon builders who have won big contracts across the continent.
When the first new class 20E locomotive rolled out of the Pyramid depot late last year, Transnet CE Brian Molefe said the deal, for 85 of the new locomotives to be built in South Africa, marked a small step for Transnet and “a giant leap” for South Africa.
“It’s a different way of doing business,” he said.
“We are no longer just buying equipment. We have a huge opportunity to build and sell to the African continent.”
Transnet’s R50-billion locomotive order, announced two weeks ago, brings that ambition a step closer.
Just 70 of the new locomotives will be built overseas. The rest — 994 diesel and electric units — will be built in the Transnet Engineering workshops at Koedoespoort near Pretoria.
Due to a tight 42-month deadline, the order — the biggest of its sort in South African history — has been split among four locomotive manufacturers.
Transnet believed that no single manufacturer had the capacity to complete the entire order within the allotted time, Molefe said.
General Electric South Africa Technologies and China’s CNR Rolling Stock will build 465 diesel locomotives while Bombardier and China’s CSR Zhuzhou Electric Locomotive will supply another 599 electric locomotives.
The CSR Zhuzhou electric locomotives will cost R15-billion, with Bombardier’s share of the order worth R10-billion. The diesel locomotive order is worth R7.8-billion to CNR and R7.1billion to GE.
Molefe said the contract would create and sustain 30 000 jobs and contribute about R90billion to the local economy.
The key part of the deal is localisation. Transnet Engineering’s contribution to the programme is about 16%, of which a third would be outsourced to other local firms.
The local content requirements for the order is high — 55% for the diesels and 60% for the electrics.
“We intend to beat that number,” said GE South Africa president and CE Tim Schweikert.
Still aglow after completing in June an order of 143 diesel locomotives for Transnet, GE will rely on its developed supplier base and sourcing team.
Local content for the GE locos will include the cab structures and frames: the sophisticated electronic cabs and traction motors will also be assembled in South Africa. Only the prime movers — the diesel power plants — will be built overseas.
In terms of the newest order, the first six of GE’s 233 locomotives will be built at its plant in Erie, Pennsylvania, with the first unit due for delivery next year. Local production will start at the same time.
If Transnet realises its ambition to become an original equipment manufacturer, it will be a first for the state-owned rail operator, which has traditionally sourced stock from outside suppliers.
It will not be the first local firm to tap into the rail revolution sweeping Africa. A number of South African logistics firms already hire train crews and refurbish locomotives for state and mining railways.
But local manufacturers have a lot of catching up to do.
Where locomotive orders were once divided between a handful of European and US builders, many of the new contracts are going to Chinese companies who often offer better pricing and a palatable alternative to the products of former colonial masters.
Competing with the Red Dragon is likely to be the South African builders’ hardest task.