It’s full steam ahead for Transnet
Company borrows billions to expand and win goods traffic
UPGRADE: Transnet acting group CEO Siyabonga Gama observes operations at the City Deep depot in Johannesburg ON Monday, Siyabonga Gama and representatives of six heavyweight financial institutions gathered in the 49th-floor boardroom at Transnet’s Carlton Centre headquarters and signed R12-billion worth of loans that the company will use to build more than a thousand locomotives.
Three days later, Gama, Transnet’s acting group CEO, was down at the railway’s vast container yard at City Deep in Johannesburg to mark the completion of an R800-million upgrade to facilities, part of Transnet Freight Rail’s aggressive move to capture goods traffic from trucks.
“We [Transnet] are eminently bankable,” said Gama, and it seems the banks agree.
The R12-billion club loan is being shared by Absa, Nedbank, and the Bank of China at R3billion apiece, and Futuregrowth Asset Management and Old Mutual Specialised Finance have lent R1.5-billion each. The loans, negotiated separately, mature in 15 years with a 54month grace period and were the result of Transnet marketing its long-term plans in a series of investor road shows.
Transnet has raised almost R50-billion to fund its programme to build 599 electric and 465 diesel locomotives for the rail division’s general freight business. The locomotive deal is part of Transnet’s market demand strategy, according to which it has spent R109-million on rail, port and pipeline infrastructure since 2012; that figure could top R500-billion by 2025.
“We are on track to cement our position as Africa’s leading infrastructure investor,” Gama said. Further investments of R340-billion to R380-billion are on the cards in the next decade.
When Transnet began its strategy in 2012, its rail division was enjoying the commodity boom. It poured money into coal and ore heavy-haul lines to keep up with mines’ demands for transport. That the slowdown in China and the slump in commodity prices have not scared off the banks says much for Transnet’s long-term plans.
“We are in the eye of the storm,” said Gama. “When we started the market demand strategy, the expectation was average growth of 5.8%. But it’s
PORT OF HAUL: Gantry cranes sit above a container ship in Durban. Transnet is planning to spend R340-billion to R380-billion within 10 years to expand capacity important that we pursue our countercyclical strategy and that we work closely with our customers.”
Gama said Transnet would need to become much more agile and reduce its dependence on minerals and mining.
For the rail division, that will mean focusing on getting more traffic from the fast-moving consumer goods and manufacturing sectors — the sort of general freight that US railroads have proved can be rail-friendly, even in economies dominated by truck transport.
The container terminal upgrade is a key part of that strategy. Shippers once regarded the City Deep terminal as a place where containers went to die. Now its new rail-mounted gantries and container handling equipment, and state-of-the-art tracking software, have doubled capacity to 400 000 twenty-foot equivalent units a year.
The terminal handles about 60% of Gauteng’s container traffic. To get a bigger piece of that heavily contested pie will mean speeding up transit times from Durban if rail is to compete with trucks. Ravi Nair, the rail division’s acting CEO, said on Thursday that transit times in the key Durban-Gauteng corridor had dropped from 27 to 16 hours, thanks to express trains.
Transnet would continue with its R26-billion investment in its manganese heavy-haul line from Hotazel to Port Elizabeth.
The plan to build a railway across Swaziland to relieve pressure on the ErmeloRichards Bay coal line is also expected to move ahead next year. “We are just waiting for the finalisation of the business case,” Gama said.
The 146km railway will cost an estimated R17-billion and could have its first trains in 2017. Swaziland Railway will build 96km, with Transnet constructing the South African portion.
Transnet also planned to spend R9-billion building vessels for oil and gas projects, and would go ahead with a scheme to deepen three berths in Durban harbour to 14.5m so the port could accommodate very big container ships, said Gama.
Transnet’s ambitions extend beyond South Africa’s borders. It has said its locomotive programme is a first step to becoming an original equipment manufacturer for railways around the world.
Gama would not comment on recent news reports that the company was one of eight group bidders to build a 2 135km railway network in Oman.
“People say our practices and infrastructure are comparable to the US and Europe,” he said. Transnet, led by its rail engineering division, would be interested in rail projects in Africa “without us being too thin on the ground in South Africa”.
People say our practices . . . are comparable to the US and Europe
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