South Africa awards R50bn worth of rail contracts
17 March 2014
State company Transnet on Monday awarded contracts totalling R50-billion to two Chinese and two North American companies to build 1 064 diesel and electric locomotives, as part of a seven-year, R300-billion expansion of South Africa's railways, ports and pipelines.
Together, this amounts to the biggest locomotive supply contract in South Africa's history, and the largest single infrastructure investment ever by a South African corporate.
Contracts for the supply of 599 electric locomotives were awarded to Chinese firm CSR Zhuzhou Electric Locomotive and the local arm of Canadian company Bombardier Transportation, along with their local empowerment partners.
And contracts for 465 diesel locomotives were awarded to the local arms of General Electric and of state-owned Chinese company China CNR Corporation, along with their local empowerment partners.
"This marks a significant milestone in the company's history together with
substantial socio-economic benefits for South Africa," Transnet Group chief executive Brian Molefe said in a statement. "The drive to modernise our fleet is
intended to improve reliability and availability of locomotives. This will improve customer satisfaction, ultimately leading to our crucial goal of road-to-rail migration
The contracts come with stringent local content, skills development and training commitments, in line with the government's Supplier Development Programme, which aims to grow South Africa's manufacturing capacity by localising the production of imported machinery and equipment.
Transnet said the four suppliers had exceeded the minimum local content criteria for
rolling stock of 60% for electric locomotives and 55% for diesel locomotives.
All but 70 of the locomotives would be built at Transnet Engineering's plants in Koedoespoort, Pretoria and Durban, with Transnet Engineering sharing approximately 16% of the total build
programme - about a third of which will be outsourced to local emerging engineering and manufacturing firms.
"In total, the localisation elements are expected to contribute over R90-billion
to the economy," Molefe said, adding: "This transaction is intended to transform the South African rail industry by growing existing small businesses and creating new ones. We are going to create and preserve approximately 30 000
In terms of the contracts, the last of the 1 064 new locomotives will roll
off the production line within three-and-a-half years. "In other words, at the programme's peak, we will be producing 480 locomotives per year at 48 per month," Molefe said.
The majority of the locomotives will be deployed in Transnet Freight Rail's general freight business, which is all cargo except for dedicated heavy haul lines for iron ore and coal. Transnet aims to grow its freight volumes from the current 207-million tonnes to 350-million