---

State transport investment 'going ahead'

27 August 2009

South African state transport company Transnet says it remains committed to an R80-billion capital investment programme over the next five years, despite the recession, and expects to spend a record R21-billion in the current financial year.

Releasing its annual report last week, the company said it spent R19.4-billion in the financial year ended 31 March, bringing to R53.3-billion the total amount invested over the last four years.

"This is cumulatively more than the total capital expenditure of the core business divisions in the previous 15 years," the company said in a statement, adding that capital investment over the next three years would amount to R57.7-billion.

Transnet expects up to R35.4-billion of this amount to be financed through borrowings and debt capital markets, while the rest will be financed by cash generated from operations.

The company said the capital investment programme, which forms part of the government's economic stimulus measures, is one of its success stories.

"The records we have set since we launched our investment programme are a source of great pride, not only for Transnet, but for South Africa as a whole," said Transnet chairman Fred Phaswana. "Few companies have the capacity to manage a programme as large as we have."

Creating capacity

In line with the company's growth strategy, there has been a discernable shift in spending patterns towards creating capacity ahead of demand.

The bulk of the year's spend – 56% or R11-billion – was spent on expanding operations, while the balance (44% or R8.5-billion) was spent on replacing existing infrastructure.

Rail was by far the biggest beneficiary, with some R9.2-billion or 47% of the total, followed by ports, which invested R7.3-billion, and pipelines, which invested R2.8-billion.

The latter mainly went to the purchase of pipes, pumps and valves for the new multi-product pipeline being built to replace the existing pipeline between Durban and Gauteng province.

Transnet acting CEO Chris Wills explained that the company had reviewed its entire capital investment programme, and had taken the necessary steps to respond to the deteriorating economic environment, though the major and strategically significant projects, most of which were under way, were proceeding as planned.

"This confirms our commitment to invest in our infrastructure to create, in a cost-effective manner, appropriate capacity for our clients ahead of demand," he said. "Given the current drop in demand as a result of global economic conditions, we will implement a delayed phasing-in of certain investments."

"However, we will remain focused on priority projects where capacity is needed to prepare for the upturn when demand improves."

SAinfo reporter