The privatisation of the country’s ports, railways, roads and other transport infrastructure has proved a thorny issue in South Africa over many years. Attempts to encourage private sector operation have generally produced a great deal of opposition.
Transnet’s proposals, therefore, carry political connotations. Yet at a time when the parastatal is being asked to do more and more but government finances are weak, it may have more success in gaining official backing for its policy.
In addition, its revenues have been affected by a three-year downturn in the price of the main dry bulk commodities it carries: coal and iron ore. Prices may have recovered somewhat but the outlook is still uncertain. Transnet is certainly one of the biggest companies on the African continent, although it is difficult to make a precise comparison because it is entirely state owned.
It is important to remember that one of the country’s biggest port facilities is already privately owned. Richards Bay Coal Terminal (RBCT) is owned by some of South Africa’s biggest coal mining companies, with smaller stakes held by empowerment interests.
Private sector companies also provide a wide range of logistics services, with Grindrod, in particular, developing a network covering the whole country and beyond. Grindrod is also expanding its own coal terminal at Richards Bay.
Transnet CEO Siyabonga Gama first announced the policy at the eThekwini Maritime Cluster’s annual maritime summit in Durban in early April and the approach has been fleshed out since then. Gama said that the country needs R400bn ($30.25bn) in new logistics infrastructure but Transnet was unable to pay for it alone, so at least 25% should come from the private sector, which he believed had the required capital at its disposal.
Transnet has been criticised in recent years for its high port charges in comparison with many other countries around the world. However, Gama says that his company merely prices according to market conditions, while many other ports benefit from government subsidies. Indeed, according to the World Bank Global Logistics Competitiveness Report, South Africa is regarded as more competitive than China, India, Russia or Brazil.
Focus on Durban
By far the biggest planned Transnet project is the construction of a brand new container port on the site of the old Durban International Airport, about 25km south of Durban. However, given current financial constraints and lower than expected trade volumes, there is no fixed timetable for its development. At present, Transnet is focusing on improving its infrastructure elsewhere.
Work will begin this year on deepening three berths at Durban Container Terminal Pier 2 from 12.8 metres to 16.5 metres. This will allow access for the new generation of Super Post Panamax vessels at low tide as well as high tide.
The chief executive of TNPA, Richard Vallihu, said: “The continued investment in infrastructure and modernisation of our flagship Port of Durban is pivotal in meeting the ever increasing demands of the maritime industry, in particular, the ever increasing size of container vessels pulling into our ports.”
The company is also seeking to improve the efficiency of its operations in ways that do not require capital outlay. For instance, at the start of April it introduced an appointment system for the delivery of containers at Durban’s Pier 1.
Haulage companies are required to book a slot for delivery in order to spread activity over the course of the week, avoid congestion and reduce allegations that drivers pay bribes to avoid the queues that build up at peak times. Transnet has set a goal of ensuring that all trucks are processed within 35 minutes.
Some freight forwarders oppose the policy, arguing that they cannot be so precise as they are subject to delays from their own customers. Transnet Port Terminals’ general manager for container operations in KwaZulu-Natal, Julani Dube, said: “We have done the necessary research and tracked all movements and transactions over the past year to know where the problems are and what is realistically achievable if we get the necessary buy-in from stakeholders to implement the container appointment system.”
Eskom and Transnet need to borrow billions more than anticipated in 2016, National Treasury revealed in its 2017 Budget Review on Wednesday.
Even as Eskom’s financial performance improved in 2015/16 as a result of a 12.7% tariff hike and a revenue increase by R10.5-billion to R161-billion, it still required borrowings for its new build and electrification projects.
In addition, Transnet grew revenues by 1.7% to R62.2-billion in 2015/16. While it has spent R122.4-billion on capital expenditure in the last five years, it plans capital investments of R273-billion in the next seven years, Treasury said.
These massive expenditure projects mean the entities take up the biggest share of government’s borrowings.
“In 2016/17 it (borrowing) will amount to R254.4-billion, or 5.8% of GDP,” it said. “This is R32.8-billion more than was projected in the 2016 Budget, reflecting a larger consolidated budget deficit and higher borrowing estimates by State-owned companies – primarily Eskom and Transnet.”
In 2015/16, borrowing by the six largest State-owned companies – the Airports Company of South Africa, Eskom, Sanral, SAA, the Trans-Caledon Tunnel Authority and Transnet – reached R128-billion.
Eskom and Transnet accounted for 74% of the total, Treasury explained.
Eskom increased planned borrowings in 2016/17 increased from R46.8-billion to R68.5-billion. “The increase results from Eskom’s revised assumptions of cost savings and lower-than anticipated tariffs during the current price determination period,” it said.
Over the next seven years, Transnet plans capital investments of R273-billion, to be funded by earnings and borrowings against its balance sheet, it said.
Foreign debt funding was lower than estimated, reaching R29.5-billion compared with an expected R42.6-billion.
“The six companies project aggregate borrowing of R102.6-billion in 2016/17 and R307.1-billion between 2017/18 and 2019/20.
“Gross foreign borrowings are expected to account for the majority of total funding over the medium term, largely as a result of Eskom’s efforts to obtain more developmental funding from multilateral lenders.”
In 2016, Eskom concluded a deal with the China Development Bank to get a $500-million loan facility.
However, Eskom is likely to need additional equity injections in the coming three to four years, according to Nomura emerging market economist Peter Montalto. “Its last equity injections stabilised ratios at very low levels, but are still a constraint,” he said in December. “Nuclear generation would severely leverage Eskom’s balance sheet without additional equity injections.”
Referring to the “injection”, Treasury said the R23-billion equity injection and the conversion of the R60-billion subordinated loan to equity helped shored up Eskom’s balance sheet.
“State-owned companies are responsible for much of the infrastructure on which the economy relies,” Treasury said. “Eskom, Transnet and … Sanral account for about 42% of public-sector capital formation.”
“Over the past year, Eskom continued its capital investment programme – bringing new generating capacity to the electricity grid – and maintained steady power supply. Transnet continued to invest in getting more freight from road to rail.”
Meanwhile, contingent liability exposure to independent power producers (IPPs) is expected to decrease in 2019/20.
“Government has committed to procure up to R200-billion in renewable energy from IPPs,” Treasury said. “As at March 2017, exposure to IPPs – which represents the value of signed projects – is expected to amount to R125.8-billion. Exposure is expected to decline to R104.1 billion in 2019/20.”
Government began to categorise power-purchase agreements between Eskom and IPPs as contingent liabilities in 2016.
“These liabilities can materialise in two ways. If Eskom runs short of cash and is unable to buy power as stipulated in the power-purchase agreement, government will have to loan the utility money to honour its obligations.
“If government terminates power-purchase agreements because it is unable to fund Eskom, or there is a change in legislation or policy, government would also be liable. Both outcomes are unlikely.”
It said Eskom is expected to use R43.6-billion of its guarantee in 2016/17 and R22-billion annually over the medium term.
It said SAA has used R3.5-billion of a R4.7-billion going-concern guarantee, with the remainder likely to be used in 2017/18.
China and South Africa signed deals totalling $6.5bn during President Xi’s four-day tour of the country last week.
Among the agreements is a $2.5bn loan to Transnet, South Africa’s state-owned rail operator, and a $500m loan for the Eskom, the hard pressed state power company, for nuclear co-operation.
The loans will also be used to buy Chinese made mechanical and electrical equipment.
During the visit Xi sought to reassure his hosts that China would still act as the prime mover for Africa’s economies, both in terms of investment and as a market for African raw materials.
“China and South Africa are large developing countries and emerging markets, and we are good friends and good brothers who understand and support each other with equality and mutual trust, comprehensive cooperation, win-win reciprocity and common development,” Xi said, according to a communiqué from the Chinese embassy in South Africa.
The recent slowing of the Chinese economy, and a fall of 40% in Chinese investment in the first half of the year has caused concern in Africa.
Earlier in the week, Xi visited Zimbabwe, a stop that resulted in the signing of 10 economic agreements, including the expansion of the southern African nation’s largest thermal power plant.
Isolated from the west, Zimbabwe’s president Robert Mugabe has turned to China for investment in transport, power and water. Now the China’s Export Import Bank has agreed to provide more than $1bn for a 600MW expansion of Hwange thermal power station, to be undertaken by China’s Sinohydro.
The funding is the final element of the $1.5bn deal, which was agreed in principle in October last year.
Fruit South Africa (FSA) aims to have 10% of exports transported to ports by rail in the years to come, cutting down on both costs and carbon emissions.
The shift – mostly focused on citrus, avocados and table grapes – would represent a massive change for an industry that currently moves 99% of the fruit by truck, covering distances that are sometimes more than 1,000km (621mi) per trip.
An FSA study estimates the trucks carrying fruit to South Africa’s ports travel 480 million km (298 million mi) per year, at a cost of ZAR969 million (US$72 million).
This was not always the case. As recently as the mid-2000’s up to 90% of the country’s citrus exports – and citrus is the country’s leading fruit export in volume – were shipped by rail to Durban and Port Elizabeth.
But the advent of containerized shipping meant the train wagons previously used were no longer compatible with the new high-packed pallets.
In response the Rail Transport Working Group (RTWG) was formed, previously as part of the Fresh Produce Exporters’ Forum (FPEF) with its ‘Tonnage off Tar’ initiative, and has been a part of FSA’s portfolio since this year.
With support from state-run rail and port group Transnet, the initiative is now seeing its first signs of significant progress.
“This is an excellent initiative as it will save costs for fruit growers and shippers, reduce traffic on the country’s roads as well as be of benefit to our environment,” Fruit South Africa CEO Dr Konanani Liphadzi said in a release.
“We are in ongoing discussions with government on this issue and the initiative is currently receiving valuable support from Government.”
In the 2015 citrus season it is estimated 900 containers from Tzaneen in the northern province of Limpopo to Durban and Cape Town, and the figure is expected to reach 1,500 containers. This compares to just 300 in 2011.
“Our key focus is to vastly increase the use of rail to reduce logistics costs, reduce the time the fruit spends in the supply chain and to add value to fruit producers. South Africa; through the joint operations of Transnet, has the ability to be the global leaders in refrigerated container [intermodal] transportation,” said Citrus Growers of Southern Africa (CGA) logistics development manager Mitchell Brooke, who is an FSA representative in the working group.
“For fruit that is destined for shipment to the Med, UK, Europe, Scandinavia and Russia via the Atlantic Ocean route, our strategic outlook is to prioritize that all railed containerized fruit exports should be transported to Cape Town for export on the SAECS (Southern Africa Europe Container Services) and MSC Europe liner services.
“Currently 70% of all South African fruit exports are shipped on these services to these markets each year.”
While citrus make up the majority of the fruit transported by rail at the moment, 4PL.COM Logistics Cape operational manager Richard van Tonder said improvements in the system would pave the way for other crops.
“Most of the fruit currently transported by these trains is citrus but as the service is extended with improved infrastructure and service delivery, during the next year it is likely that it will receive more support from the deciduous and subtropical fruit industries,” said van Tonder said, who is a project leader in the working group.
“What we need for this project to be successful in the long term is buy in from the fruit export companies. If they bring the cargo we will bring the trains.”
Van Tonder explained the current service could only transport 38 containers per train, but Transnet would soon be making 10 extra carriages available, customized so that each train could transport 48 containers per trip.
Transnet SOC Ltd., the South African ports, rail and pipelines operator, is pursuing opportunities to expand on the continent and in the Middle East as the state-owned company seeks to redress an over-dependence on its home market.
The utility wants 25 percent of revenue to come from outside South Africa by 2025, acting Chief Executive Officer Siyabonga Gama, 48, said in a Sept. 10 interview at Bloomberg’s office in Johannesburg. That compares with 4.2 percent of its 61.2 billion rand ($4.5 billion) in the 12 months through March this year. The company has started a process to form a new unit, to be called Transnet International Holdings, which will oversee the foreign expansion, he said.
We have a fairly good idea where it’s going to come from and how,” Gama said. “We are not just looking at Africa, we are also looking at the Middle East. There are a number of things that we are working on.”
Transnet leadership believes the company depends too much on South Africa, where it operates more than 20,000 kilometers (12,430 miles) of rail network and facilitates 98 percent of South Africa’s global trade through
its eight ports. The utility will seek to apply its expertise and skills acquired at home to ports, rail and pipelines in new markets, Gama said.
The opportunities for expansion include consulting, training, and facilities-management contracts, as well as competing for, and operating concessions, Gama said. The international unit will be capitalized with “a decent amount” of funding, he said. Transnet last week signed a contract in Cotonou, Benin, to advise on the port there’s container terminal.
“We will try and improve their efficiencies, with the view that we will
make some further investments once we have helped them with the port
master plan,” Gama said of the Cotonou deal. “It’s small but it indicates
the direction that we are taking in a number of these markets.”
Transnet already operates in other African countries including Mozambique, Botswana, Zimbabwe and Zambia. Most of the foreign activities are rail-related, Gama said. The company also sees opportunities to invest in new natural-gas pipelines in South Africa, as well as in countries including Tanzania and Mozambique.
Gama, the head of Transnet’s freight rail unit, was named acting CEO of the company in April, after Brian Molefe was seconded to head Eskom Holdings SOC Ltd., South Africa’s state power company. Transnet Chief Financial Officer Anoj Singh has also moved to Eskom on an acting basis.
South Africa’s iconic Blue Train could be recapitalised and expanded following the announcement of a new public–private partnership between State-owned freight logistics utility Transnet and tourism and leisure group Sun International. Print Send to Friend 0 5 The five-star luxury “hotel on wheels” – which was first launched in 1923, upgraded in the 1930s and re-entered service in 1946 after the Second World War – remains a popular tourist attraction for domestic and, especially, international tourists.
However, with occupancy rates having fallen to 70%, along with profitability, in April, Transnet invited bidders to submit proposals to partner with it in developing and piloting a new marketing strategy for an initial period of up to 18 months. Sun International was among two of five initial bidders short-listed and on Tuesday acting Transnet CEO Siyabonga Gama announced that the gaming and hospitality company had been selected as the winning bidder.
A joint business plan would be developed over the coming six months, outlining a new “value proposition” for the train, which was likely to include new investments, route expansions and possibly the integration of gaming into the experience. Also on the cards was the creation of package deals that made it more accessible to domestic tourists. Domestic tourists generally viewed the train as out of reach, with packages of between R13 000 and R21 000 per person sharing, depending on the season.
Speaking at the announcement, held in the Blue Train Lounge at the historic Pretoria Station, in Gauteng, Sun International CEO Graeme Stephens said it was premature to offer details as to the future commercial terms and investment plans. However, he promised that Sun International would include black economic-empowerment partners in any future commercial arrangement. Stephens saw significant opportunity to extract synergies between the Blue Train and the group’s own five-star properties, including the Table Bay Hotel, The Palace of the Lost City and the Royal Livingstone, in Zambia – destinations that were all accessible by rail.
“In the preliminary phase it’s about tapping into the understanding we have of the various source markets and Transnet’s understanding of rail to evolve a business plan,” he explained, adding that investment and routing decisions would flow from that plan. Gama indicated that Transnet, which was focused on freight logistics, but had retained the Blue Train as its last passenger-rail business offering, hoped to tap into Sun International’s understanding of the fast-evolving tourism market, as well as its package and booking systems.
He expected Blue Train occupancy to rise to between 90% and 100%, but stressed that Transnet was also keen to back a growth strategy, which could involve investments into additional trains and coaches and the opening of new route networks. Transnet’s goal was to recapitalise the Blue Train, “which may include building new state-of-the-art train sets”, in partnership with private sector investors and operators. “At the moment we have two sets of the Blue Train and in future we may be able to build many more to extend the reach and footprint of the Blue Train,” Gama said.
Transnet recently allocated two new electric locomotives to the Blue Train, which employed over 60 people. But the current train set, which was almost 40 years old, had become expensive to maintain and operate. “We believe there is an opportunity to optimise the Blue Train by including more destinations, such as the national parks, and to recapitalise it to make it a much more sustainable offering.”
Cape Town – Transnet chief financial officer (CFO) Anoj Singh has been seconded to Eskom in the same role for six months, according to the state utility on Thursday.
Singh’s secondment is effective from 1 August 2015 and he will attend both the Eskom board of directors and the executive committee meetings, Eskom said in a statement.
“He will be responsible for driving all aspects of the company’s finance strategy, including the R250bn funding plan.”
On June 25, former Eskom finance director Tsholofelo Molefe resigned, after being suspended along with three other senior executives, including former CEO Tshediso Matona. He also resigned, along with executive for group capital Dan Marokane.
All the executives were on Wednesday cleared of any wrong doing, the Eskom board announced, after an inquiry into company was concluded. Eskom said the inquiry report was being finalised and would be shared with government in due course.
READ: Suspended Eskom execs cleared of wrongdoing
Singh will be primarily tasked with transforming the company’s finance function, aligning it with key strategic priorities of generation, funding and build programme, while enhancing the approach to tariff applications, Eskom said.
According to Eskom, Singh is a chartered accountant who has been Transnet’s CFO for the past six years. He led Transnet’s treasury operations, which saw the company raising billions in both domestic and international markets, Eskom said.
Singh has extensive experience in financial strategy development and execution, capital projects assurance, treasury, corporate finance, investor relations, tax and funding for regulated businesses, Eskom said.
It added that he has won several accolades in recognition of his outstanding performance and leadership. These include: Public CFO of the year award for two consecutive years in 2014 and 2015 respectively, Strategy Execution Award and Compliance and Governance Award, among others.
Before joining Transnet, he worked as an accountant at a listed company and as an auditor.
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Transnet Bursaries 2016 : Latest Bursary Programme
Transnet is offering the Latest Bursaries 2016 in South Africa. The Transnet Bursary Programme 2015/2016 is available at different Transnet sections for those candidates who are looking for valuable training and student financing schemes. The Transnet Bursary fundswill be available for the hard working, deserving and talented candidates, so you should avail these 2016 Bursaries at Transnet, South Africa.
You should get the full advantage of the available bursaries 2016 at Transnet. Transnet is one of the most popular group of companies to work for in South Africa, and it can pay for your expenses through the Transnet Bursaries 2016 programme. Interested applicants should download the Bursary Application Form and forward it to the relevant department.
Transnet Bursaries 2016 in South Africa: New Bursary Schemes
Transnet is a focused and integrated freight transport company which is essentially driven by five operating divisions Transnet Freight Rail, Transnet Engineering, Transnet National Ports Authority, Transnet Port Terminals, Transnet Pipelines and specialist units (Transnet Capital Projects and Transnet Property).
Full-Time Bursaries are awarded annually according to the employment needs of the company. All our full-time students are viewed as potential employees – depending on vacancies being available after successful completing their qualifications.
Fields of study:
Electrical (Heavy Current)
The comprehensive Transnet Bursary, covers the following:
Accommodation and meals
Students are allowed to study at a South African University of their choice who offers the relevant fields of study.
Closing date for applications : 31 July 2015
How to apply for Transnet Student Bursaries 2016: Available bursaries in South Africa
If you comply with the minimal requirements or eligibility criteria as mentioned above, you should Click Here and download the application forms and submit to the bursary office:
150 Commissioner Street
Or these may be submitted via Fax on 086 571 63 75
Terms & Conditions apply.
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Freight logistics group Transnet has secured a R2.8-billion loan from Germany’s KfW Development Bank to fund part of its 1064 locomotives acquisition programme.
Transnet would use the proceeds to fund the acquisition of 240 electric locomotives to be built in cooperation with Bombardier Transportation at Transnet’s manufacturing facilities in Durban.
Transnet acting CEO Siyabonga Gama and KfW head of infrastructure in Southern Africa Dr Jan Martin Witte signed the agreement on Monday.
“The agreement is evidence of Transnet’s focus on agility and innovation in raising the required funding to execute its R336-billion rolling seven-year infrastructure investment programme – the Market Demand Strategy.
“Agreements like this are an affirmation of Transnet’s successful efforts in strengthening its financial position and confirm that the company is on the right track. They are an attestation of the attractiveness, commercial viability and bankability of Transnet and its projects from reputable international investors,” the State-owned group said.
The loan would mature in 15 years, with a five-year grace period in which Transnet would only pay interest.
In line with the company’s currency risk mitigation policy, the agreement was negotiated in rand terms and, therefore, had no currency risk. The cost of the loan was in line with the company’s average cost of debt.
The German federal government had issued a partial guarantee for the loan. German ambassador to South Africa Dr Horst Freitag commented that the German government was “deeply impressed” that Transnet was investing R50-billion to manufacture the 1 064 locomotives.
In March 2014, Transnet awarded a contract for the building of 1 064 diesel and electric locomotives to four global original-equipment manufacturers.
The company awarded China South Rail (CSR) Zhuzhou Electric Locomotive and Bombardier Transportation contracts to build 599 electric locomotives and; General Electric Technologies and China North Rail (CNR) Rolling Stock contracts to build 465 diesel locomotives.
All but 70 locomotives would be built at Transnet Engineering’s plants in Koedoespoort, Pretoria and Durban. “Germany supports South Africa’s strategy to increase the efficiency and capacity of its freight transport sector, aiming for a modal shift from road to rail.
This will reduce carbon dioxide emissions and make an important contribution to protecting the climate,” said Freitag. Earlier this month, Transnet concluded a R30-billion loan facility agreement with China Development Bank to fund the acquisition of 232 diesel and 359 electric locomotives being built in cooperation with CNR and CSR respectively.
Further, Transnet, in March, announced that it had secured separate funding agreements with the Export-Import Bank of the US and Export Development Canada, worth a collective R13-billion, to fund the acquisition of locomotives from General Electric and Bombardier Transportation.
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The power crisis is something that South Africa would have to bear with for at least the next two years, Deputy President Cyril Ramaphosa said on Wednesday.
“That is going to be a problem that will stay with us for… two years. We can’t run away from that,” he said during a question and answer session in the National Assembly. He said many countries around the world were facing an energy crisis, including the US.
“The good thing with us is we are not sitting on our backsides. We are addressing the problem.” He said state owned enterprises had accelerated development in the country over the past 10 years. “Notable progress has been made in turning around Eskom.
I did say the appointment of the acting CEO [Brian Molefe] has been a really good shot in the arm of Eskom,” Ramaphosa said. “Governance and leadership challenges at Eskom are being addressed as we speak. “South African Airways and the South African Post Office are also being turned around.”
‘They are going to be turned around’ He said there were a number of reasons why parastatals could underperform, including governance problems. “[However] we must dispel the myth that people who run parastatals are ill-equipped to do so. Many of them are good professionals and they need to be supported and assisted in their work.
” He said Transnet was an example of parastatal that was “operating well”. “It may well appear that we are pumping billions [into parastatals], and we are. But that is how it works,” Ramaphosa said. “They are going to be turned around.” He said almost all companies have high and low periods, including those on the stock exchange.
“When they go through their down time, you don’t jettison them and throw them away.” Ramaphosa was also asked about reports that PetroSA could declare a loss of between R9-billion and R14.9-billion for the 2014-15 year, which would the largest incurred by a state company. He responded that many companies in the oil sector were having financial troubles, however he did not speak specifically on PetroSA’s reported loss.
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