South Africa State Transport Company Plans International Growth

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.

Source: bloomberg

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