JOHANNESBURG - Transnet has launched a new company, Transnet International Holdings (TIH) to facilitate multiple rail, port and pipeline projects in the rest of Africa.
TIH, which has a capital injection of R100 million, held its inaugural annual general meeting this week to, among others, appoint a board. According to Transnet chief executive Siyabonga Gama, the new entity would commence trading on April 1.
Gama said the new entity would not be a burden on Transnet’s balance sheet. “The idea is to ring fence TIH to make sure that it does not take risks that are not managed,” said Gama.
TIH would have to leverage the R100m “and see how from a structured finance perspective they are able to bring in different partners. The key issue is to have projects that can run on their own and are feasible,” he said.
Gama said Khaya Ngema was the group executive responsible for overseeing TIH, while Petrus Fusi, Transnet’s general manager for cross-border strategy, is the new chief executive of TIH. Transnet Board of Directors, Department of Public Enterprises and National Treasury have already approved the establishment of the company.
He said Transnet’s plans to diversify had long been on the cards. In terms of Transnet’s new strategic blueprint, called Transnet 4.0, the entity prioritised geographic diversification “using the core competencies of port, railway, pipeline and gas. How do we assist other countries in terms of regional integration? That is the space that TIH is going to be in.”
INTO AFRICA: Transnet chief
executive Siyabonga Gama.
Ngema said the Transnet 4.0 strategy required the logistics group to participate in the broader logistics value chain. “We are there to provide logistics solutions for those countries. We are helping to integrate the logistics within the continent,” he said.
He said the company was currently executing a number of projects in certain African countries such as Nigeria where the group had a major rail projects. But the parastatal was looking beyond individual projects. “Our ambitions for Nigeria are not the rail projects. We want to participate in the different facets of the entire logistics system,” he said.
Gamas said Transnet had identified a total of 18 countries for growth opportunities. He said TIH had given itself seven years to establish presence in the 18 countries. “It is not something that will happen overnight. At the moment they are focusing on Zambia, Zimbabwe, Nigeria and Senegal,” said Gama.
He said TIH was cognisant of risks such as inability to repatriate funds and changes in currency. “Political stability is an important aspect. That is why in a continent with 54 countries, we think we are comfortable to start with 18. We are not going to be everything to everyone. It is a sober and rational market penetration strategy underpinned by the understanding of risk and commercial imperatives,” said Gama.
Fusi said the first wave of projects were ready for implementation. “(In terms of governance), they are sitting with the Minister of Finance for concurrence and Minister of Public Enterprises for approval in terms of the Public Finance Management Act (PFMA),” he said. He said the parastatal would give details of these later.
Transnet last month handed mainline locomotives, wagons and passenger coaches to National Railways of Zimbabwe (NRZ) in a transaction valued at more than R2 billion. This followed a public tender by NRZ for its recapitalisation. “It has been awarded to Transnet. Cabinet has given approval. The framework agreement has been signed. We are now negotiating a suite of agreements relating to the 25 year concession. However, Zimbabwe’s needs are immediate. They needed an immediate solution,” said Fusi.
He said the handover of the assets was part of the interim solution for Zimbabwe. He said Transnet wanted to conclude the Zimbabwe transaction by the end of July.
Fusi said in Zambia, TIH was part of the revitalisation of the Zambian Railways Limited. He said this entailed leasing locomotives and wagons to Zambia Railways in order to boost its capacity to handle bulk cargo. He said the costing of the revitalisation was not complete but was expected to be approximately R100m. “The infrastructure is in bad shape,” he said.
He said in Nigeria, TIH was part of a consortium in a $2bn railway concession project. Other members of the consortium are General Electric, Dutch-based APM Terminals and China's Sinohydro Consortium. ”We are negotiating a 30-year concession,” he said.
The project entails overhauling that country’s ageing railway system and covers two lines - one from Lagos to Kano in the north and another from Port Harcourt to Maiduguri.