221012 Transnet CE (center)Brian Molefe,Public works Minister Malusi Gigaba shakes hands with Mr Li Zhixhuan from China South Railways at their Locomotive fleet renewal programme that took place in Pretoria South Africa .photo by Simphiwe Mbokazi 453
221012 Transnet CE (center)Brian Molefe,Public works Minister Malusi Gigaba shakes hands with Mr Li Zhixhuan from China South Railways at their Locomotive fleet renewal programme that took place in Pretoria South Africa .photo by Simphiwe Mbokazi 453

Transnet signs deal for 96 diesel locomotives

By Roy Cokayne Time of article published Oct 23, 2012

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Roy Cokayne

TRANSNET was to implement a locomotive fleet procurement “of unprecedented scale in South Africa’s history” worth about R35 billion for 1 064 locomotives in the next quarter, Public Enterprise Minister Malusi Gigaba said yesterday.

This new procurement programme was to meet and maintain the volume targets of Transnet’s market demand strategy in line with its R300bn seven-year investment plan.

It would be made up of 599 new dual-voltage electric locomotives and 465 new diesel locomotives and lay a platform for a seven-year strategic partnership between Transnet and its suppliers in the locomotive cluster, he said.

Gigaba was speaking at the official contract signing ceremony of Chinese manufacturer China South Rail (CSR) Zhuzhou Electric Locomotive as the successful bidder for a contract worth about R2.6bn for 95 electric locomotives for Transnet Freight Rail.

The winning bid was awarded to joint venture company CSR E-loco Supply in which CSR has a 70 percent stake and black economic empowerment (BEE) partner Matsete Basadi holds the remaining 30 percent.

Matsete Basadi comprises Matsete Industrial Services, owned by a group of qualified black professionals, and Matsete Dirang, a wholly-owned woman’s group, which both have a 10 percent shareholding in the joint venture. Five percent each is also held by the Matla Sechaba community trust and an employee scheme that still has to be established.

CSR president Xu Zongxiang said it had been working in the South African market for more than eight years and was familiar with local policies, especially BEE requirements.

Zongxiang said three potential partners had been recommended by its employees in South Africa and it had decided to partner with Matsete Basadi because of the consortium’s specialised commercial and industrial expertise and broad-based background.

Gigaba said the tender was historic because it marked the first time Transnet had procured locomotives to provide capacity for its key rail corridors from a Chinese original equipment manufacturer (OEM).

This reflected South Africa’s commitment to the Brics (Brazil, Russia, India, China and South Africa) strategic trade and investment relationships within this emerging economic community, Gigaba said. It also recognised the tremendous progress made in China to build globally competitive capabilities in sectors involving the manufacture of highly sophisticated capital equipment.

The tender awarded to CSR required the suppliers to meet a minimum threshold of 60 percent localisation, but he was unable to quantify how many jobs would be created.

Gigaba said the first 10 locomotives would be assembled in CSR’s factories in China and delivered by December next year, while the remainder would be made in South Africa.

“We believe this will inject massive economic benefits and lead to the development of intermediary sectors who will serve as suppliers because 50 percent of the capital budget will be spent on rail,” he said.

Delivery of the last batch of locomotives is planned for September 2014.

Gigaba said the scale of locomotive fleet procurement was expected to increase in the second phase of procurement in seven years time.

The capital expenditure programme put South Africa on the path of becoming one of a number of manufacturing centres competing on the basis of price and quality, he added.

“We are seeking to partner OEMs not just for the South African market but also for the purpose of exporting to the regional and global market.

“We would like to see our partners make South Africa the design and manufacturing hub for their regional activities, not just in the locomotive supply chain, but in all the spheres in which the OEM is active,” he said.

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