Traxtion commits to R1.5bn rail investment as part of SA’s Economic Recovery Plan
CAPE TOWN – Traxtion Group, the provider of rail services and solutions across the African continent, on Monday announced its intention to embark on a significant investment programme within South Africa’s rail sector.
This follows the Economic Recovery Plan presented by President Cyril Ramaphosa at the Joint Sitting of Parliament on October 15, where he announced that the State would be granting third-party access to the core rail network within the next 12 months.
Under this new policy private freight rail operators will be allowed to operate on the state-owned rail infrastructure alongside and complementary to Transnet.
In response to this policy change, Traxtion has announced an initial locomotive and wagon build programme of R1.5 billion upon conclusion of the appropriate access rights with Transnet.
Traxtion plans to invest a further R14bn to R17bn in locomotives and wagons over the next five years as part of a carefully scaled rolling procurement programme.
The initial investment has the support of Traxtion’s shareholders, including Harith General Partners, the leading Pan-African fund manager for infrastructure development across the continent, and Principle Capital, a London-based investment company.
Traxtion chief executive James Holley made the announcement as part of the Africa Rail conference’s keynote panel discussion “Open Access: New Business model, New Profits”. Holley was joined by Railroad Association chief executive Mesela Nhlapo and Abigail Kiernan, senior project engineer at the United Kingdom’s Network Rail.
Sipho Makhubela, the chief executive of Harith General Partners said: “We see Traxtion as the ideal vehicle to invest in a sector that we believe will add tremendous impetus to the economic recovery of this country. The rail sector will bring real benefits in terms of further industrial growth, and increasing the country’s industrial competitiveness and job creation.”
Holley, who has for some time advocated the advantages of open access to the core network for private rail operators said: “Traxtion is excited by the immense potential that the South African rail sector represents. Transnet has made significant capital investments in the sector and is one of the world’s largest rail companies.
“South Africa has a vast rail track infrastructure base and it is the excess network capacity that will enable the government to realise a rare number of wins with this policy shift.
“First, it is a win for Transnet as they will be able to earn a new revenue stream through ‘track access fees’. Second, it is a win for the rail industry as companies like Traxtion will be able to enter the market and grow the rail customer base. Third and most importantly, it is a win for South Africa’s ambition of stimulating general economic growth by leveraging off the benefits of expanded access to rail services.
“We have a long track record in the sector, having run trains for the last 33 years in South Africa and Africa. We have invested significantly over the years in skills, capacity, rolling stock and our Rosslyn Rail Services Hub.”
While open access is an exciting policy change, the big story is not necessarily the investment that will be made by Traxtion, but the positive impact that greater access to railway infrastructure will have on the broader economy. This includes the development of new businesses, mines and farms and the expansion of existing businesses that now will have access to rail services.
“When we invest in a train set to service a mine, for example, we will employ 40-50 people to run that service, but that mine could employ 5 000 people. That’s the real story, and that is why this is such an exciting policy shift,” Holley said.
Holley said the rolling stock investment programme would see Traxtion partner with a blue-chip OEM supplier for locomotives to be assembled in the local market. For the wagons, Traxtion would partner with domestic manufacturers.
Traxtion will target the movement of general freight in South Africa converting road movements to rail. Traxtion plans to partner with established freight logistic businesses and does not intend to invest in warehousing facilities or freight consolidation hubs.