Capital Investment by Transnet Logistics Group Critical for Growth in South Africa- Minister Malusi

Massive capital investment by logistics group Transnet will become a major driver of economic growth in South Africa, Public Enterprises Minister Malusi Gigaba said on Thursday.

Gigaba, whose area of supervision also includes South African Airways, arms firm Denel, power utility skom, and nuclear power station Koeberg, said South Africa was well placed as a key player in southern and eastern Africa thanks to extensive fleet procurement by Transnet.

Minister Gigaba spoke at the 4th investment forum of the 19-member Common Market for Eastern and Southern Africa (COMESA) in the Emirates city of Dubai, where he led a high-powered delegation of government and business leaders. Some 1,000 government, policy and business leaders are attending.

Like other African railways, Transnet was confronted with major infrastructure problems, Gigaba said, explaining that the locomotive and wagon fleet at Transnet Freight Rail, an operating division of Transnet, was on average 26 years old.

"As a result, Transnet plans to spend billions of rands (hundreds of millions of dollars) on capital expenditure for rail related equipment and infrastructure as well as expanding maintenance and repair capacity at Transnet Rail Engineering, which is responsible for the manufacture and repair of Transnet's rolling stock," Gigaba said.

"The massive recapitalization programme of Transnet is regarded as having the potential to become a major driver for economic growth in South Africa. Much attention and effort is being given to increasing local spend and to use this capital expenditure programme to entrench world class technologies, suppliers and service providers in South Africa," he said.

He said South Africa's Competitive Supplier Development Programme (CSDP) aimed to reduce the import content of the capital and associated operational expenditures, while increasing the long term economic benefits for the local supplier industry

Whilst volumes in other Southern African Development Community (SADC) countries are not sufficient to warrant a CSDP programme, consolidation of demand provided an opportunity to ensure a steady state of investment to deliver benefits of a CSDP type programme for the region.

Gigaba said South Africa offered the region "the opportunity to utilise the CSDP and Transnet Rail Engineering capabilities to contribute to maintenance capability in the region as well as the regional rolling stock leasing pool.

Gigaba also spoke in support of the North-South (transport) Corridor launched in April 2009, saying South Africa's approach to integration was about addressing the supply-side constraints and focusing on real economy cooperation between member states.

The North-South Corridor Pilot Aid for Trade Programme is a joint COMESA-EAC-SADC initiative. Its aim is to reduce the time and costs of road and rail travel along the two priority corridors: Dar es Salaam corridor linking the Dar es Salaam port to the Copperbelt, and the North South Corridor which links the Copperbelt to the southern ports of South Africa.

The Pilot Programme in the rail sector focuses on the back-bone rail systems along the North South Corridor (essentially the NS railway system from the South African border, through the Copperbelt to the Democratic Republic of the Congo, and the rail system feeding the Port of Dar es Salaam.

The pilot Aid for Trade programme proposes concession agreement studies, upgrading and restructuring of the Tanzania-Zambia Railways (Tazara), extension of the Northwest Railway, strengthening the Southern African Rail Association and regional operating agreements, upgrading of Victoria Falls to Bulawayo Railway and the establishment of a regional locomotive and wagon leasing pool.

By: Department of Public Enterprises, Republic of South Africa

 

This article was originally posted on South Africa Business Communities

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