Alstom's $5 Billion Rail Contract Moves South Africa's Industrial Base

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Henri Poupart-Lafarge, president of Alstom Transport (PTC:ALSMY) (Paris, France), said that the $5 billion-plus contract for 3,600 rail coaches for the Passenger Rail Agency of South Africa (PRASA) would be his company's largest. He was speaking at the AfricaRail 2013 exhibition in Johannesburg this week.

PRASA's preferred bidder for the contract is Gibela Rail Transportation, which is made up of consortium leader Alstom and the engineering company Actom (Boksburg, South Africa), a local distribution arm for Alstom. The two companies will announce their black economic empowerment partners later this year.

It is reported that PRASA and Gibela have completed negotiations on the supply of the coaches over the next 10 years, and all the contracts for the project will be signed by the end of July. The final contracts will define and apportion the risks of materials escalation and the performance of the trains.

In the original tender for the project, state-owned logistics and transport company Transnet was designated as the builder of the new 36-hectare factory in a new industrial park in Ekurhuleni (formerly Germiston), part of the traditional heavy engineering and industrial conurbation east of Johannesburg.

"We see this as building a strong base for exporting in the future," Poupart-Lafarge said. "We need this to become a worldwide base."

PRASA CEO Lucky Montana said that project would see the establishment of a new greenfield industrial complex, which would house the rolling stock manufacturing plant, as well as a number of component suppliers and training facilities. He said that Transnet was going to play a pivotal role in the industrial park and was expected to participate in the manufacturing process. Chiming with Poupart-Lagarge's comments, he stressed that the industrial complex would become a hub for rolling stock manufacturing for Africa and the rest of the world.

Montana said that the South African government would assume the risk of the factory, as it would remain a South African asset after the PRASA contract was completed.

PRASA has secured $4 billion in government funding for the contract, which will be the first tranche in the total of $10 billion for the overall rolling stock renewal program, Montana said. Negotiations are under way with the national treasury for the balance of $1.1 billion for the project's funding.

The first train unit is scheduled to be delivered in 2015. It is to be the same "world class" train product that Alston is supplying to Australia.

As South Africa goes through a painful process of industrial seasoning as it "re-industrializes," the PRASA contract is a key plank in the process and will deliver quality service to the population, as well as turning a confident face to world markets.

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