Alstom Consortium's $6 Billion South African Rail Contract Promises 69% Local Content

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The Gibela Rail transportation consortium of Alstom S.A. (ENX:ALO) (Paris, France) and the local company Actom (Boksburg, South Africa) has been awarded a $6 billion contract by the state-owned Passenger Rail Agency of South Africa. The contract covers the supply of 3,600 passenger coaches over a 10-year period from 2015 to 2025, and maintenance until 2033. Currently, Prasa operates a fleet of 4,538 coaches, of which 90% were procured in the 1950s.

Prasa CEO Lucky Montana said that of the seven bidders, only three were able to meet the technical requirements of the bid fully. He also explained that Alstom had performed well on its commitments to business development and job creation. The program would create about 8,088 jobs direct jobs and an overall total of 33,000 jobs, he said. By the second year of the contract, a local content level of 69% is expected to be achieved.

The other bidders were: Bombardier Incorporated Bombardier Incorporated (TSX:BBD.B) (Montreal, Quebec), CAF (MSX:CAF) (Beasain, Spain), China South Rail, China North Rail (which are both located in Beijing, China), Dudula Rail consortium (ABB South Africa and Stadler, Switzerland) and the CSR Beijing/Wictra South Africa consortium. The contract won by Gibela is the first phase of a $14.5 billion recapitalization program to add 7,200 new metro coaches by 2035. Prasa requires that a local factory should be fully operational by June 2016, with the delivery of test trains scheduled for the first quarter of 2015 and operational trains by the last quarter of 2015. The government says that the program will drive the revival of South Africa's rail engineering sector and the re-industrialization of the country.

Alstom is having discussions with Transnet Rail Engineering concerning technology transfer and training. Alstom is also involved in bidding for a Transnet Rail Freight contract, which could involve the direct investment in South Africa of more than $2 billion.

Under the passenger rail contract, $3.8 billion would go to subcontracting black economic empowerment entities, and $625,000 and $188,000, respectively, would be procured from small businesses and entities owned by black women.

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