Electro-Motive Diesel, Alstom Seek Roles in South Africa's Locomotive and Rolling Stock Renewal

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources--(Sugar Land, Texas)--The rail network and delivery component for South Africa's major, long-term infrastructure development continues to create manufacturing and engineering opportunities. This week, a joint venture was announced between the Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois) subsidiary, rail products and services company Progress Rail Services (Albertville, Alabama) and Caterpillar group company Electro Motive Diesel (EMD) (LaGrange, Illinois) with the local company Barloworld (JSE:BAW) (Sandton, South Africa), a supply chain distribution partner of Caterpillar in South Africa and other world regions.

EMD produced locomotives in South Africa some decades ago, but withdrew from the country as a result of anti-apartheid sanctions. Many of the 800 locomotives that were supplied to South African operators are still in operation. The company will again produce locomotives for Transnet's re-equipment scheme, but the timescale for the re-establishment of an assembly plant has not yet been announced. EMD CEO Billy Ainsworth said in Johannesburg that the company "could move pretty quick."

Some locomotive components will be imported, but localization of content will be a key part of the build program. Citing Brazil as an example, Ainsworth said that the first locomotives off the new assembly line in Sete Lagoas, in the state of Minas Gerais, had a local content approaching 50%, with the aim to increase this to 60%.

EDF is planning to benefit from the supply chains of other Caterpillar group companies already in the country and leverage this for the new venture.

Ainsworth said that EDF was not coming to South Africa solely as a locomotive company, saying that they had a very broad net and could serve customers on a one-stop shop basis. EDF has two divisions in locomotive and railcar services and engineering and track services, including signaling.

EDF is looking to access opportunities in the whole sub-Saharan African market, where it sees a long-term investment program taking advantage of a region with inflation under control and low interest rates.

In the same week, Alstom Transport (OTC:AOMFF) (Paris, France) was meeting with potential suppliers to partner with in tendering for the $15 billion rolling stock fleet renewal program for the Passenger Rail Agency of South Africa (Prasa) (Pretoria, South Africa). The program will stretch over 20 years.

In April, Prasa released its request for proposals for the procurement of about 7,200 rail coaches, with 3,600 to be supplied by the manufacturer within 10 years and delivery starting in 2015. Prasa must retire about 33% of its current fleet through 2015. With an average age of 40 years, the fleet is a factor in the unreliable service currently being provided to 2.3 million daily commuters.

For related information, see April 17, 2012, article - South Africa's Transnet to Boost Freight Capacity with $38 Billion Investment Program.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.