South Africa's Transnet Orders 1,064 Locomotives from China, GE and Bombardier

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Pursuing the strategic goal of shifting more freight from the road system, South Africa's state-owned rail utility Transnet launched a $28 billion, seven-year plan in 2012 to modernize and expand rail networks, ports and pipelines under its control. The target is to raise general freight business volumes to an annual 170 million tons, from the current 82.6 million tons, by 2019.

The total target rail freight volume is 350 million tons by 2019, from the current 208 million tons. The tonnage above general freight business would come from dedicated coal and iron ore export lines, which are also being expanded and modernized.

This week, contracts were signed for the manufacture of 1,064 locomotives in deals worth almost $5 billion. Chinese companies took 56% of the orders. China South Rail (CSR) Zhuzhou will supply 359 electric locomotives to Transnet, and China North Rail (CNR) will supply 232 diesel locomotives. The balance of the total order will be made up by Bombardier (TO:BBD-b.To) (Montreal, Quebec) and GE (NYSE:GE) (Fairfield, Connecticut). All the units, except the first 70, will be manufactured in South Africa.

In a separate $250 million deal, CSR already has delivered 95 locomotives, which will soon join Transnet's service fleet after three months of testing.

The locomotives will be manufactured at Transnet Engineering's plants at Koedoespoort in Pretoria and in Durban. Brian Molefe, Transnet's chief executive officer, said that by the end of the manufacturing process, the state-owned entity will have sufficient knowledge to become an original equipment manufacturer (OEM). Procurement will create $8.5 billion in localization benefits, as well as about 30,000 direct and indirect jobs.

Transnet Engineering will have about 16% of the build program, with 33% outsourced to black engineering and manufacturing firms.

The Department of Trade requested that local original equipment suppliers have 55% local content for diesel locomotives and 60% for electric units. Molefe said that some suppliers might deliver localization spin-offs of 65% or higher and stimulate a domestic railways reindustrialization process, while creating the platform for the transformation of Transnet Engineering into an African rail OEM.

The first units are expected to be ready for testing within 15 months, and Transnet is hoping to receive the full complement of 1,064 locomotives within 42 months of the first delivery.

For related information, see June 29, 2013, article - Alstom's $5 Billion Rail Contract Moves South Africa's Industrial Base, and February 25, 2014, article - South Africa's Richards Bay Coal Terminal Ships Record 70.2 Million Tons in 2013.

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