Transnet Wants GE to Have Permanent South Africa Train Plant

Transnet SOC Ltd., South Africa’s state-owned ports and rail operator, wants companies including General Electric Co. (GE) to set up permanent train-assembly plants in the nation to create jobs and a new industry.

GE has started putting together 233 locomotives in the country after Johannesburg-based Transnet in March awarded it, Bombardier Inc. and two Chinese companies a 50 billion-rand ($4.7 billion) contract to supply 1,064 diesel and electric trains over four years.

“We want to keep these factories working,” Transnet Freight Rail Chief Executive Officer Siyabonga Gama, 47, said in an interview at Bloomberg’s Johannesburg office yesterday. “We want to make sure that there are at least 50, maybe to 150 locomotives on an annual basis that will be built here so that we sustain the productivity.”

TFR, as Transnet’s biggest unit is known, is spending about two-thirds of the company’s 312 billion-rand expansion budget over the seven years through March 2019 on a new fleet, upgrading and building new lines after decades of underinvestment in the rail infrastructure of Africa’s biggest coal and iron-ore producer. TFR is boosting capacity to haul those commodities as well as steelmaking ingredient manganese.

GE and CSR Corp. (1766), China’s biggest trainmaker and a partner of Bombardier, are assembling locomotives in Pretoria, the capital, with CSR responsible for 359 units. Bombardier and China CNR Corp.’s (6199) facilities will be in the eastern port city of Durban, with each working on 240 and 232 trains respectively.

Locomotive Parks

“We are looking at locomotive parks,” Gama said. “The key thing for us is we are trying to establish an industrial base for locomotives in the same manner as we have a key industrial base for the automotive industry in this country. This must not be a one-off.”

Gama was referring to government-subsidized programs that started in 1995 and have seen automakers including Toyota Motor Corp. (7203), Daimler AG’s Mercedes Benz and Volkswagen AG operate plants in South Africa to benefit from rebates. That helped create an export industry and provide jobs in a country where more than one in four people is unemployed.

GE’s facility east of Pretoria has produced more than 160 locomotives for African railway customers and the company supports the plant with ongoing skills-development programs, GE South Africa President and CEO Tim Schweikert said in an e-mailed response to questions.

GE Investment

It is investing 500 million rand in a local research and development facility and a further 200 million rand in “supplier development aimed at supporting and enabling an environment” for and small and medium enterprises to thrive and be active participants in growing the economy, he said.

Bombardier’s transport unit is reviewing options, Sandy Roth, a spokeswoman, said by phone from Paris yesterday.

TFR wants private funders to invest about 100 billion rand in transportation projects to help address bottlenecks, Gama said on Aug. 7.

The new locomotives are replacing a current fleet of about 2,400 that have an average age of 32 to 34 years, Gama said. The renewal program will cut the number of models on TFR’s tracks to four from 29 now, making maintenance easier as the newer trains are self-diagnostic, he said.

“We were facing an untenable situation since probably about 1998,” he said. “We are only trying to resolve it holistically now. We are moving away from the Stone Age to the Industrial Age. We have been doing a lot of patchwork on rogue locomotives, putting technicians with train drivers” on journeys to repair the aging machines, he said.

Sanctions against South Africa under white-segregationist apartheid rule that ended in 1994 forced TFR predecessor Spoornet to make customized replacement parts and dismantle engines for equipment to keep other locomotives going, he said.

About 48 new trains will enter service monthly from June 2016, he said.

“We are quite confident we have enough time” to deliver, Gama said. “We are 14 to 15 months away.”

To contact the reporters on this story: Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net; Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net; John Viljoen at jviljoen@bloomberg.net Ana Monteiro, Sarah McGregor

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