Transnet plans to hike investment in infrastructure to R93.4 billion over the next five years and intends to float bonds in Europe and the US to attract foreign capital.

Appearing before three parliamentary committees yesterday, acting chief executive Chris Wells told MPs that the company – which has been without a chief executive since Maria Ramos left a year ago – had raised R19bn in the debt capital markets in the financial year to March.

About R4bn of this was raised on foreign markets, Wells reported.

The state-owned utility, which focuses on freight transport, had planned to spend R80.5bn over the next five years, but Wells said it had the capacity to expand its capital spending. However, he said, it would require significant investment from funders to enable the programme to be implemented.

“We have just listed a global medium notes bond programme which will enable us to issue bonds in the US and the European markets, as the circumstances are advantageous for us.”

Spending on infrastructure, which is part of the government’s capital spending programme, ballooned from R6.6bn in 2005/06 to R21.9bn in 2009/10. The capital spending programme amounts to nearly R800bn. In 2005/06 R53.4bn was spent, said Wells, noting that about 500 000 jobs had also been created.

Spending tapers off over the next five years to about R20bn in 2010/11, dropping to about R10bn in 2013/14.

Transnet has a 30-year development plan for the maintenance and expansion of its rail, pipeline and port infrastructure. It expects the freight business to double in the next 20 years. BR>
Transnet rail planning director Francois Meyer told MPs that it was envisaged that a ring rail system would be built around Gauteng, providing a dedicated freight line so that it did not have to share slots with passenger services on existing routes in the Johannesburg/Pretoria area.

He acknowledged that cost constraints might mean that it could be reduced “to half a circle” arcing round the east of Johannesburg and linking to the existing rail network.

Meyer also said that a freight terminal was needed in the longer term, which would carry 5 million twenty-foot equivalent units (TEU) a year. This would be two and a half times the size of the massive 2 million TEU a year Chicago freight terminal, one of the biggest in the world.

Opposition MP Pieter van Dalen suggested to Wells and his team that the various state-owned enterprises, including Transnet and Eskom, put their heads together to encourage “a big bang move” from road to rail. The team included Vuyo Kahla, the group executive in the office of the chief executive; Moira Moses, the group executive for Transnet capital projects; and Lennie Moodley, the chief operating officer of Transnet pipelines.

He suggested that they start by building rail links between the coal mines supplying Eskom’s power stations to take trucks off the roads.

Meanwhile, Kahla opposed suggestions that the arms of Transnet should be separated – or even sold off. Other countries around the world were envious of Transnet’s integrated business embracing ports, rail, and pipelines, which provided operational efficiency for its customers.

However, Transnet said it was looking at concessions on non-core rail assets for private investors, including branch lines, which were underused.
PUBLICATION: Business Report
AUTHOR: Donwald Pressly
DATED: 4th February 2010