The rail and freight arm of logistics group Transnet plans to spend up to R44bn over the next five years on expanding rail capacity and infrastructure.

Transnet Freight Rail (TFR) CE Siyabonga Gama said the unit had spent R29bn since 2004 on upgrading the lines, wagons, locomotives and monitoring centres.

“We’ve made tremendous progress … over the next five-year period we expect to spend another R42bn to R44bn,” he said this week.

TFR has faced widespread criticism for neglecting the rail infrastructure, but Gama said the recent investments — five times what was put into the sector every year before — would pay off.

He said efficiency had been improved by up to 40% on average, trains were more reliable, and the unit was spending more time on running the trains, rather than on maintaining them.

Gama said TFR had an annual capacity of bringing up to 74-million tons of coal to port. He said TFR had railed 5,4-million tons in February after heavy rains hurt mine output.

A lack of rail capacity and years of underinvestment have created bottlenecks for mining companies, which say they cannot get all their minerals to port.

But Gama said the fact that TFR only managed to transport about 62-million tons last year was not only due to derailment and signalling problems, as volumes were simply not there.

The Richards Bay Coal Terminal, one of the world’s major coal exporters, has an annual capacity to export up to 76-million tons of coal, and this is due to be expanded to 91-million tons by July.

The expansion is expected to supply smaller mining companies with export capacity, but has raised questions about how the additional coal would be brought to the port if Transnet does not deliver an expanded rail infrastructure.

Gama said that with the new 110 locomotives to be delivered soon, TFR could raise capacity on the line to 86-million tons, but he said the infrastructure would only be able to handle 81-million tons. He said TFR would not pay to improve the latter until mining companies committed to long-term contracts to ensure demand and a financial back-up for the necessary investment.

“Let’s sign long-term contracts, let’s see the volumes … then we are in business,” he said.

Contrary to media reports, Gama said, TFR had not been approached by any mining companies to engage in a public-private partnership to increase capacity, even though the company had indicated three years ago that it was open to talks.

“If people wanted to share the pain, we would welcome it… but no one has approached Transnet officially,” he said.

The company held discussions with Kumba Iron Ore 12 months ago to form a partnership but it was waiting for Kumba to drive the process forward.

TFR has expanded the iron ore line capacity to 47-million tons, and expects to raise it to 60-million by 2013. It was also studying the prospects of going beyond that, Gama said.

PUBLICATION: Business Day
AUTHOR: AGNIESZKA FLAK
DATED: 13th March 2009