TRANSNET’s ambitious R300bn infrastructure spending plans over the next seven years would significantly reduce the cost of doing business in both South Africa and the rest of Africa, Transnet CEO Brian Molefe says.
Mr Molefe told a breakfast briefing in Port Elizabeth on Friday that the infrastructure development programme would reduce the overall cost of doing business in South Africa by 19%.
The state-owned company’s “market demand strategy” over the next seven years would focus heavily on turning around the “unfortunate” situation that South Africa and the rest of the continent found themselves in, where a freight market skewed towards road transport over rail created substantial additional costs of transport and doing business in the region.
Transnet’s spending plans, announced earlier this year, included upgrades and expansions of existing ports and rail lines, the construction of new rail lines, and improving port efficiencies.
There is a logjam in many sectors of the economy — most significantly in mining — and Transnet has included in its plans the construction of a rail line into Swaziland to enable Transnet to meet current and future demands and allow exporters to get their goods out of the country.
The region had a “highly underdeveloped freight system”, and for South Africa to become competitive, this would have to be addressed and the bulk of goods transport be shifted to rail.
With the improved infrastructure in place, Mr Molefe said the supply-chain costs of businesses in South Africa could be lowered by as much as 23%, as transporting by rail was much cheaper than by road.
“There needs to be a decisive shift from road to rail to enable economic growth and to create jobs,” Mr Molefe said.
Transnet National Ports Authority CEO Tau Morwe said in an interview that the group was looking at ways to optimise operational efficiencies at ports, with a “key focus” being to reduce the time ships spent in ports, as this would reduce the costs of trade.
The R1bn relief programme for exporters of manufactured goods announced by President Jacob Zuma in February had been a “very successful” programme, but Mr Morwe said it was “too early to say” whether it could be extended.
Mr Molefe said the capacity of the Port of Ngqura would be vastly increased, from handling 800,000 containers a year now to 2-million in 2019. The port would focus largely on manganese ore but Transnet also envisioned it becoming a “trans-shipment hub” between the East and the West.
Mr Molefe said tariff increases at ports were likely to increase over the seven-year upgrade period by inflation plus 2%, but this would be balanced by better efficiencies in rail and port services, and was necessary to fund the group’s expenditure programme.
Nelson Mandela Bay Business Chamber CEO Kevin Hustler said in an interview that business would probably like to see tariff increases “in line with inflation” to avoid adding to the costs of doing business, but the improvements and expansion of ports would “enhance the ease of doing business”, and would be beneficial to South Africa’s relationships with Africa and its Brics (Brazil, Russia, India, China and South Africa) partners.
Mr Molefe said funding for the extensive programme would not be an issue, and that 70% of the R300bn would be financed through Transnet’s operating cash flows. Foreign investors were incredibly keen to invest in the programme, he said, and funding for the current year was already secured.
In a recent debt auction in the US, Transnet aimed to raise $1bn, and the auction was eight times oversubscribed, with $8bn in orders, he said.
Article source: http://www.businessday.co.za/Articles/Content.aspx?id=177692