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Transnet signs deal for 96 diesel locomotives


Business Report

October 23, 2013

By Roy Cokayne

TRANSNET was to implement a locomotive fleet procurement “of unprecedented scale in South Africa’s history” worth about R35 billion for 1 064 locomotives in the next quarter, Public Enterprise Minister Malusi Gigaba said yesterday.

This new procurement programme was to meet and maintain the volume targets of Transnet’s market demand strategy in line with its R300bn seven-year investment plan.

It would be made up of 599 new dual-voltage electric locomotives and 465 new diesel locomotives and lay a platform for a seven-year strategic partnership between Transnet and its suppliers in the locomotive cluster, he said.

Gigaba was speaking at the official contract signing ceremony of Chinese manufacturer China South Rail (CSR) Zhuzhou Electric Locomotive as the successful bidder for a contract worth about R2.6bn for 95 electric locomotives for Transnet Freight Rail.

The winning bid was awarded to joint venture company CSR E-loco Supply in which CSR has a 70 percent stake and black economic empowerment (BEE) partner Matsete Basadi holds the remaining 30 percent.

Matsete Basadi comprises Matsete Industrial Services, owned by a group of qualified black professionals, and Matsete Dirang, a wholly-owned woman’s group, which both have a 10 percent shareholding in the joint venture. Five percent each is also held by the Matla Sechaba community trust and an employee scheme that still has to be established.

CSR president Xu Zongxiang said it had been working in the South African market for more than eight years and was familiar with local policies, especially BEE requirements.

Zongxiang said three potential partners had been recommended by its employees in South Africa and it had decided to partner with Matsete Basadi because of the consortium’s specialised commercial and industrial expertise and broad-based background.

Gigaba said the tender was historic because it marked the first time Transnet had procured locomotives to provide capacity for its key rail corridors from a Chinese original equipment manufacturer (OEM).

This reflected South Africa’s commitment to the Brics (Brazil, Russia, India, China and South Africa) strategic trade and investment relationships within this emerging economic community, Gigaba said. It also recognised the tremendous progress made in China to build globally competitive capabilities in sectors involving the manufacture of highly sophisticated capital equipment.

The tender awarded to CSR required the suppliers to meet a minimum threshold of 60 percent localisation, but he was unable to quantify how many jobs would be created.

Gigaba said the first 10 locomotives would be assembled in CSR’s factories in China and delivered by December next year, while the remainder would be made in South Africa.

“We believe this will inject massive economic benefits and lead to the development of intermediary sectors who will serve as suppliers because 50 percent of the capital budget will be spent on rail,” he said.

Delivery of the last batch of locomotives is planned for September 2014.

Gigaba said the scale of locomotive fleet procurement was expected to increase in the second phase of procurement in seven years time.

The capital expenditure programme put South Africa on the path of becoming one of a number of manufacturing centres competing on the basis of price and quality, he added.

“We are seeking to partner OEMs not just for the South African market but also for the purpose of exporting to the regional and global market.

“We would like to see our partners make South Africa the design and manufacturing hub for their regional activities, not just in the locomotive supply chain, but in all the spheres in which the OEM is active,” he said.

South Africa: Transnet finds R6bn in irregular pipeline spending


Mail&Guardian Online

By Lynne Donnely

March 16, 2012

Irregular expenditure on contracts relating to Transnet’s new multi-product pipeline amounted to an estimated R6.2-billion, it was revealed in Parliament this week. 

At a hearing by Parliament’s standing committee on public accounts (Scopa) the parastatal revealed that two contracts for engineering, procurement and contract management services on the controversial pipeline contributed a major share of the total of R8.3-billion of irregular expenditure disclosed in the company’s 2011 annual report.
The pipeline has been fraught with controversy because of delays and cost escalations, which increased from the originally budgeted R9.5-billion in 2006 to R23.4-billion now.
Full completion was intended for the first quarter of 2011 but was delayed until 2013, although certain sections have since become operational.
Rising costs and time delays prompted Public Enterprises Minister Malusi Gigaba to launch an independent review of the project.
The review, which is expected to be released next week, included three independent reports on the governance, engineering and project management aspects of the pipeline, as well as an independent legal opinion.

Pipeline tariffs affect petrol prices
The increases have also had an impact on pipeline tariffs as costs for the infrastructure are recouped. This in turn has an impact on petrol prices for South African commuters.
On Thursday the National Energy Regulator of South Africa announced a 22% increase in the pipeline tariff, which is expected to cause a 4c per litre hike in the petrol price.
The company’s acting chief financial officer, Anoj Singh, told Scopa that three contracts for procurement and management services totalling R6.57-billion were deemed irregular.Of these, one contract for services valued at about R300-million was unrelated to the pipeline. The contracts had been concluded in 2004-2005 and 2006-2007.

He said, however, that in all three cases Transnet had received value for money on the contracts, even though procurement procedures had not been complied with.

For this reason, the contracts were not classified as fruitless or wasteful expenditure.

Contracts awarded without following procedure
The first contract for the pipeline was awarded after an individual without the delegated authority signed the agreement. The second was deemed irregular after it was found that internal policies and procedures had not been followed because internal controls in awarding the contract were not applied. But this was in the first stages of the pipeline project, said Singh, and contributed the smallest amount to the combined pipeline irregular-expenditure total of R6.57-billion. He could not tell the committee the individual worth of pipeline-related contracts…Read more.

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