China’s plan to fix SA’s logistics and energy crises

When Public Enterprises Minister Pravin Gordhan asked for a solution to not only Transnet’s locomotive problem but also South Africa’s wider energy and logistics crises during a recent visit to China, a consortium led by the state-owned China Communications Construction Company (CCCC) went to work. 

The R250 billion plan it came up with and presented to Gordhan in August makes one thing clear: The time for tinkering is over. South Africa needs an extensive plan to revive its economy, akin to the US Marshall Plan to revive the European economy after World War II. 

This is in line with the so-called Belt and Road Initiative of the Chinese government launched in 2013 by President Xi Jinping to invest in infrastructure in more than 150 countries worldwide. It is a key element of Xi’s foreign policy. 

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Transnet and Eskom: Logistics and load shedding

South Africa has been suffering rolling blackouts of two to 10 hours per day almost daily this year as electricity supply cannot keep up, even with shrinking demand. In addition, mines, factories and farmers have increasingly struggled to get their products to market, especially those meant for export, due to Transnet’s failing rail and port services.

The Minerals Council SA estimates the losses in the mining industry due to problems at Transnet at R30 billion, with some of its members embarking on retrenchments as a result.

Transnet recently saw the departure of its group CEO Portia Derby, group CFO Nonkululeko Dlamini, and the CEO of Transnet Freight Rail (TFR), its largest subsidiary, Siza Mzimela – and it is not clear when these positions will be filled permanently. 

Mzimela has blamed Transnet’s problems largely on its locomotive problem, which stems from a botched contract with China Railway Rolling Stock Corporation (CRRC) to buy 1 064 new locomotives.

The contract was set aside in court, and the two companies have been unable to settle the outstanding issues. As a result, CRRC has withheld delivery of hundreds of locomotives as well as spares for those Transnet did take receipt of.

According to Mzimela, 378 of Transnet’s locomotives are in the repair shop, 300 of them being those bought from CRRC.

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Leasing of all locomotives

CCCC now proposes to lease all the locomotives from Transnet together with coaches and railway lines and appoint an operator to provide the service using state-of-the-art rail management systems. 

However, this will focus on the route between the harbours in Durban, Richards Bay and Maputo and the mineral-rich Gauteng, Limpopo, Mpumalanga and North West.

It proposes to increase the capacity of the coal line to Richards Bay from 80 million tons to 130 million tons, enlarge the Overvaal tunnel, remove other bottlenecks, and extend the line to the coal fields in the Waterberg region.

Three elements

The plan provides for a new goods and rail centre outside Johannesburg to replace the inefficient City Deep facility, and to improve the Port of Richards Bay’s ability to handle bulk mineral and container train loads to reduce road transport and damage to road infrastructure.

The rationale is to increase the efficiency of business in provinces that contribute almost 70% to the country’s GDP. The consortium believes this can be done within three to five years after completion of the feasibility study.

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The second element is beneficiation of the country’s minerals “as much as allowed by energy availability”, and to that end, the consortium proposes a beneficiation park in Richards Bay, which it believes can be done within three years after completion of the feasibility study.

The third element is the provision of cleaner energy – from gas sourced in Mozambique, which will require a new undersea pipeline, or the new find near Secunda in Mpumalanga, which will be used at a newly built gas-fired power plant in Richards Bay. This plant would feed the beneficiation park and provide electricity to KwaZulu-Natal.

A representative of China Harbour Engineering Company (CHEC), a subsidiary of CCCC, confirmed on Friday that the consortium is still waiting to hear if the South African government is interested in the Marshall Plan.

The consortium proposes a Memorandum of Cooperation between the South African and Chinese governments as a starting point to provide guidelines for the implementation process and “lend credibility to the project and support raising of funding”.

This article is republished from Moneyweb under a Creative Commons licence. Read the original article.