Transnet group CEO Portia Derby.
- Transnet group CEO Portia Derby says the entity needs R2.9 billion to aid its recovery from this year’s floods and get locomotives running again.
- Derby says Transnet is making progress with locomotive and component producers, although CRRC is encountering challenges.
- Minister Pravin Gordhan says the funding for Transnet ought to be considered as a reimbursement rather than a bailout or recapitalisation.
- For more financial stories, go to the News24 Business front page.
Transnet group CEO Portia Derby told Parliament on Wednesday that an appropriation of R2.9 billion was urgently needed to help the entity improve its locomotive capacity and continue its recovery from the flooding that occurred in KwaZulu-Natal earlier this year.
Derby briefed Parliament’s Standing Committee on Appropriations about the required allocation and the challenges that Transnet leadership has experienced with improving its locomotive capacity amid rising demand from customers.
Finance Minister Enoch Godongwana allocated R5.8 billion to Transnet when he tabled his Medium-term Budget Policy Statement in October. This amount was intended to assist Transnet with its recovery from the floods and building efficiency.
As an example of Transnet’s locomotive capacity challenge, Derby said the national coal demand is equivalent to 198 trains, compared to Transnet’s capacity of 138 available trains. She said Eskom’s Majuba coal power station has a demand equivalent to 42 trains, but Transnet only has a capacity equivalent to 21 trains.
READ | Transnet receives R5.8bn in state support to ‘build efficiency’
Derby said Transnet was at advanced stages of settlement with its original equipment manufacturers (OEMs) with which it entered into ill-fated contracts for 1 064 locomotives, including General Electric (GE), Bombadier (whick merged with Alstom), and CRRC, which was formed from a merger between China South Rail (CSR) and China North Rail (CNR).
Derby said there had been “mergers across the board”, including GE’s locomotives business, which was sold to Wabtec. A settlement has been reached with GE Wabtec, she said. “[T]hey have delivered all of the locos on their side, and this is in process to get towards a court order.
“We have signed all of the agreement documents and to our minds, we have reached a just and equitable settlement,” said Derby.
Derby said Transnet was making progress with getting material reliability and support agreements with each OEM, although CRRC was experiencing some delays.
“Hopefully by January next year, we will have reached an agreement. To be frank, I think it’s a lot more hopeful [for] all of the other OEMs, except for CRRC. There is definitely some support and some hard work still has to be done,” Derby said.
Derby said CRRC still needed to receive a valid tax certificate from the SA Revenue Service, while the SA Reserve Bank needed to lift restrictions on CRRC accounts to allow Transnet to import their components and permit the company to repatriate proceeds to China.
CRRC has previously been used at Transnet, with two other contracts prior to the 1 064.
READ | Transnet reopens second coal line on North Corridor
Derby said in addition to addressing flood damage, the R2.9 billion was also a critical part of maintaining and repairing longstanding locomotives that were out of service. Derby said Transnet had 315 longstanding locomotives as of the beginning of this week, although this number fluctuates based on the entity’s ability to get components and parts.
In terms of the KwaZulu-Natal floods, Derby said Transnet suffered significant damage, with total losses estimated at R7 billion and revenue loss estimated at R1.5 billion, which cannot be claimed as it is not insured.
Transnet faced replacement costs of R5.5 billion and clean-up costs of R72 million, she said.
“We are insured at R2.3 billion. However, we have to take the first loss of R500 million so the claim that we had to put with insurance is R1.8 billion, which is currently in assessment. We’ve made quite good progress, actually, in the assessment, working with the assessment to get close to the R1.8 billion that is due to us,” she said.
Public Enterprises Minister Pravin Gordhan said the funding for Transnet ought to be considered as a reimbursement rather than a bailout or recapitalisation.
“The word bailout has been used and, chair, you used capital activation. But I think neither of the R2.9 billion amounts to a bailout or a recapitalisation of Transnet. As we explained, it’s about recovering from the floods, which were quite devastating as far as rail and port infrastructure is concerned,” said Gordhan.
Gordhan said legislators needed to give due consideration to the damage that state capture wrought on state-owned entities, which will take a long time to recover from for each affected institution.
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