The two yards represent the divergent fortunes of Transnet Freight Rail and the Passenger Rail Agency of South Africa (Prasa), the country's two state-run rail businesses.


Prasa is currently trying to cancel a e250m locomotive deal with Vossloh Rail Vehicles, Spain. Meanwhile, its long-distance passenger operations now consist of fewer than a dozen services -­ in a country where most people rely heavily on public transport.

Transnet - which comprises ports, railfreight, pipelines and rail engineering divisions - on the other hand, is forging ahead with a multi-billion Rand investment programme through which it is buying more than a thousand new locomotives, building new port infrastructure and spending heavily on operations such as City Deep.

Siyabonga GamaActing group chief executive, Mr Siyabonga Gama, says Transnet will continue to pursue its "countercyclical strategy" in the wake of the Chinese slowdown and the end of the commodities boom which has pushed the South African economy into the doldrums with growth easing to 1% in the third quarter of 2015, down from a revised estimate of 1.3%.

"We are in the eye of the storm," Gama says. "When we started the market demand strategy [in 2012], the expectation was average growth of 5.8%. We need to become much more agile and reduce our dependence on minerals and mining."

City Deep's recent Rand 800m ($US 55m) upgrade, which has doubled capacity to 400,000 TEUs a year is evidence of Transnet's long-stated ambition to recover traffic lost to road since the mid-1980s. The terminal is at the northern end of the critical 600km Durban - Johannesburg transport corridor, along which most of the country's container freight runs. Lorries can cover the distance in eight hours; trains often take three times as long although new "express trains" can complete the journey in 16 hours.

The major current outlay in Transnet's market demand strategy - on which it has spent Rand 109m on rail, port and pipeline infrastructure since 2012 - is for 1064 new locomotives for the general freight business, with GE, Bombardier, and CRRC supplying a total of 599 electric and 465 diesel locomotives under agreements announced in March 2014.

At the end of November, Transnet officials and financial institutions signed Rand 12bn club loans to fund the locomotive deal. Local banks Absa and Nedbank, and the Bank of China, are each lending Rand 3bn, while local financial institutions Futuregrowth Asset Management and Old Mutual Specialised Finance are both lending Rand 1.5bn.

The club loans are in addition to a $US 15bn loan facility agreed with China Development Bank (CDB) in June last year, as well as a $US 2.5bn funding guarantee signed with China Export Credit Insurance Corporation (Sinosure) last month.

Gama says the loans were raised after Transnet embarked on a series of investor roadshows. "We are eminently bankable, and we are on track to cement our position as Africa's leading infrastructure investor," he says, adding that further Rand 340-380bn investments are on the cards in the next decade.

Despite weak growth, Transnet plans to continue with various large capital projects, including a Rand 26bn investment in a manganese heavy-haul line. The project will involve upgrading the existing line from Hotazel in the Northern Cape province to a new port at Ngqura, near Port Elizabeth, in the Eastern Cape. Transnet plans to run 200-wagon trains on the route, boosting manganese heavy-haul capacity to 16 million tonnes per year.

Gama also noted that the plan to build a new railway from South Africa across Swaziland is expected to go ahead in 2016. The 146km link aims to relieve congestion on the Ermelo - Richard's Bay heavy-haul coal line and will cost an estimated Rand 17bn. Swaziland Railway will build 96km, with Transnet constructing the South African portions. Operations could
start in as early as 2017.

Transnet's ambitions extend beyond South Africa's borders to becoming an original equipment manufacturer for railways around the world with its locomotive programme a first step to realising that ambition.

Through Transnet Engineering, its rail engineering and rolling stock division, Transnet is also interested in building and operating railways elsewhere. However, Gama declined to comment on recent news reports that Transnet was one of eight group bidders to build a 2135km railway network in Oman.