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South Africa Upgrades Port, Rail Infrastructure To Boost Exports

South Africa Upgrades Port, Rail Infrastructure To Boost Exports

East Africa Port 2

Some of the major contractors recently announced for the infrastructure projects include firms from the US and China, though the actual work will remain primarily localized.

Los Angeles-based engineering firm AECOM is a “global provider of professional technical and management support services,” including transportation projects and  the Fortune 500 company serves public and private clients in more than 140 countries. The company has been active in Africa since the 1960s and today they are present in more than 30 African countries.

AECOM’s new Transnet projects include rail and material-handling infrastructure for a new railroad car rotary dumper in Saldanha; expansion of the container terminal in the Port of Cape Town; new iron ore train-loading facilities at Postmasburg; fire-suppression system upgrades at various locations; resurfacing of various berths in the Port of Cape Town; new-build port buildings; and numerous building upgrades and expansions.

Each of the projects has a construction cost of up to $150 million – a total of approximately $2.2 billion – and AECOM estimates its fees on the projects will total up to approximately $30 million.

AECOM is also involved with Transnet’s proposed Durban Port “digout,” a project to expand one of the busiest ports in Africa.

“We are currently 80 percent of the way through the pre-feasibility study,” AECOM’s Dickard told AFKInsider. “We anticipate more expansions in the Ports of Saldanha, Durban, Richards Bay, Ngqura and Cape Town.”

Rail Infrastructure Upgrade

To get goods to and from the ports requires a strong, modern rail system and two thirds of Transnet’s Market Demand Strategy is geared toward rail infrastructure and “rolling stock,” which have suffered as a result of decades of underinvestment.

In fact, Transnet Freight Rail has one of the largest locomotive acquisition programs in the world. The company is buying and building thousands of locomotives and equipment, as well as expanding their port-rail resources and shifting cargo from road to rail – which reduces the cost of doing business and carbon emissions.

Although they are a state-owned company, Transnet points out that their outside funding initiatives are on the strength of their financial position. Last year they raised $1.34 billion and during the current year they are targeting another $1.4 billion from a range of sources.

Transnet recently announced a loan agreement with Nedbank, with a guarantee from US Export-Import Bank. The funding is for 53 of the 143 diesel locomotives they have built with US-based General Electric. The funding is in two stages. The first, concluded last year, was for the initial 47 locomotives, and the new agreement is for the remaining 53 locomotives.

Keeping it local, the locomotive acquisition program has stringent supplier development requirements that range between 54 percent and 65 percent, which means the General Electric diesel locomotives were actually built at Transnet’s engineering facilities in Koedoespoort, east of Pretoria.

An additional 95 electric locomotives have been contracted to a consortium led by China South Rail’s Zhuzhou Electric Locomotive Company. That award stipulated that only 10 of the locomotives be built in China, with the rest – like the GE agreement – to be built at Transnet’s engineering facilities.

Last March, Transnet said it had signed a “groundbreaking” $5 billion financing agreement with the China Development Bank, deepening the country’s relations with China. China South Rail, meanwhile, is hoping for an additional contract to supply the additional 599 electric and 465 diesel locomotives Transnet has already budgeted for.

In all, Transnet has obtained approval to acquire 1,064 diesel and electric locomotives at an estimated total cost of $3.5 billion. Transnet has also invested roughly $920 million a piece in the maintenance and overhauling of locomotives and rail cars.

The combined port and rail expansion in South Africa is expected to help the country not only increase its exports offshore to their BRICS partners, the US, and beyond, but also to inland African nations who have experienced sluggish trade do to the bottlenecks in infrastructure.

If all goes as planned between now and the project’s end in 2019, goods will soon be moving seamlessly and investors will be lining up.