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GIBS Business School

Transnet poised to take advantage of growth in African trade

By GIBS News

Posted on 20 April 2012

Transnet CEO Brian Molefe told a GIBS Forum in Johannesburg last night that his market demand strategy to invest R300bn in upgrading Transnet’s ports, rail and pipeline infrastructure will make the company into a top-tier freight logistics provider.

Transnet CEO Brian Molefe told a GIBS Forum in Johannesburg last night that his market demand strategy to invest R300bn in upgrading Transnet’s ports, rail and pipeline infrastructure will make the company into a top-tier freight logistics provider.

Central to Molefe’s ambitious strategy to transform the company over the next seven years is to position South Africa as an integrated logistics hub into sub-Saharan Africa.

“One of our biggest opportunities is the fact that intraregional trade in Africa is low. As the fortunes of the continent are reversed over the next few decades, trade is bound to grow, and we will need ports and rail infrastructure to take advantage of this growth,” he said.

The strategy aims to address maintenance backlogs, develop new tracks and install more modern equipment in the country’s ports and pipelines so that Transnet “can begin to share our expertise and expand into Africa to take advantage of the growth that is to come,” Molefe continued.

The capital investment project aims to improve operational efficiency, encourage a decisive shift from road to rail for freight, thereby reducing the cost of doing business, create jobs and encourage skills development.

R7,6bn of the R300bn capital investment will be spent on training, with an increase in Transnet’s permanent staff headcount from 59 000 to 75 000 at the peak of the project.

The investment in infrastructure is expected to boost export coal volumes to 97,5m tons a year, from 68m tons a year, while iron-ore export volumes are set to rise to 82,5m tons a year from 53m tons a year over the next seven years.
The higher volumes are expected to lift Transnet’s revenue by an estimated 178% over the period, from R46bn to R128bn by 2018-19.

Molefe pointed out that while R180bn has been spent on capital investment projects over the last seven years by the company, over 60% of that has been spent on maintenance of existing infrastructure.

“No new rail line has been laid in South Africa in the past 30 years. The country’s rail infrastructure is 158 years old and in some places we are utilising tracks that were laid at the turn of the last century.”

The requirement for improved domestic freight logistics facilities that will reduce the cost of business and promote regional integration is self-evident: “It is called the market demand strategy because we are trying to meet the demand that already exists.”

“If we achieve what we have set out to do, we will be a very different company in seven years.”

While Molefe acknowledges that any slowdown in the global economy presents a risk to keeping the strategy on track and would result in Transnet having to scale back on its plans, he believes realising the company’s vision ultimately depends on a broader South African partnership and support, and that South African citizens will be the ones to reap the benefits of success.



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