aBr May 2014 | Page 96

by Frank Beeton M oving atters Frank Beeton scans the transport world for news pertinent to the Logistics Sector. Locomotives for Africa! On Monday, March 17th, Transnet announced the awarding of orders for the supply of 1 064 new locomotives, at a total cost of R 50-billion, to its Transnet Freight Rail division. This reportedly represents the largest contract ever concluded by the State-owned utility, and is the result of an open tender process. Initial deliveries of completed units are expected within 15 months, with full execution of the contracts due during 2019. The contract was divided among four suppliers, as detailed in the following table: Country of Origin Model Description Volume Total Contract Value Approximate Unit Price* Bombardier Transportation SA moving matters Contractor Canada/ Germany Traxx Africa Dual Voltage Electric 240 units R10,4 billion R 43,3 million CSR Zhuzhou Electric Locomotive China Dual Voltage Electric Six Axle 359 units R14,6 billion R 40,7 million General Electric SA Technologies USA Diesel Electric 233 units R7,1 billion R 30,5 million CNR Rolling Stock SA China 3,3MW Six-Axle Diesel Electric AC Traction 232 units R7,8 billion R 33,6 million ES40Aci Evolution * Total Contract Value divided by number of units. C onsiderable local input is envisaged for this contract, and after the initial delivery of 70 built-up units, assembly of the balance will take place at Transnet Engineering facilities in Pretoria and Durban. These operations will receive a collective investment of R300 million in preparation for this task. Minimum local content levels of 55% and 60% have been set for the diesel-electric and allelectric locomotives, respectively, and it has been estimated that the contract will create approximately 30 000 direct and indirect jobs in South Africa. Transnet Engineering has aspirations to become an Original Equipment supplier to rail operations throughout Africa, and much of the expertise and equipment associated with the execution of these orders is likely to be beneficial to that objective. However, questions are sure to arise regarding the high percentage of orders allocated to suppliers of Chinese origin, despite relatively small apparent differences in unit pricing. Transnet management reportedly holds the view that the selection of multiple suppliers was prudent in assuring delivery within the required timescale. They have also gone to considerable lengths to confirm the legitimacy of the tendering process, assuring that “all governance and procurement procedures were followed to the letter”. Notwithstanding the foregoing, Transnet’s new locomotive fleet needs to play a pivotal role in the carrier’s strategic intent to double its general freight tonnage by 2019. In doing this, Transnet Freight Rail aims to improve its share of the “transportable gross domestic product” from the current level of 15%, to between 25 and 30% by 2022. Watch this space! | logistics in action 94 As we have reported before, locomotives from that country have experienced serviceability difficulties under African conditions, and it could be argued that the risk element inherent in this Transnet order allocation appears to be high. While we do not argue against China’s emergence as a great global industrial power, it is usually prudent to limit exposure to a new, and relatively inexperienced supplier, until they have built up a satisfactory track record. In Africa, with its demanding operating, geographic and climatic conditions, this strategy has proved to be highly appropriate, many times over. may 2014