State owned transport and logistics utility Transnet launched a R300bn investment plan in a move that promises to create about 600000 jobs over the next seven years.
The move forms part of government’s R3.2 trillion infrastructure development program which was announced by President Jacob Zuma early this year.
Launching the plan, Transnet CE Brian Molefe said the investment plan will be focused on beefing up capacity in rail, ports and pipeline divisions. This will result in a significant increase in freight volumes, especially in commodities such as iron ore, coal and manganese. It will also lead to a significant modal shift from road to rail.
The main objective of the strategy is for Transnet to invest in building capacity to meet validated market demand that will enable economic growth.
He said the plan was the centre piece of government’s growth strategy through investment in infrastructure and a key component of enabling the aspirations of the New Growth Path (NGP).
The plan will catapult Transnet Freight Rail (TFR), which has the lion’s share of the investment programme, into the world’s fifth biggest rail freight company. Rail volumes will increase from approximately 200 million tons to 350 million tons during the period. By 2019, TFR will increase its market share of container traffic to 92% from 79% currently.
Transnet said “The increase will have a major impact on reducing the cost of doing business. Studies conducted by Transnet show that rail in South Africa is on average 75% cheaper than road transport. In addition, the large scale shift from road to rail will address costs, congestion and reduce carbon emissions”.
About R205bn will be allocated to rail projects and R151 billion to general freight to support the growth in volumes to 170 million tons per annum (mtpa).
The plan will facilitate expansion of coal exporting infrastructure from 68mtpa to 97,5mtpa. Iron ore export will increase from 53mtpa to 82,5mtpa. Container volumes handled through the ports to increase from 4,3 million to 7,6 million twenty-foot equivalent unit containers (TEUs).
The plan will also see Transnet grow its revenue by 16% per annum over the next seven years, driven by volume growth. R213,6bn of the required funding will be generated from operating cashflows and R86,5bn be raised from debt capital markets. Gearing and cash interest cover will remain within target levels of 50% and greater than three times respectively.