R45bn transport renewal project gets going

the long-awaited period of infrastructure renewal and extension at state-owned transport and logistics company, transnet, is beginning to take shape with the announcement of r45,8-billion-worth of capital expenditure to run from this year until beyond 2006.
under the plan, which was announced at the release of the corporation’s results yesterday, r9,1-billion will be spent during the current financial year, across the broad spectrum of transnet businesses.

national carrier south africa airways (saa) will absorb the lion’s share with r2,9-billion budgeted, followed by the national ports authority (npa), which has responsibility for building the coega harbour in the eastern cape, with r1,9-billion, and railways company spoornet with r1,3-billion.

transnet’s telecommunications company, transtel, is likely to spend r1,23-billion this year as it rollsout infrastructure ahead of the licensing of the second network operator, while south african ports operations is set to spend about r521-million.

over the entire period, saa will absorb more than half of the overall capital budget as it moves to replace its fleet, while spoornet and the npa will take up 22% and 19% respectively.

the budget is expected to rise to r11,4-billion in 2004, before coming down to more moderate levels.

the capital programme is viewed as an integral part of government’s drive to improve the overall transport and logistics environment in south africa, which has been under-maintained and is falling behind in efficiencies.

speaking yesterday, public enterprises minister jeff radebe said it was imperative that the infrastructure backlog be addressed, adding that the ports were in particular need of attention.

“our ports are a major hub of activity, both for export and import, and we cannot sustain the current backlogs, inefficiencies and delays that continue to mark much of their activity”.

he added that while south africa could not build its way out of the problems – and that much attention needed to be given to the existing operations, particularly the port of durban – the development of coega and the extension of the east london harbour were also critical areas of focus for the current year.

“we do not expect any delays in the implementation of these important projects,” he said.

the capex programme also fits with the newly defined vision of transnet, which was outlined by its chairperson dr bongani khumalo at the presentation.

he said that transnet aimed to become ‘africa’s undisputed world champion in transport and logistics solutions’, adding that the organisation would pursue this vision with an eye to both maximising profits as well as ensuring that it played a developmental role.

the capex plan is, however, likely to put some strain on the finances of the corporation, which is already heavily geared.

indeed, beyond the r9,1-billion capex, the organisation will also need to retire r3,5-billion-worth of debt in the current year, which is likely to push it debt:equity ratio beyond its current 67%.

overall the company has r24,4-billion-worth of debt, which has to be repaid between now and 2029.

therefore, it is likely that transnet will engage with the capital markets over the next few years, using its relatively positive credit rating as leverage.

it is also willing to look at financing option not widely employed in the group at present, such as project finance, operating leases, joint ventures, strategic equity partnerships and public private partnerships.