Transnet to go to international debt market

A minimum "benchmark" issue of US$500m would need to be issued to ensure the liquidity and tradability of the bonds‚ Molefe said‚ adding that the upper limit of the issue would be US$1‚5bn.

He declined to say when the company would go to the debt markets and said it would make its decision "opportunistically" in order to secure the cheapest rates‚ he said.

The rail and ports company will be investing R300bn in expanding its capacity under a new seven-year programme dubbed the market demand strategy.

The investment schedule will triple the size of the company and raise revenue by 152% to R128bn through increased general freight and bulk commodity volumes.

More than two thirds of the market demand strategy budget will be spent on rail and rail-related infrastructure as part of the state's efforts to catch up on infrastructure backlogs which have limited SA's ability to export commodities such as coal and iron ore at a time when prices have soared on demand from China and India.

Transnet to make own equipment: CEO

Meanwhile, Sapa reports that Transnet will eventually manufacture its own trains and locomotives, quoting CEO Brian Molefe.

"Transnet will be equipped with the knowledge and skills to be an equipment manufacturer," he said.

"We will build our own locomotives and trains."

He was speaking at a business breakfast hosted by the American Chamber of Commerce in South Africa.

Transnet had ordered 143 locomotives from General Electric's local subsidiary. The first 10 of these had been wholly manufactured in the United States.

"During the manufacture, we sent our people to learn and study how the locomotives are put together."

A manufacturing plant had been set up in South Africa, and Transnet had begun ordering parts for local assembly rather than complete locomotives. Some parts were already manufactured locally, such as wheels.

"We have put in an order for cranes for our port terminals, and we are looking to conclude a similar agreement here," he said.

Transnet would insist that maintenance, at least, be carried out in South Africa.

Responding to criticism of the country's high port charges, he said the group was looking at port charges for containers.

Historically, South Africa had been a bulk exporter of raw materials, particularly minerals. As a result, bulk prices were kept low, but container prices were high.

Now that the country was industrialising, it was increasingly exporting containers of manufactured goods.

"We need to encourage container exports," Molefe said.

South Africa's port charges were perceived as high relative to other countries because it did not offer subsidies.

"The question we should be asking is, should South Africa, to be competitive, start subsidising its ports?"

There were arguments for and against subsidies.

Subsidies would take resources away from priorities such as health and education, and when the government needed to cut spending, charges would go up as subsidies fell away, Molefe said.

Source: Sapa via I-Net Bridge