By Li Jean
As Nigeria kick starts negotiation with South African rail giant, Transnet, industry sources from South Africa are raising doubts about the likelihood of any agreement between Nigerian and the South African giant until after the February 2019 general election in Nigeria.
Questions are reportedly raised on the wisdom of entering a two billion dollar concession on the eve of a general election in country as volatile as Nigeria. The tension said to be gripping Nigeria is said to have lowered confidence in any agreements until after the election.
An official within the South African Presidency who craves anonymity because he was not authorized to speak on the matter hinted that while Nigeria is a great friend of South Africa, Pretoria would prefer any agreement to be consummated after the February election.
This it was learnt was also linked to the ongoing financial crisis rocking the South African firm. Transnet on its own cannot finance the concession and it has to seek intervention of banks and external investors.
However, the firm itself is facing credit recall by creditors and investors. Her 2018 financial report is also not rosy. Equally, her operations and management are facing scrutiny due to massive corruption.
Our checks however showed that both governments have political will to proceed with the concession. For the South African firm, the concession, it was a great opportunity to fully enter the Nigerian railway market. For Nigeria, it will be a plus for the current government to prove that the GE pull out has not crashed the concession policy.
Nigeria’s transport minister, Rotimi Amaechi, had confirmed on Sunday that his government was in talks on the concession with Transnet, Reuters reported. “When we conclude we will sign the concession agreement and they will rehabilitate the entire 3,500km of railways,” Amaechi said.
But already, the opposition political party has politicized the GE exit, accusing the incumbent government of squandering the concession. So concluding the concession agreement with Transnet is a key political goal for the ruling party in Nigeria.
Despite the impediments which are beyond the capacity of both parties, they are both upbeat about a likely agreement. The concession will boost Transnet African strategy for which it has committed itself through business model reorganization early this year. Transnet’s consortium partners in the concession are APM Terminals, a Dutch-based global port, terminal and intermodal inland services provider, and SinoHydro, a Chinese state-owned hydropower engineering and construction business.
Transnet said on Monday that its Transnet International Holdings (TIH) division and its partners were conducting a bankable feasibility study to account for the change in consortium members and to enter into a 30-year concession agreement with the Nigerian government. The concession would fund, rehabilitate and operate Nigeria’s western and eastern narrow-gauge lines, connecting Lagos in the southwest to Kano in the north, and connecting the oil terminal city Port Harcourt in the southeast to Maiduguri in the northeast.
“This will support the migration of traffic from road to rail and decongest Nigeria’s logistic infrastructure,” said Petrus Fusi, CE of TIH.
“The consortium will endeavour to reduce the cost of doing business in Nigeria and assist in knowledge sharing with all the partners involved,” said Fusi. Under the approved international operational model of TIH, Transnet’s domestic balance sheet was exposed to a “greatest minimum” in such transactions.TIH was launched earlier in 2018 with a capital injection of R100m. Then CEO Siyabonga Gama said its revenue would be ring-fenced to avoid burdening Transnet’s balance sheet.