Transnet as Africa’s Rail Leader by Olawale Rasheed

The current travail of South African rail giant, Transnet, should not becloud Africans and South Africans in particular of the critical importance of that firm to Africa rail development. Whatever her financial status may be, South Africans may want to know that Transnet means more to the whole Africa especially at this critical time that the continent is pursuing a continent wide railway revolution. For an integrated Africa, railway interconnectivity is pivotal. Transnet is best positioned to lead that developmental struggle.

As at today across the continent, no indigenous firm can boast of the technical and manufacturing capability of Transnet. Across railway value chains, Transnet can effectively compete and even surpass other international competitors. The company’s capacity is under-utilised at home and her experience and partnership are much needed across Africa. South Africans should thus see the firm as the bedrock of continental railway revolution through a homegrown partnership with African countries yearning for railway expansion and modernization.

The company also understands this historical significance, hence her adoption of the African growth strategy that started in 2015 but was consummated early this year. In 2015, former head of Transnet delivered a comprehensive briefing on the African strategy. In addition, even if the briefing was from th point of view of South African interest, its African-focus makes it an interesting reading. According to Mr Siyabonga Gama, rail freight volumes in Africa were low because of a lack of rail infrastructure. Transnet’s cross border strategy saw the development of four big shipping hubs with rail connectivity. These included, in East Africa, Dar es Salaam in Tanzania and Mombasa in Kenya. In West Africa, the hubs were based in Ghana and Nigeria. In Central Africa there were hubs in the Democratic Republic of Congo (DRC) and even in the East African islands, with Mauritius also being a hub. Transnet would open satellite offices through Transnet International Holdings (TIH).

He presented a SWOT analysis for Transnet’s entry into the rest of Africa. For its strengths, he noted that it had a proven operational capability, was a trusted brand, was the leading logistics company in Africa and the Middle East, ran accredited training programmes, was willing to partner and or collaborate with other entities and could offer an integrated pipeline, rail and maritime offering.

Gama noted that Africa was home to seven of the ten fastest growing economies and there were major opportunities for the hitherto largely neglected rail infrastructure, in the transportation of mined minerals, especially given Africa’s endowment with a variety of minerals. This would also diversify revenue income in foreign currency. The market was very big and opportunities lay in the containerisation of products. Most African ports lacked deep water berths. The growth in the oil and gas sector with increased exploration activities offered opportunities for pipeline contracts.

He said Transnet expected intense competition from global operators who had an established presence in sub Saharan Africa. Cheap capital from China meant South African development finance institutions (DFIs) struggled to compete but needed to be brought along. Other threats were the poor policy and regulatory environment in Africa, and political risks. Specific risks for Transnet’s entry into the field were also set out.

The Transnet Africa Strategy had four key revenue drivers. The first was increased rail volumes. The second was export sales of wagons and locomotives. Thirdly, it planned the geographic expansion of port, rail and pipeline operations through concession agreements and management contracts. Transnet was currently exploring opportunities in Benin, Nigeria, Guinea, Kenya, Tanzania, SADC countries, Burundi, Rwanda, Tanzania, and the North- South Corridor. The fourth strategy explored potential opportunities in pipelines from Djibouti to Ethiopia, from Hoima to the Port of Lamu, and the Gasnosu pipeline in Mozambique.

The presentation then spoke to the Governance / Operating Model. The Department of Public Enterprises (DPE) hosted a monthly Africa Steering Committee. The forum consolidated the initiatives being pursued in Africa by State Owned Companies (SOCs) with the focus being on how DPE and the Department of International Relations (DIRCO) could support the SOCs. Transnet International Holdings (TIH) would be a wholly owned subsidiary of Transnet and be incorporated in South Africa.
The potential for mass embrace of Transnet on the continent is high. Already Ghana, Nigeria, Zambia, Zimbabawe are in the caucus. More African countries may be warming up despite the financial woes of the firm. South African political leadership and the management of the firm must however take certain steps to be fully accepted as a firm of choice and rallying point for African rail development.

First is a need for deliberate easing of transaction conditions while dealing with fellow African nations. If Africans are scared of shylocks from Northern hemisphere, they should not be faced with an economic shark at the African front. Secondly, the South African leadership must deploy political support for Transnet expansion plan, as this will benefit not just South Africans but the entire continent. More importantly, Transnet should start to operate like a through multinational firm, adopting best practice codes and eschewing cronyism in continental operations.
Africa can be proud of Transnet. The company can lead African rail revolution. All depends how smart South African political leadership play her a card.

* Rasheed, a railway enthusiast ,writes from Abuja, Nigeria

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