Transnet to launch big locomotive tender in August as it clears legal hurdles

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State-owned freight logistics group Transnet intends to launch its long-awaited tender for new locomotives in August, after recording a 5.6% drop in rail volumes last year due to a combination of locomotive shortages and serious operational and safety issues.

In 2021/22 the group lost a total of 1,500km of overhead copper wire to theft and was unable to service a number of locomotives, largely due to an ongoing dispute with the Chinese Railway Rolling Stock Corporation (CRRC), which refuses to supply the utility with specialist spare parts.

Operational and security difficulties on the main line between Durban and Johannesburg, for example, led Transnet Freight Rail (TFR) to confiscate all container volumes from road hauliers, who themselves experienced serious security incidents, often sparked by protests against foreign truck drivers. .

Speaking during the publication of the group’s 2021/22 results, the CEO Portia Derby said Transnet had originally planned to launch the locomotive request for proposals (RFP) in July, but the internal deadline was shifted to ensure various legal and governance issues were addressed ahead of the tender.

Ongoing disputes with some of the original equipment manufacturers (OEMs) who participated in the so-called “10-64” contract for 465 diesel locomotives and 599 electric locomotives are at the heart of the delay, as Transnet did not want to continue until he was not convinced that the tender would not be prohibited.

The 50 billion rand contract, which was halted in 2019 on the grounds that it was deemed “irregular and illegal” by Transnet, featured prominently in proceedings under the State Capture Commission, presided over by Justice Raymond Zondo, who has since been appointed Chief Justice.

Derby said it was premature to offer details on how many locomotives Transnet would seek to procure under the new tender, or whether diesel locomotives would be given priority given the continued theft of overhead wires.

However, it had previously indicated that it was likely that the request for proposals would be for at least 400 new locomotives, given that Transnet had taken delivery of 595 locomotives under the 10-64 contract.

However, with around 300 locomotives currently “parked”, partly due to a lack of spare parts, it is possible that the tender will be expanded. That said, Derby has indicated that an alternative OEM support strategy will be pursued for the existing fleet if the current standoff with CRRC is not resolved.

She said that following a recent successful legal petition, which was taken with the Special Investigations Unit, regarding the actions taken by the CRRC to dismiss the review of Case 10-64 , Derby said “we are now at least in a position where we can safely start a new supply event”.

“We definitely need some extra pulling power,” she added.

Derby also confirmed that TRF was pursuing a tender process for the sale of 16 rail slots to third-party operators, despite market concerns over the design of the slot sale process.

She acknowledged concerns had been raised, particularly over the two-year duration of the award, but said TFR had committed to making slot selling a permanent feature of the rail business.

“It’s not a pilot,” Derby insisted, adding that it was optimistic that slot operators would be present from April next year, when the number of slots would increase to 42.

The tender process had been delayed due to recent flooding in KwaZulu-Natal and the tender would now close at the end of August.

In its earnings statement, the group said it appreciated the importance of improving the performance of TFR’s operations.

He also said “significant progress” had been made towards concluding adjusted long-term contracts with coal exporting parties (CEPs) following the force majeure notices issued in April.

“Most of the CEPs participated in good faith, and we received approval from the two main CEPs and all the emerging miners.

“We expect the full cooperation of a major CEP and its affiliates,” the statement said.

Transnet said it has continued to provide transmission services for all CEPs while contract negotiations continue.

Meanwhile, the group recorded a 1.8% increase in revenue to R68.5 billion and a profit for the year of R5 billion, compared with a loss of R8.7 billion last year. last year.

A Public Financial Management Act (PFMA) exemption received from the National Treasury meant that the group no longer had to disclose PFMA transgressions in its annual financial statements.

Therefore, although there are still R105 billion in transgressions to report, including approximately R104 billion in irregular expenditure, their exclusion from the financial statements enabled the Auditor General of South Africa to express an opinion of unqualified audit.

“This is a significant development from the history of qualified audit opinions received over the past four fiscal years related to the completeness of irregular expenditures,” Transnet said.

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