Global giants eye SA rail tenders

[John Ashworth]

Global giants eye SA rail tenders

Sep 23 2012 16:52 Jan de Lange - Sake24 - fin24

Berlin – South Africa’s rail infrastructure plans were the central theme at the biennial InnoTrans Expo, the world’s biggest rail trade fair, held in the German capital the past week.

The giants of the rail industry, including France’s Alstom, Germany’s Siemens, the US’s General Electric and Canada’s Bombardier, are gearing up for huge expenditure.

The first and at this stage the biggest tender – for the supply of 7 200 passenger coaches worth R123bn over 20 years for South Africa’s Passenger Rail Agency (Prasa) – closes next week.

This tender alone is one of the world’s three biggest rail projects being tackled this year. It's the anchor project for re-establishing the country’s once-proud rail commuter industry.

Feverish preparations are also under way for various tenders from Transnet, that wants to increase the number of its locomotives from 148 to 648 by 2019. Over this period the parastatal will spend R300bn on new infrastructure.

Prasa expects the winning bidder to deliver the 7 200 passenger coaches with a 65% local content.

The successful bidder will therefore have to establish a rail-commute manufacturing industry in the country with a plant employing around 2 500 people. The supply chain for this will however increase the total number of jobs created to around 75 000.

French company Alstom, which also plays a big role in South Africa’s electricity industry, and Canadian group Bombardier, which provided the Gautrain, are regarded as the favourite candidates for this enormous contract, but there are at least 11 international suppliers that will bid for it.

On Tuesday, the tender process will reach a critical stage in South Africa when Prasa chief executive Lucky Montana will announce his requirements for black empowerment candidates in Johannesburg. The BEE partners will have a joint 30% stake in the project.

The initial BEE deal’s value is estimated at R17bn, which makes it the biggest to date.

Prasa itself will identify its BEE partner as it is determined to ensure that broad-based empowerment will flow from the project – and avoid the same BEE candidates that have already benefited in other areas also cashing in on the Prasa project.

These conditions have led to serious friction with the Black Business Council (BBC) and it is doubtful whether Montana can stand up to political pressure from the BBC and its members owing to their ANC connections.

Alstom already has two plants in North Africa – in Algeria and Morocco – and is determined to win this tender.

“It's a particularly difficult project for us because it involves establishing an entire rail manufacturing industry in South Africa,” says Henri Poupart-Lafarge, chief executive of Alstom’s transport division.

Alstom, which already has a 350-strong workforce in South Africa with around 3 000 employees at its subcontractors in the country, regards the Prasa and the Transnet tenders for the supply of electric and diesel locomotives for freight transport as critical to its presence in Africa.

“If we don’t win these tenders, it will be difficult to make a return to the region,” Poupart-Lafarge told a group of South African journalists Alstom brought to Germany to inspect urban systems and technological installations.

These include civil construction works, coaches, signalling and maintenance systems.

“This cuts out red tape and huge administration. We did this very successfully in several Indian cities,” said Poupart-Lafarge here at a news conference.

He says it's a particularly complex contract, not only for the successful bidder but also for the country’s transport authorities. “It's easy to make a train and ship it to any place in the world, but it's an entirely different matter to put up a new plant.”