Transnet: Minister Gigaba wants to treble capex budget

[Steve Appleton]

From Business Day, 2 November 2011, http://www.businessday.co.za/Articles/C ... ?id=157560

Gigaba wants to treble Transnet’s capital budget
Public Enterprises Minister Malusi Gigaba promises significant announcements on infrastructure investment soon on a fast-tracking programme
NICKY SMITH
Published: 2011/11/02 06:42:36 AM

The Department of Public Enterprises is seeking to treble the capital expenditure budget of state-owned freight and logistics company Transnet to R330bn to speed up its investment in new rail and ports capacity.

Public Enterprises Minister Malusi Gigaba is frustrated by the slow pace of investment in new infrastructure, and promises significant announcements soon on a fast-tracking programme.

South Africa’s biggest development finance institution, the state-owned Industrial Development Corporation (IDC), has realigned its focus to work more closely with the government to meet its growth and employment targets.

A doubling — or even trebling — of its budget is being investigated by Transnet, Mr Gigaba said on Tuesday at a press briefing at the Southern African Railways Association conference in Midrand.

"We have asked Transnet to expand its capital expenditure plans. The president should be able to make interesting announcements in his state of the nation address in February next year," Mr Gigaba said.

President Jacob Zuma said on Tuesday that the government’s R800bn infrastructure investment would sustain between 50000 and 100000 jobs in construction until 2015.

Speaking at a breakfast arranged by The New Age newspaper in Cape Town, Mr Zuma said the infrastructure investment would contribute to economic growth and development.

"The global economic recession of over two years ago resulted in almost half a million jobs being lost. The probability of another global downturn does not bode well for us and our commitment to grow the economy and create jobs and job opportunities," he said.

"We, however, remain steadfast in our commitment to remove all obstacles to achieve our goal of creating 5-million jobs for our fellow citizens that are currently unemployed, by the year 2020."

Mr Gigaba said Transnet, Eskom and the IDC were working together to find new ways of borrowing more money, over a shorter period of time.

"(Economic Development) Minister Ebrahim Patel and I are impatient that we should find a model that we can use across the spectrum (of state-owned enterprises)," Mr Gigaba said.

"By the state of the nation address the president should be able to announce programmes for Transnet and Eskom," he said.

An accelerated spend would affect the pace at which capacity could be increased on the coal, iron-ore and general freight rail lines, and the country’s ports, Transnet Freight Rail CEO Siyabonga Gama said on Tuesday.

Transnet Freight Rail was formulating a fleet plan which would be made public in the "very near future", and which would create significant capacity for new rolling stock, Mr Gama added. For his part, Mr Gigaba said he was "reluctant" to discuss in more detail how the state would achieve a doubling or trebling of Transnet’s capital budget.

Much depended on the work "finance people are putting forward". "The capex programme we are implementing now has constraints as it doesn’t create new capacity to the extent that we would want it to," he said.

In September Mr Gigaba first floated the idea of public-private partnerships that would allow the IDC and the Public Investment Corporation to fund new infrastructure to grow the economy.

An example of facilitation may be for the IDC to buy locomotives and lease them to Transnet, giving the company the opportunity to buy them from the IDC over time, he said then.

The IDC plans to disburse R102bn in the next five years to be invested in the green economy, manufacturing, and mining and beneficiation. Its listed investment portfolio is worth about R50bn.

The company has been singled out as one of the main vehicles the government will use to create the 5-million jobs promised by 2020 in Mr Patel’s New Growth Path.

The government was also finalising protocols for a framework to allow the private sector to invest in the state’s capital expenditure projects, Mr Gigaba said.

Draft documents outlining how the public-private partnerships could be structured to better use the collective balance sheet of the economy still had to "go to other parts of government", he said. With Bekezela Phakathi