Tag Archive | euro crisis

Transnet doing better but resists carving up its assets

Loans a major feature of Transnet balance sheet………

Brian Molefe, CEO of Transnet, on speaking to the  portfolio committee on public enterprises, noted that already South Africa’s freight volumes were threatened by the euro-crisis and Transnet could not absorb this and any other threats, such as reducing its asset base “ if it was to continue without re-negotiating with its lenders.”

Anoj Singh, acting chief financial officer, Transnet, earlier this month, told the portfolio committeethat the rail containers portion of its business was of “ significant focus” and volumes increased by 13.2%, and market share increased to 34%, representing a significant shift from road to rail.

Its general freight business grew by 2.2%, despite a loss of volumes due to industrial action, cable theft and rolling stock related faults. Overall productivity and service were of concern, Singh noted, and delivery turnarounds had deteriorated from the prior year, but measures have been promised and now put in place to turn that around.   Domestic coal volumes grew by 12.4% despite operational challenges and a key focus area for the next five years was to meet Eskom’s domestic coal requirements. Magnetite volumes increased by 3.7 and export manganese volumes increased by 23.1% compared to the prior year.

CEO, Brian Molefe, said that export coal volumes (62mt) reflected marginal growth, but overall productivity and service delivery deteriorated from the prior year, mainly due to the impact of industrial action as well as rail infrastructure problems and operational challenges.

Export iron ore volumes (46.2mt) increased by 3.4% despite an unprecedented number of derailments that resulted in lost volumes and impacted on operational performance levels. Ship loading rates increased at 9.7%, due to the successful implementation of dual and staggered ship loading process installed at the Transnet iron ore terminal .

Concerns were raised by parliamentarians regarding on-time departures and arrivals of freight and their impact on productivity and efficiency, noting that the number of delays had risen according to figures presented.   Mr Molefe responded that the general freight business, by and large, had improved dramatically over the past year. There was a 7.5% increase in containers on rail last year and, for the first time in the history of Transnet, more than 200 million tons of commodities were transported by rail. Over the next seven years, R200 billion of the R300 billion that Transnet was spending on capex would be going into rail.

There was a 1.5% increase in petroleum volumes from the prior year, despite the constraints presented by the existing Durban-Johannesburg pipeline and Transnet spent R21.5 billion on capital investment, with the biggest portion in the rail and pipeline sectors. 94% of the planned spending was achieved.   MPs asked what the future plans were for the Port of Ngqura, and how the Eastern Cape would benefit from that. Molefe responded that there had been a decision to establish a manganese terminal at the Port of Ngqura, with a budget of R300 million.

This would be developed as the transhipment hub. Manganese was currently exported through Port Elizabeth, but would be moved to Ngqura. Cranes and equipment were bought, and paving was finished. Transnet had recently negotiated more transhipment traffic for the Port of Ngqura from Europe.

Brian Molefe said that in order to foil piracy off Somalia, some of the larger world sea vessels, consuming a great deal more fuel to do so, were travelling at high speeds using a Mediterranean Sea to South Africa route direct and reaching the safety of South African waters with its defence frigates and aircraft, to the benefit of SA port facilities.

MPs asked the reason for the decrease in revenue in the pipeline division in 2010/1, which was some 2%.  Molefe responded saying this was largely because of industry issues and that Transnet had received less revenue than projected but that the “pipeline was ready, commissioned and functioning very well” and the situation would soon reverse.

In a subsequent meeting with parliamentarians of the portfolio committee on economic affairs, CEO Brain Molefe warned that changing Transnet’s asset base by selling of assets would change its gearing and thus its ability to finance its expansion plans.

He referred again to the restructuring of the general freight business which depending upon its ability to borrow funds and said that any plans to break up Transnet so that it became an operator competing with the private sector on certain sections of line were to be rejected, he said.

Molefe noted that already South Africa’s freight volumes were threatened by the euro-crisis and Transnet could not absorb this and any other threats, such as reducing its asset base “if it was to continue without re-negotiating with its lenders.”   The general freight business of Transnet, which depended upon its ability to borrow funds, said Molefe, was at a critical stage that any plans to break up Transnet so that it became an operator competing with the private sector on certain sections of line were to be rejected.

 

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