Transnet launches plans for R300 billion spend

- Finance - Apr 13, 2012

Transnet, the South African government-controlled company running rail, port and pipeline operations, has launched a R300 billion infrastructure plan set to create 588,000 new jobs in the local economy.

The amount will be spent on capital projects over a seven-year period through its Market Demand Strategy (MDS).

Transnet says the strategy is aimed at expanding the country's rails, port and pipeline infrastructure, resulting in an increase in freight volumes, especially for commodities such as iron ore, coal and manganese. It will also lead to a significant modal shift from road to rail transport.

The MDS is the centrepiece of government's growth strategy through investment in infrastructure and a key component of enabling the targets of the country's New Growth Path (NGP) national development strategy.

The MDS will catapult Transnet Freight Rail (TFR), which has the majority of the investment programme, into the world's fifth biggest rail freight company.



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During the seven-year period, rail volumes are projected to increase from approximately 200 million to 350 million tons.

It is expected that by 2019, TFR will increase its market share of container traffic from the current 79 per cent to 92 per cent. The increase will have a major impact on reducing the cost of doing business.

Studies by Transnet show that rail in South Africa is on average 75 percent cheaper than road transport.

Around R205 billion will be spent on rail projects, while R151 billion will be spent on general freight business. By 2018/19, R7.7 billion will be spent on skills development.

The MDS also says that it will assist with local industry growth through practical procurement, and 50 percent of the R78 billion set aside for locomotives will be spent on local suppliers.

The successful implementation of the MDS will see Transnet's revenue almost triple from R46 billion to R128 billion over the next seven years, driven by strong volume growth.

The MDS is also expected to meet the NGP objectives, which include skills development and youth employment.

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