Transnet Freight Rail (TFR), which generates revenue by transporting commodities such as coal and manganese from mines to ports, has lost more than R3bn in revenue because China Railway Rolling Stock Company (CRRC) has refused to deliver spares and components for 195 locomotives that are largely standing idle.
A year of negotiations between Transnet and the Chinese firm over the delivery of spare parts came to nothing, forcing the state-owned freight and logistics company to launch legal action against CRRC last Wednesday.
CRRC has refused to supply Transnet with spares for the 95 20E and 100 21E locomotives it acquired from the Chinese firm in 2012 and 2014. The spare parts are critical to servicing and maintaining certain locomotives used by TFR for transporting commodities to ports.
The 20E class of locomotives were purchased between 2012 and 2014 by TFR to transport manganese along the Cape corridor, while the 21E class of locomotives were purchased to transport coal to the Richards Bay Coal Terminal.
The lack of spare parts for the locomotives has cost TFR R1.96bn in lost revenue on the cape corridor and a further R1.24bn in Richards Bay since 2016, Transnet chief legal officer Sandra Coetzee said.
Transnet wants the high court in Pretoria to compel CRRC to make available imported spare parts and components that are critical for TFR’s operations. Transnet is also seeking compensation for the amount due by CRRC for spares.
“Of the 195 locomotives delivered by CRRC to Transnet, a large number are currently inactive. Of those that are active, Transnet is at risk that they will deteriorate to the point of becoming unserviceable,” Coetzee said in court papers.
Spare parts
Coetzee said there is no other reasonable manner to compel CRRC to provide Transnet with the required spares because the firm and its parent companies have exclusive rights to manufacture the parts.
“Until CRRC releases its intellectual property rights, Transnet is limited to accessing the spare parts from CRRC or its selected third-party manufacturers,” Coetzee said.
Transnet, which also operates ports and container terminals, suspended contracts with CRRC worth more than R50bn to supply 1,064 diesel and electric locomotives on the grounds that they were improperly awarded and that the Treasury’s instructions were deliberately ignored.
Transnet and the Special Investigating Unit (SIU) launched a court challenge in March 2021 to set aside these contracts. The legal review process is under way.
The tender was among the biggest scandals of the state capture era, in which companies linked to the Gupta family and their associate Salim Essa received about R5bn in kickbacks. The tender’s estimated total cost ballooned from R36bn to R54.5bn.
The suspension of the contract left Transnet with insufficient trains, but it hopes to end this by issuing a tender for the purchase of new locomotives later this month.
CRRC had not responded to inquiries by the time of publication.
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