Rail and ports operator Transnet is finalising the appointment of a supplier to help source spare parts for almost half the 459 locomotives standing idle because of a prolonged impasse with the Chinese manufacturers it bought them from.
Transnet Freight Rail (TFR) CEO Russell Baatjies said on Friday that efforts by TFR, assisted by the mining industry and the national logistics crisis committee (NLCC) — an initiative between the presidency and business to sort out the logistics crisis — were bearing fruit, as they had been successful in sourcing some parts from original equipment manufacturers (OEMs) in other parts of the world.
State-owned Chinese railway and rolling-stock manufacturer CRRC has been withholding components and equipment needed to get the more than 200 locomotives moving again since the suspension of a contract for their acquisition, over state-capture corruption, in December 2019. The contract to supply 1,064 locomotives featured prominently in the Zondo commission, which investigated how costs had ballooned from R38.6bn to R54.5bn.
Bombardier Transport South Africa — part of the Canadian-German rolling-stock giant — settled with Transnet and agreed to pay back R486m for its role in the saga. CRRC, on the other hand, stopped supplying parts to Transnet, unhappy at having to answer to the South African Revenue Service (Sars) and the South African Reserve Bank regarding its financial affairs in the country.
Efforts by former public enterprises minister Pravin Gordhan to negotiate directly with the Chinese yielded no results. As a result, TFR swapped parts between the Chinese-made locomotives.
Between ourselves and Transnet, we identified that there were suppliers of these critical spares we could approach directly, rather than going through CRRC
— July Ndlovu, Thungela
“Since the suspension of the CRRC contract in December 2019, TFR made many attempts to resolve the impasse with CRRC. The impasse negotiations escalated to the ministerial levels of both countries. During this period of negotiations, TFR used parts from ‘out of service’ CRRC locomotives to repair and sustain the remaining CRRC locomotives that are ‘in service’,” Baatjies said.
TFR was now in the final stages of identifying a step-in OEM to supply the parts.
“Currently, 200 out of the 459 locomotives in the CRRC fleet are out of service. TFR, together with the NLCC and industry, is trying to source similar or alternative parts. TFR is also now in the process of appointing a single step-in OEM to collaborate on the sourcing of spare parts,” he added.
Thungela CEO July Ndlovu told News24 on Monday, after the release of the group’s interim financial results, that the industry and Transnet had discovered that 80% of the parts used in the locomotives were generic and could be sourced elsewhere in the world.
“Between ourselves and Transnet, we identified that there were suppliers of these critical spares we could approach directly, rather than going through CRRC.”
“The next challenge was to use our global networks to identify who the suppliers of these are and to approach them on a prioritised basis to supply those components to us directly,” he said.
Ndlovu told journalists in March that the industry had started to collaborate with Transnet’s rail division to source the spares, and that compressors and batteries had already been delivered and fitted to the locomotives.
The Thungela CEO on Monday lauded progress made in addressing challenges on the coal-carrying north corridor, adding that “the worst is probably behind us”.
“While we believe the correct building blocks are being implemented by TFR, we expect to see improved rail performance only from 2025.”
He said Thungela was planning its business in a way that expected no further improvements in that corridor over the next year.
Thungela, a JSE thermal coal exporter spun off from Anglo American, said softer prices and TFR’s continued underperformance had negatively affected its financial results in the six months ended June 2024 compared with the same period in 2023.
The group generated adjusted earnings before interest, taxation, depreciation and amortisation of R2.1bn, and a net profit of R1.2bn, with its Australian mine Ensham contributing R419m to net profit for the period under review.
Ndlovu said Thungela had begun a resource-development plan review at Ensham.
“We have 1-billion tonne [capacity] at Ensham, [but are] doing 4-million tonnes. It stands to reason that if we can unlock the licences that are required, and obviously at an acceptable capital, that operation, all things being equal, should be able to do more than it is now doing.”
He said the miner still believed in South Africa and was investing in operations in the country.
“In fact, we are investing R4.3bn in the Elders and Zibulo projects to extend the life of our business from eight to 15 years. That is important, because often people tend to think we are going to Australia [and] abandoning South Africa.”
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