JOHANNESBURG (miningweekly.com) – South African freight logistics group Transnet and Swazi Rail confirmed on Thursday that they planned to move ahead with a R16-billion to R17-billion greenfield railway project between Lothair, in South Africa, and Sidvokodvo, in Swaziland – the single line was currently scheduled to be commissioned in 2016, with an initial yearly capacity of 15-million tons.

The 146-km link would divert general freight currently being moved on the Ermelo-Richards Bay line through Swaziland, thereby increasing the capacity of South Africa’s capacity constrained coal channel from Mpumalanga to the Richards Bay Coal Terminal (RBCT), in KwaZulu-Natal to what Transnet CEO Brian Molefe said would be “close to 100-million tons”. Currently, the coal line had the capacity to move about 72-million tons – well below the 91-million-ton nameplate capacity of the privately owned RBCT.

The development, construction on which was expected to begin in 2013, was being pursued in parallel with an initiative to build heavy-haul capacity from the Waterberg coalfields, in the Limpopo province, to Ermelo, which should open up new coal export capacity from South Africa and possibly neighbouring Botswana.

Transnet chairperson Mafika Mkwanazi said a separate announcement would be made on the Waterberg development, which the South African coal industry was arguing should be prioritised, as the coal resources being mined in the Mpumalanga matured.

ENGINEERING & FUNDING

Detailed engineering for the project, which was receiving strong backing from the South African and Swaziland governments, still had to be completed, and environmental approvals obtained. In addition, land would have to be acquired, while some resettlements were also possible.

However, South Africa’s Public Enterprises Minister Malusi Gigaba and Public Works and Transport Minister Ntuthuko Dlamini made a public commitment to doing all in their power to ensure that these issues were dealt with expeditiously. The two youthful Ministers have also promised to support project fundraising efforts, with Transnet expected to contribute some R12-billion and Swazi Rail about R5-billion.

“We are determined to drive this project hard to ensure its speedy implementation as it will create jobs on both sides and, on the South African side, it will further enable the unlocking of the long-awaited Waterberg coal line,” Gigaba said.

Transnet Freight Rail (TFR) COO Mlamuli Buthelezi indicated that, besides the Lothair-Sidvokodvo link, which could involve capital of around R7.3-billion, Transnet would also need to upgrade and strengthen other networks in South Africa, Swaziland and Mozambique.

These associated projects included the upgrade of the 108-km Davel-Lothair line at an estimated cost of R2.2-billion, strengthening the 345-km Sidvokodvo-Richards Bay line (R4.6-billion) and upgrading the 154-km Phuzumoya-Maputo line, which could involve capital of around R1.8-billion.

But Molefe stressed that the final capital budget still had to be determined and would be informed by the detailed engineering studies, which would be undertaken during the course of 2012. Environmental approvals, as well as any land acquisitions, were expected to be finalised between 2012 and 2014.

Both Transnet and Swazi Rail would seek to dip into various finance pools to fund the development, including development finance resources. However, it was unlikely that the two governments would contribute directly, with Molefe indicating that it should be self-funding, as the lines would be cash positive from the start of operations.

Swazi Rail CEO Dr Gideon Mahlalela indicated that the two State-owned companies had already received several approaches from commercial banks keen to participate. He attributed this to the fact that the general freight demand already existed, which meant that there would be immediate revenue flows.

Coal producer Exxaro indicated that it would support any development that could improve the logistical chain in the region and, therefore, welcomed the plan to build the new railway line.

“If the demand on the coal line is reduced, Transnet, coal exporters, RBCT and the country as a whole would benefit from the potential higher exports,” spokesperson Hilton Atkinson told Mining Weekly Online.

Likewise, Xstrata Coal's Gugulethu Maqetuka said that, while the group was not aware of all the details of the proposed project, it was supportive of initiatives by Transnet to expand export rail capacity to Richards Bay in the next few years "to match port capacities and beyond".

SOME QUESTIONS

However, independent transport economist Andrew Marsay was less optimistic about the economics of the project. He said he doubted whether the general freight line would ever prove viable on a standalone basis.

He acknowledged that the project could alleviate some immediate pressures on the coal corridor, but added that it would not solve the efficiency problems on the channel, which could be attributed mainly to the fact that there were simply too many customers to enable the line to operate at optimal levels. This was because the volumes at loading points were simply too low to ensure high levels of efficiency.

“Overall, therefore, this will be a lot of money spent to very little avail. The general freight line will be a very inefficient investment and, secondly, the whole solution is not addressing the principle cause of the lack of efficiency on the line,” Marsay argued.

He also argued that it would be vital to develop the project in tandem to a commitment to building a high-capacity line to the Waterberg, as it might be possible to ensure that the constraints associated with current operations were not repeated when that came on line.

“If at all possible, it would be preferable to have a line that bypasses Ermelo, because a high-capacity bulk line needs the minimum possible stops. Therefore, they might even be shooting themselves in the foot by assuming that you have to have the Ermelo depot,” Marsay added.

Nevertheless, the project is attractive from a political perspective, particularly given that it appears to be aligned to the aspiration of building regional railways networks that move beyond the traditional colonial rail patterns that generally associated a mining area with a port.

In fact Gigaba even argued that the projects could make a significant contribution towards the realisation of the much-vaunted ‘North-South Corridor’, which would seek to link the regional economies of Southern Africa. President Jacob Zuma is currently the African Union’s so-called champion of the North-South infrastructure development corridor.

Currently, envisaged in the first phase was a single, non-electrified line, with crossing loops spaced about 40-km apart. Therefore, the new line, which could emerge as South Africa’s first greenfield line in more than three decades, would be operated by diesel locomotives. TFR is in the process of acquiring and building 143 Class 43-000-type General Electric C30-ACi diesel-electric locomotives, which will be deployed over the coming months and years.

The route had been selected mainly owing to the fact that the terrain was less “hostile” than the other options contemplated. However, there will still need to be a number of tunnels and bridges developed along the route.

“We expect the first train to run in three years time,” Molefe enthused, adding that the sod turning on the project marked the beginning of cooperative development between South Africa and Swaziland and represented Transnet’s responsiveness to the infrastructural needs of the region.
 

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