From South Africa’s perspective, the plan to move ahead with a R16-billion to R17-billion greenfield railway line between Lothair, in South Africa, and Sidvokodvo, in Swaziland, is primarily an attempt to relieve pressure on the coal corridor to Richards Bay.

State-owned freight logistics group Transnet and Swaziland Railways (Swazi Rail) confirmed last week that they planned to move ahead with a 146 km single, nonelectrified line by 2016, with an initial yearly capacity of 15-million tons.

The project, which has reportedly been discussed within the rail fraternity since 1882, is designed to divert general freight currently being moved on the Ermelo–Richards Bay line through Swaziland. This should help raise the potential 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 asserts will be “close to 100-million tons”. Currently, the coal line is able to move about 72-million tons, which is well below the 91-million-ton nameplate capacity of the privately owned RBCT.

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

Transnet chairperson Mafika Mkwanazi says a separate announcement is being planned regarding the Waterberg development, which the South African coal industry has argued should be prioritised, particularly as the coal resources being mined in Mpumalanga mature.

Transnet has indicated that it plans to finalise the Swaziland link prior to the introduction of new capacity from the Waterberg, but has not provided any technical, costing or funding details.

What is emerging, particularly from the side of the South African government, is a desire to deal with the current rail constraint, which has been blamed time and again for the fact that South Africa has not been fully benefiting from the resources boom generally and the coal boom, in particular.

What is more, the global demand for coal is expected to remain strong for some time, despite rising concern about greenhouse-gas emissions and the influence these are having on the climate.

In fact, the International Energy Agency’s (IEA’s) inaugural ‘Medium-Term Coal Market Report 2011’, which was published in December, reflects this reality.

It states that global coal demand will continue to expand “aggressively” over the coming five years, albeit at a slightly slower rate than was the case in the ten years from 2000 to 2010.

The IEA report forecasts that average daily coal demand is set to grow by 600 000 t over the period, despite calls for efforts to be intensified to remove carbon from the energy system. Average daily coal demand during the last decade grew by over 700 000 t, when global hard coal demand expanded by more than 70% from 3.7-billion tons in 2000 to an estimated 6.3-billion tons in 2010.

The increase in demand will be underpinned by surging power generation in emerging economies, especially China and India. And, despite the rise of new exporting countries, such as Mongolia and Mozambique, traditional exporters, such as South Africa, are expected to meet the bulk of the demand growth. Six countries, including Indonesia, Australia, Russia, South Africa and Colombia, currently account for more than 80% of global coal exports.

The report also cautioned that the infrastructure bottlenecks experienced in recent years, which have caused coal prices to surge, could again place pressure on markets and prices.

Top-Level Backing
Given that context, it is little wonder that government and the coal industry are putting pressure on Transnet to deliver the infrastructure needed to facilitate export growth.

The SwaziLink project is, therefore, receiving strong backing from both the South African and Swaziland governments.

In fact, South Africa’s Public Enterprises Minister, Malusi Gigaba, and Swaziland’s Public Works and Transport Minister, Ntuthuko Dlamini, have made public commitments that they would do everything in their power to ensure that the project is fast-tracked.

They are both conscious that detailed engineering still has to be completed and that environmental approvals still need to be obtained. In addition, land will have to be acquired, while some resettlements are also possible.

But both Gigaba and Dlamini have promised that these issues are to be dealt with expeditiously. The two youthful Ministers have also promised to support any project fundraising efforts, with Transnet expecting 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 says.

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

These associated projects include the upgrade of the 108 km Davel–Lothair line at an estimated cost of R2.2-billion, strengthen- ing 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 stresses that the final capital budget still has to be determined and will be informed by the detailed engineering studies, which are to be undertaken during the course of 2012. Environmental approvals, as well as any land acquisitions, are expected to be finalised between 2012 and 2014.

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

Swazi Rail CEO Dr Gideon Mahlalela reports that the two State-owned companies have already received several approaches from commercial banks keen to participate. He attributed this to the fact that general freight demand already exists, translating into immediate revenue flows.

Coal producer Exxaro, which has the country’s main Waterberg mine at Groote-geluk, indicates that it is supportive of any development that could improve the logistics 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, the RBCT and the country as a whole would benefit from the potential higher exports,” spokesperson Hilton Atkinson tells Mining Weekly.

Anglo American adds that the measures being taken should boost coal export potential. “Currently and in the recent past, TFR rail capacity has not matched RBCT export capacity. Therefore, there is a need to introduce measures to balance this situation. The proposed solution will contribute significantly to resolving this imbalance while also contributing to the economy of the country,” media specialist Hulisani Rasivhaga says. The group adds that, while the immediate benefits will accrue to the mines in the Witbank coalfields, Transnet and industry stakeholders are engaging on alternatives to serve the country’s energy needs, while sustaining the country’s export potential. Likewise, Xstrata Coal’s Gugulethu Maqetuka says that, while the group is not aware of all the details of the proposed project, it is 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 is less optimistic about the economics of the project. He doubts whether the general freight line will ever prove viable on a standalone basis.

He acknowledges that the project could alleviate some immediate pressures on the coal corridor. But adds that it will not solve the efficiency problems on the channel, which could be attributed mainly to the fact that there are too many customers to enable the line to operate at optimal levels. This makes volumes at loading points 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 argues.

It will be vital to develop the project in “tandem” with a commitment to building a high-capacity line to the Waterberg, as it may be then be possible to ensure that the constraints associated with current operations are 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 adds.

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 argues 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.

He also says this political initiative comes at a time when commercial and development financiers are showing an increased appetite for African rail infrastructure projects.

“On the part of both governments and even the funders, there is great interest in supporting the project. So, we need not worry about where the financing will come from – there is appetite for it, and we will secure it,” Gigaba says.

Currently, envisaged in the first phase is a single, nonelectrified 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, will 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 has been selected to follow terrain that is less ‘hostile’ than the other options contemplated. However, a number of tunnels and bridges will still need to be developed along the route.

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

(See also page 19.)

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