Transnet to hold off on loco procurement following in-principle agreements with CRRC E-Loco and Alstom

25th October 2022 By: Terence Creamer - Creamer Media Editor

Transnet to hold off on loco procurement following in-principle agreements with CRRC E-Loco and Alstom

A Transnet Freight Rail locomotive in action
Photo by: Creamer Media

Transnet Freight Rail (TFR) CEO Sizakele Mzimela reports that the group’s plan to procure new locomotives will be put on hold in light of the recent in-principle agreements reached between Transnet and two original equipment manufacturers with which it has been in legal dispute – CRRC E-Loco, of China, and Alstom, which recently acquired Bombardier Transportation (BT).

Speaking during a briefing held to outline the progress TFR was making to recover from a recent strike, Mzimela reported that the agreements were likely to result in TFR securing both much-needed spares, the absence of which had left 311 locomotives standing idle, as well as the outstanding locomotives procured in 2015 under the so-called 10-64 contract, which was the subject of intense State-capture scrutiny during the Zondo Commission.

The inquiry found that the increase in the price of the procurement of the 1 064 electric and diesel locomotives from R38.6-billion to R54.5-billion was based on misrepresentations by senior executives and was to the detriment of Transnet, which had subsequently declared the contracts unlawful.

Under the contract, which was split between four suppliers, General Electric was awarded a contract to supply 233 of the 465 diesel locomotives, while China North Rail was contracted to supply the 232 balance. China South Rail was awarded a contract for 359 of the 599 electric locomotives ordered, with BT to supply 240. The two Chinese firms subsequently merged under CRRC.

In August, Transnet and CRRC E-Loco announced an in-principle agreement in relation to legal disputes between the companies, with a similar agreement reached with Alstom in early October.

“Now that we have an in-principle agreement that has been reached with both [CRRC E-Loco] and with BT-Alstom we believe that this will allow us to have sufficient locomotives to carry us through at least for the next three to four years,” Mzimela stated.

“So, at this stage, while we still have intentions to again go for an open-market tender for additional locomotives that will now be held back until we have received the full order from the Chinese and from BT.”

Prior to the agreements, Transnet CEO Portia Derby indicated that the group was preparing to procure about 400 new locomotives to close the gap given that Transnet had taken delivery of 595 locomotives under the 10-64 contract. The tender was initially expected for release in July, but never materialised.

Mzimela also reported that the agreement opened the way for TFR to receive the spares it required from CRRC E-Loco to return 311 idle locomotives to service, which would alleviate the capacity constraints on several corridors, most notably the North Corridor, which transports export coal.

Ahead of the strike, the Minerals Council South Africa estimated an export loss of R50-billion on an annualised basis this year for iron-ore, coal, chrome, ferrochrome and manganese exporters as measured by delivered tonnages by TFR against contracted rail tonnages.

TFR said the iron-ore had recovered well since the strike and that it had not revised its 60-million-ton export-coal target for the 2022/23 financial year, notwithstanding the fact that the corridor had been seriously disrupted during the recent strike.

“The in-principle agreement that has been reached with the Chinese will result in them helping us to bring back to service the long-standing locos first, but also to complete, once everything has been finalised, the supply of the outstanding number of locomotives that would have been part of the initial order,” Mzimela said.

The spares are required for the 53 Class 20E and 67 Class 21E locomotives.

It is anticipated that the agreement with Alstom will similarly allow for the completion of that contract, with Transnet having revealed recently that 85 of the BT locomotives had been delivered to date.

Overall, it is understood that Transnet has taken delivery of 595 locomotives arising from the 2015 contract, representing 56% of the original order.

Meanwhile, TFR announced that it operations were recovering from the recent strike and that the system was operating at about 90% of planned production currently.

At the peak of the strike TFR had been following a staged recovery process that had initially focused on the clearing of safety hazards, before the networks were unblocked so that hazardous and perishable cargo could be prioritised ahead of a stabilisation of the system.

During the strike, cable theft had intensified, particularly on the Container Corridor from Durban to Johannesburg, where 12 km of cable were stolen over the eight days of disruption, with the stretch between Ladysmith and Pietermaritzburg emerging as a particular crime hotspot.

The other corridors had recovered strongly, but the Container Corridor, which was also badly affected by the KwaZulu-Natal floods in April, continued to struggle, with three trains still “staged”, or located in areas where they were not meant to be, mostly as a consequence of ongoing cable theft. Diesel locomotives were being deployed in an effort to unblock the line.

At the peak of the strike TFR had a total of 257 staged trains, 234 of which had been cleared by October 25.