Reviving SA's rail industry
- World’s largest rail contract up for grabs
08 November 2012|
The world’s largest rail contract is up for grabs as SA revamps its commuter rail services. Razina Munshi assesses its promise to revitalise the industry while adopting a new model for black empowerment.
Before the end of the year, one of seven international bidders will be awarded the most lucrative rail contract currently available in the world.
It will be the Passenger Rail Agency of SA's (Prasa) first major tender, for the manufacture of new commuter coaches.
With an initial tranche of R40bn over 10 years, the new fleet is the biggest single item of government infrastructure spending since SA's preparation for the soccer World Cup.
It is the first part of a spending programme valued at R123bn over 20 years, for the replacement of Prasa's rolling stock.
This makes it more than double the value of the 1999 arms deal and as likely to generate debate and acrimony, given Prasa's pledge to revive the commuter rail industry and to raise the bar on the way the black empowerment component is implemented.
SA's commuter railways are in a state of disrepair. Three decades of little or no investment is bringing the system to a grinding halt. The frequency of collisions is rising and the number of commuters who have been injured has soared over the past two years.
Prasa CEO Lucky Montana says SA's commuter rail requirements are so critical that without an efficient and functioning system, efforts to grow and sustain cities and the economy will not work.
Prasa board chairman Sfiso Buthelezi is even more frank: "If we don't do something now, the system will collapse. This is the consequence of decades of no investment in rail."
The last time Prasa bought a train was in 1986, from the Japanese.
The average age of Metrorail's fleet is 40 years. Metrorail is Prasa's commuter rail service in urban areas. Shosholoza Meyl, its regional and long-distance network, is only slightly better off, with an average coach age of 30.
The first 10-year tender will produce 3600 coaches out of a total of 7224 over 20 years. It will deliver modern commuter coaches to replace Metrorail's old, outdated and unsafe carriages.
A decision to procure a new fleet from manufacturers abroad would have been an easy option. But Prasa won't just buy trains, says Montana.
"If we are buying a train, we also want to buy local jobs, local skills and buy into a rail industry for SA. We must create the black industrialists of the future."
The size of the programme - all with guaranteed funding from national treasury - justifies the creation of an industry.
SA once had a thriving rail engineering sector but decades of under investment and neglect caused local capability, technology and skills to fall away .
To revitalise it, as Prasa hopes, will require the transfer of technology, meaningful skills development and the creation of 66000 new direct and indirect jobs. It also presents an opportunity for black economic empowerment (BEE) players to get a foothold in the sector, which will help achieve Prasa's goal of creating black industrialists.
It is rare that an entire fleet is procured all at once - usually coaches are acquired as and when old ones need replacing.
Unfortunately, government waited until it was almost too late to act. One-third of Prasa's coaches need to be retired within the next three years.
However, the magnitude of the expenditure and the fact that it will come from government's coffers is expected to forge a new industry.
Seven international companies and consortia have submitted bids, after a request for proposals which closed in September. Prasa says it will announce its preferred bidder in the first week of December.
Those in the running are Spanish firm CAF, Canadian Bombardier, China South Rail, China North Rail, Gibela Rail Transportation (comprising French manufacturer Alstom and SA company Actom), Dudula Rail (made up of Swiss company Stadler, ABB SA and Naledi Rail Engineering), and a seventh consortium of China South Rail and Wictra.
The tender comes at a time when rail manufacturers are scrambling to expand into new markets. The rail market in Europe is saturated, and demand during an economic crisis is low.
Even with fairly stringent requirements, this makes Prasa's tender an attractive prospect. Several bidders have praised the process so far.
The tender requirements include:
The construction of a local manufacturing facility by 2016;
65% local content (goods and services sourced in SA) by mid-2016;
Mandatory skills development of local artisans, technicians, engineers and technologists;
The transfer of rail intellectual property;
Sustainable job creation; and
The creation of a local supply chain.
Furthermore, the winning bidder will have to partner with an empowerment consortium which Prasa will select through a separate bidding process. It has set a minimum requirement of 30% for broad-based BEE in the project.