Huge contract to replace rail stock

The group under pressure to deliver the Medupi power plant, several of South Africa’s top businesswomen, and groups representing the disabled and autistic are among the partners in one of the biggest government contracts yet – the first of two multibillion-rand contracts to replace South Africa’s ageing rail stock for the Passenger Rail Association of South Africa’ (Prasa). The R123 billion programme has been split into two 10-year contracts. The first contract, valued at R51bn, was awarded last year to the Gibela Consortium, made up of French company Alstom and local company Actom. More than 60 percent of all the train components will be locally produced, creating up to 33 000 direct and indirect jobs.

The 30 percent BEE stake will be held by three consortiums which together will hold 17 percent of the deal, an educational trust (3 percent) and an employee trust (10 percent).

The three consortiums are:

Community Rail Services, which is made up of “a number of people with disabilities”, black female youths, Parmtro Investments and Kaelo Investments. The directors include Anna Mokgokong, a businesswoman who is founder of Community Investment Holdings, a multibillion-rand company with interests in mining, pharmaceuticals, technology and logistics, and Mokganyetsi Sithole, a director at NKWE Platinum, a resources company which is listed on the Australian Securities Exchange. She is married to the ANC chief whip in the City of Johannesburg, Bafana Sithole. The third director is Esther Letlape, an award-winning businesswoman who has worked in human resources at major South African companies such as Sappi and Sasol and is a director at PetroSA.

Khipunyawo Rail, a black-owned enterprise already involved in the rail sector and made up of SA Freight Logistics, and Autism South Africa. The directors of the consortium could not be found through a deed search. SA Freight Logistics is headed by businessman Thami Gwala, who is also a majority shareholder in the company. He is the president of the Railroad Association of South Africa and SA Freight Logistics was one of the first BEE companies to obtain a Train Operator Railway Safety Permit from the Railway Safety Regulator.

Elgin-Identity is a black investor enterprise. The consortium includes the Durban-based Elgin Engineering, Identity Capital Partners, which is a women-headed investment firm, and the Disability Empowerment Concerns Trust. No directors of the consortium could be found through a deed search. Elgin’s active directors are listed as chief executive Lee Donjeany, chief operating officer Ian Donjeany and managing director Vincent Chetty.

Identity lists its shareholders as well-known businesswomen Sonja Sebotsa, Polo Radebe (the former chief director of BEE at the Department of Trade and Industry) and Nedbank chief financial officer Raisibe Morathi. Prasa group chief executive Lucky Montana told Parliament this week that the average age of South Africa’s trains was about 40 years, and they were currently coming to the end of their design life, with many due for retirement in 2015/16. “The last new train sets were bought in the mid-1980s,” he said, adding that the technology was “old and inherently obsolete”. A comparison of 22 of the features of the trains used by Metrorail and modern trains revealed that the Metrorail trains only passed in one area – they had heating.

They were deemed “adequate” in another two areas and failed in the remaining 19, including areas of speed, crashworthiness, signalling, ventilation and air-conditioning. The fleet renewal programme will see the construction of a new facility in Gauteng’s East Rand, where 360 trains will be produced each year for a 20-year period. The East Rand facility will take about 18 months to complete, and Montana said they had already made a contingency plan to buy the first 20 train sets from overseas, in case of any delays. After Thursday’s announcement of the BEE partners all that now remains is for the Treasury to release more funding, according to Montana.

He said the Treasury had allocated R40bn for the R51bn contract and Prasa would need to approach them for the remaining funding. “After that we will sign the contracts and we expect financial close by September 15,” he said.