Transnet looking for foreign business

Transnet is looking to pursue more cross boarder railway infrastructure projects. One railway line would see South Africa connecting to the Democratic Republic of Congo, and the utility has also begun talks on developing the North-South Corridor on the African continent, Transnet Chief Executive Brian Molefe said last week. Speaking at the Ernst & Young’s global Strategic Growth Forum Africa in Cape Town, Molefe said the Swaziland rail link announced by the company in January, which would connect South Africa, Swaziland and Mozambique, was only a first step.

“In future more bolder projects can be expected out of Transnet,” he said. Molefe said an existing railway line connecting South Africa to DRC was unused but the infrastructure could be fixed. He said regional integration would be required to bolster the continent’s infrastructure investment. Molefe said African countries found it hard to convince private equity players to commit to long-term investments of 15 to 20 years and therefore government and government affiliated businesses would have to be at the forefront of infrastructure investment and development, thus Transnet assuming the role it has.

He said he was confident that the utility will not have any problem executing its R300 billion infrastructure plans because it has taken a lead role in investment by committing to provide R200 billion of this and only borrowing R100 billion. “The problem is, infrastructure role in the whole world is led by government. I’m afraid Africa has to follow a similar route. We are not going to be able to rely on private funding. We must look at capital flows in the continent, the pension funds, and make use of them,” he said.

Molefe said when companies come to Africa with money, they tend to hold back a little which was why the continent needed to leverage on its resources “instead of waiting for capital from elsewhere”. “Capital hasn’t come for the past 50 years but only aid and loans which got us into trouble,” he said. Goolam Ballim, Standard Bank’s chief economist said in order to drive growth, there was no other way but the private sector would have to “bleed Africa’s infrastructure”, especially because access to capital would not be plentiful in the next few years.

Roderick Wolfenden, an advisory director at Ernst & Young Africa said European, American and Asian history had shown that government was at the forefront of infrastructure investment to bring these continents to where they are now. He said in the case of Africa, it would be the same but government should not be left to be the only player. He said because infrastructure investment was a long-term commitment, it was financially sustainable for the private sector to invest and generate returns. “It will be a dangerous scenario if the private sector sit back and watch the government. It has to be a collaborative effort,” he said.