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New Transnet chief prioritising diversification as commodity ‘meltdown’ bites

Transnet CEO Siyabonga Gama
Photo by Duane Daws
Transnet CEO Siyabonga Gama

28th April 2016

By: Terence Creamer
Creamer Media Editor

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State-owned freight logistics group Transnet is taking aim at new sectors, such as fast-moving consumer goods (FMCG) and manufacturing, as it seeks to sustain volumes amid the prevailing commodity “meltdown”.

Speaking publically for the first since his appointment as permanent Transnet CEO, Siyabonga Gama said this week that product diversification was a high priority for the group, given the fall in the price of coal, iron-ore and manganese; all key products transported by the utility.

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The plunge in prices of these bulk commodities had already forced a review of Transnet’s Market Demand Strategy (MDS), as mining companies indicated that various capital expansion programmes would be placed on hold until prices recovered.

Volume growth was, therefore, unlikely to match the initial MDS assumptions, especially for coal and iron-ore, when the strategy had forecast export coal volumes growing from 68-million tons yearly in 2012 to 98-million by 2020 and iron-ore from 53-million tons yearly to 83-million tons.

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Gama insisted that Transnet would continue to invest “counter-cyclically”, but said the pace of investments would be based on “validated demand”. However, he stressed that the MDS remained largely intact, with only some spending having been “deferred”.

“What we were going to do over a seven-year period, we will now do over a ten-year period,” he reaffirmed after the Public Enterprises Budget Vote in Parliament.

In other words, the R337-billion, seven-year spending plan had been revised to one where between R340-billion and R380-billion would be invested over a ten-year period.

“As a country, we are a net exporter of raw materials, but to stimulate the economy we need to look at other sectors like the manufacturing  sector . . . and what we want to do as Transnet . . . is begin to diversify the pond from which we fish.”

The group was already moving to play a larger role in the oil and gas sector, which was a key area of focus under government’s Operation Phakisa initiative, which is modelled on Malaysia’s ‘Big Fast Results’ programme. However, as it renewed its rail fleet in particular, Gama said it would begin homing in on opportunities in time-sensitive markets, such as the transportation of perishable products.

“With the locomotive renewable programme, we now have very reliable locomotives and we are able to reduce [turnaround] times. So we are looking at FMCG, manufactured goods and a whole range of new areas that we have hitherto not been able to get into.”

As a result, the group’s “reliance” on mining commodities would decline.

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