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South Africa: Transnet scores a rail deal in Ghana

By Xolisa Phillip, in Johannesburg
Posted on Friday, 13 December 2019 14:05

The railway will help revive the mining town of Tarkwa in Ghana's Western Region. REUTERS/Matthew Mpoke Bigg

Transnet has continental ambitions beyond freight and wants to be a major player in railway equipment and expertise. It is starting by reviving narrow-gauge railways in West Africa.

South African state-owned rail and freight operator Transnet has agreed to a rail revitalisation deal with the Ghana Railway Company Limited and the Ghana Railway Development Authority.

The agreement stipulates the revival of Ghana’s narrow-gauge railway between Takoradi and Tarkwa, in Western Region – a distance of around 82km.

  • Takoradi Port is Ghana’s main export facility, and the inland town of Tarkwa, home to one of the largest gold mines in Ghana and in the world, Tarkwa mine.

The three entities have agreed to rehabilitate and maintain the line, refurbish and maintain existing locomotives and wagons, supply additional rolling stock, jointly operate the line, and have factored in a skills development component.

Shift from road to rail

Transnet and the two Ghana entities have established a joint project team that will conduct due diligence of infrastructure and facilities.

“Transnet is committed to working with local Ghanaian companies to achieve the objectives of the project,” said Transnet International Holdings chief executive Petrus Fusi. “Through this partnership, Transnet believes it will contribute to the revival of Ghana’s railway infrastructure and operations, and return it to full reliability. This is expected to result in a shift of transporting bulk cargo from road to rail, and contribute to a reduction in Ghana’s cost of logistics.”

Nigeria first

The Ghana deal follows a successful tender in Nigeria. In November 2018 Transnet replaced General Electric as the lead consortium partner in the country’s narrow-gauge railway project. That project entails rehabilitating and operating Nigeria’s western and eastern narrow-gauge lines.

Transnet said the consortium aimed to enter into a 30-year concession agreement with the Nigerian government.

An SOE trying to get back on its feet

Transnet is the dominant player in the domestic market, and the biggest integrated freight transport company on the continent, transporting more than 200m tonnes of cargo a year.

  • Like many of South Africa’s state-owned enterprises (SOEs), however, it was subject to state capture by the government of former president Jacob Zuma and ended up with losses of R12bn.
  • Compounding this, a difficult operating environment at home has caused a drop in volumes for the freight division.

READ: The albatross around South Africa’s neck: why SOEs aren’t working

In 2018, Transnet set out to expand its ambitions on the continent in the fields of original equipment manufacturing and technical expertise, setting up a new company for this purpose, Transnet International Holdings.

  • The manufacturing division, Transnet Engineering, documented improved sales that helped it post a pre-tax profit of R319m ($22m) in the six months ended 30 September 2019.

Transnet operates the world’s longest narrow-gauge freight train at 4km. The train has 375 wagons and transports manganese deposits between Sishen in the Northern Cape and Saldanha in the Western Cape.

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