Report of the Portfolio Committee on Public Enterprises on the oversight visit to Transnet Rail Engineering, dated 18 February 2015

Public Enterprises

Report of the Portfolio Committee on Public Enterprises on the oversight visit to Transnet Rail Engineering, dated 18 February 2015
 

1. INTRODUCTION

 

The Portfolio Committee on Public Enterprises (the Committee) undertook an oversight visit to Transnet Rail Engineering on 25 November 2015.

 

The purpose of the oversight visit was to familiarise the Committee with the business of Transnet Rail Engineering, in terms of industrial capabilities, challenges, and the contribution to the developmental objectives of government. The Committee visited the Transnet Rail Engineering, Koedoespoort Centre in Pretoria. The Committee met with the leadership of Transnet, led by the Chairperson, Mr Mafika Mkhwanazi, and the Chief executive of Rail Engineering, Mr Richard Vallihu. The Committee undertook a tour of the facilities which included the School of Engineering, and the following business divisions: wheel, coach, locomotives, rolling stock equipment, rotating machine and auxillary business divisions.

 

This report provides an overview of the visit, observations and recommendations.

 

2. COMPOSITION OF THE DELEGATION

 

The multiparty delegation consisted of the following Members:

 

Portfolio Committee on Public Enterprises:

• Ms Dipuo Bertha Letsatsi-Duba (Committee Chairperson – ANC)
• Dr Zukile Luyenge (ANC)
• Ms Zukiswa Rantho  (ANC)
• Ms Girly  Nobanda (ANC)
• Mr Moses Tseli  (ANC)
• Mr Eric Marais (DA)
• Mr Nqabayomzi Kwankwa (UDM)

 

Committee Support Staff:

• Mr Disang Mocumi, Committee Secretary
• Ms Lee Bramwell, Researcher
• Mr Rodney Mnisi, Content Advisor
• Ms Yoliswa Landu, Principal Communication Officer
• Ms Yandiswa Cele, Committee Assistant

 

3. MEETING WITH LEADERSHIP OF TRANSNET

 

In his introductory remarks, the Chairperson of Transnet, Mr Mafika Mkhwanazi welcomed the delegation of the Committee and expressed the apology of the Group Chief Executive, Mr Brian Molefe. Transnet made two presentations to the Committee, one that dealt with the overall business of the group and its Market Demand Strategy (MDS), and one presentation that focused on Rail Engineering as a business division.  

 

3.1        Presentation on the Market Demand Strategy

 

The presentation on the Market Demand Strategy highlighted the following:

• Transnet will invest a total of R312 billion over the MDS period of seven years;
• Transnet will be expanding rail, port and pipeline infrastructure, to increase capacity before demand;
• Will shift road to rail to reduce the cost of doing business and carbon emissions, thus enabling economic growth;
• This will result in job creation, skills development, localisation, empowerment and transformation.

 

1.      Overview of Koedoespoort

 

Transnet Rail Engineering in Koedoespoort employs 3692 employees, of which 3434 are permanent and 258 are on contract. Seven out of the eight business units are in operation. The facility produces one locomotive per day. Transnet Rail Engineering offers 9 core businesses, supplying complete products to competent level products.  The nine businesses are locomotive, wagon, coach, port and auxiliary, rolling stock equipment, rotating machine, wheel and foundry.

 

 

3.3        Industrial Capabilities of Transnet Rail Engineering

 

These are some of the industrial capabilities of Transnet Rail Engineering as presented:

• Over 150 years of experience in running maintenance, heavy maintenance, refurbishing and conversions, upgrades, new builds and leasing;
• The first ever new diesel locomotive (Class 39-200) was built in South Africa by Transnet Rail Engineering;
• Has six (6) modern manufacturing facilities, equipped with the latest technology, worth over R8 billion. TE has over 133 depots across the country, able to support various services and across all products;
• Has customers in eighteen (18) countries across Africa and Europe and has worked with over 10 international original equipment manufacturers (OEMs) and component manufacturers spanning across four (4) countries;
• Has invested approximately R1 billion in research and development to lead innovation and development in the business;
• The key objective is to expand footprint and gain market share in the African continent;
• Has a target for Disabling Injury Frequency Rate (DIFR) of 0.79, but has achieved a rate of 0.61, which is below the industry standard;
• Product and service offerings provide a ‘One-stop shop’ for customers;
• Ability to train more than 3 000 new learners through various programmes and 18 training campuses. R120 million was spent on skills development in the 2013/14 financial year;
• Has 16 campuses of the School of Engineering which are responsible for the development and training of core engineering and technical skills;
• Capability to build passenger coaches, but has lost market share due to lack of orders;
• Will build 1400 locomotives over 3 years.

 

3.4 Committee observations

 

The Committee made the following observations:

3.4.1     The Committee encouraged the company to invest more and spend the budget set aside for Research and Development (R&D);

1. The Committee noted with concern that some SOCs are not collaborating and urged Transnet to collaborate with other state-owned entities which fall under the Department of Public Enterprises, and build good relationships with other state-owned companies;
2. A concern was raised with the Statistics South Africa (STATSSA) report that skills development in the country is not going well in relation to black people. The Committee further urged Transnet to ensure it responded to the challenges facing unemployed youth;
3. The Committee applauded Transnet for the African market strategy, particularly its alignment to the Industrial Policy Action Plan (IPAP) and African Union agenda;
4. Transnet should provide more information on what is being done in Saldanha Bay with regards to the oil and gas industry. What plans are being put in place to address this?
5. The Committee appreciated the efforts to invest in infrastructure, but emphasised the need to focus on rural development and the lack of infrastructure in rural communities;
6. Transnet should engage with the private sector in ensuring that more freight was from the road to rail;
7. The Committee noted with concern that the role of Transnet Rail Engineering has not been clarified in the refleeting of Metrorail passenger trains, and the lack of orders to grow the business.

   

4. RECOMMENDATIONS

 

The Committee recommended that the Minister of Public Enterprises should ensure that:

4.1        Transnet works closely with the Department of Higher education and Training and other State-Owned Companies (SOCs) to ensure a comprehensive response to skills development and job creation;

4.2        Transnet work with the Passenger Rail Agency of South Africa (PRASA) to ensure that branch lines are reopened in order for communities to access the Industrial Development Zones (IDZ) in the Eastern Cape.

 

 

Report to be considered.