Rail infrastructure contributes to local industry... | KPMG | ZA

Rail infrastructure contributes to local industry development

Rail infrastructure contributes to local industry...

Audit, tax and advisory firm KPMG notes that State-owned rail operators Transnet and the Passenger Rail Agency of South Africa’s (Prasa’s) investments, collectively valued at more than R430-billion, offer significant localisation opportunities for South Africa. This article first appeared in Engineering News, 11 April 2014


Senior Partner, Deal Advisory Infrastructure

KPMG in South Africa


Also on KPMG.com

Railway track

“The establishment of local industries is taking place on the back of Transnet’s and Prasa’s investment strategies, which will ensure an increasing capability to manufacture passenger and freight locomotives in South Africa.

“This will render the country as the African leader in rail infrastructure development with significant opportunities to influence developments in Southern African Development Community countries and even further north,” KPMG head of infrastructure advisory and global infrastructure: major projects De Buys Scott tells Engineering News.

He adds that these investments offer significant growth opportunities for companies in the rail infrastructure value chain in terms of passenger train and freight wagon developments.

“The programmes being led by Prasa and Transnet are substantial and will provide significant opportunities to develop the local manufacturing industry, which will remain sustainable for a long time, given the length of the procurement processes by both institutions,” says Scott.

He highlights affordability as one of the major challenges facing the local rail infrastructure industry. “South Africa is in a massive infrastructure investment and development phase on every possible front, which absorbs the available resources from the fiscus quite quickly.

“Also, the depressed local gross domestic product growth rate makes maintaining the cash flows to carry out these infrastructure investments rather challenging and, often, the capital is simply not available,” he states. He notes that funding these investments and funding the budget deficit, through debt and the profits generated by rail transport operations, present a significant cash flow constraint.

Another challenge highlighted by Scott is the ageing infrastructure in South Africa. “Most of our rail tracks are the narrow 1 067 mm Cape gauge width, which does not conform with the current 1 435 mm gauge standard width of the newer and more modern tracks used in most countries.”

He adds that new trains will need to be adjusted to fit existing tracks, further increasing costs. Replacing the tracks will not provide an effective solution, as it would be more time consuming.

Scott says, although the lack of technical capacity and capability in South Africa presents another challenge, the localisation programmes of Prasa and Transnet will alleviate this problem over time.

Connect with us


Request for proposal