South Africa: "global locomotive manufacturing hub"?

[John Ashworth]

SOUTH AFRICA: LOCOMOTIVE HUB?

Railways Africa on June 14, 2011 in South Africa

The South African government wants the country to become a “a global locomotive manufacturing hub”, says public enterprises minister Malusi Gigaba. In an address in early June at the University of the Witwatersrand in Johannesburg, he said this forms part of the broader plan to prod state-owned enterprises (SOEs) to act as catalysts for economic growth and job creation and to diversify SA’s economy, which is heavily dependent on commodities.

South Africa has the potential to become the most significant market for electric locomotives outside China, he suggests, but acknowledges there are funding constraints, with enterprises such as Transnet lacking the capability to carryout “complex” procurement requirements.

Through the procurement leverage programme, the Department of Public Enterprises could foster “strategic partnerships” with global original equipment manufacturers like General Electric (GE), the US industrial conglomerate, in order to achieve the development of “new advanced manufacturing capabilities” in South Africa.

Government would like to provide global original equipment manufacturers with access to markets in exchange for “developmental partnerships”, in line with the country’s strategic vision for relevant industries, to be able to achieve the transfer of technology and skills, and access markets.

Transnet’s locomotive fleet renewal process is illustrative of the new procurement leverage approach. It has procured hundreds of new diesel and electric locomotives, which include the transfer of technology as well as quality management and skills development programmes to get the country’s existing industry capabilities to a world- class level, he says, adding that South African production accounted for about a third of the value of the locomotives.

“The next step will be to implement fleet procurement to structure a strategic partnership with a global original equipment manufacturer and so build a global locomotive manufacturing hub in SA,” Gigaba says. “This will involve investment in greenfield plants, as well as the development of new advanced manufacturing capabilities in SA”.

Gigaba acknowledges however that state-owned enterprises lack the capability to design and implement complex procurement programmes: “It is recognised that we are a long way from having world-class procurement capabilities in our SOEs. There is a significant gap between our aspirations and institutional capacity of SOEs to procure complex requirements”.