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Transnet, Eskom drive local supply

Aug 14 2012 15:33 Sapa

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Johannesburg - Transnet's locomotive acquisition spree and Eskom's build programme present two of the best opportunities to increase local procurement, the department of public enterprises said on Tuesday.

It told MPs that Transnet's three contracts for the acquisition of locomotives had so far yielded a local procurement component of just over R1bn.

The department was briefing the portfolio committee on public enterprises on progress with the government's plans to re-industrialise the economy through its industrialisation programme.

Its feasibility study on Transnet indicated the state-owned rail-freight group would need 1 064 locomotives in the next seven years - or 152 a year - as part of its R300bn market demand strategy.

Femida Mahomed, a chief director with the department, said Transnet could ideally improve the local content of its spending from roughly a third to about 85% of the value of a locomotive.

The company was expected to spend R35bn upgrading its locomotive fleet.

In a major boost for industry, Transnet recently announced it would start a factory to build more than 7 000 metro rail coaches, and carry the potential investment burden of about R4bn.

Eskom had contributed R644m to local supplier development, with the bulk of the money going through Hitachi, the company contracted to supply boilers for its new Medupi and Kusile power plants.

Mahomed singled out the power utility's need for fabric filters to eliminate toxic gas produced by coal-fired plants as "creating a strong case for a localisation strategy".

She said at the moment Eskom used seven fibre suppliers, but only one of them was South African. Four local companies were involved in stitching the bags, which accounted for only 14% of the final cost of the product.

Producing and needling the fibre used to make the bags accounted for the remaining 86% of the production cost.

Mahomed said it was in this area that Eskom should step up its local sourcing and, to make it viable, should co-operate with other local buyers for the finished product.

"They have to engage with other potential buyers, for example Sasol."

Eskom and Transnet began implementing local supplier development programmes in 2007 and 2008 respectively.

In June, Eskom, Transnet, SA Airways, the Passenger Rail Association of SA and Denel attended a six-day retreat with four government departments and the Industrial Development Corporation to devise ways of improving their local sourcing strategies.

Several MPs commented that the committee could not effectively oversee the local sourcing of parastatals if the department did not set quantitative benchmarks for the policy.

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transnet  |  eskom  |  procurement
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