Transnet takes over as lead partner in Nigerian railway concession from General Electric
US company’s announcement that it would transition leadership of an international consortium to parastatal came after it said it had spun off transport business
Transnet, SA’s beleaguered state-owned rail operator, has taken over from General Electric (GE) as the lead consortium partner in a $2bn Nigerian narrow-gauge railway concession, giving it the lion’s share of the deal.
Transnet announced in 2017 that it was seeking to expand operations in Senegal, Liberia, Nigeria, Ghana, Togo, Benin, the Democratic Republic of Congo and Kenya. In the same year it and its consortium partners were selected preferred bidders in the Nigerian rail rehabilitation project.
It first began exploring African opportunities in 2015 when it announced its Africa strategy. Former public enterprises minster Lynne Brown said at the time that Transnet needed to diversify its revenue sources in response to the economic slowdown in South Africa.
Intra-African trade accounts for less than a fifth of total continental exports, according to the World Bank’s Logistics Performance Index. Only six of the 46 African countries ranked are in the top two categories, 18 are ranked as partial performers and 22 are ranked “logistics unfriendly”.
GE’s announcement that it will transition leadership of an international consortium to Transnet came after the US company said it had spun off its transport business. “This development is in line with GE’s exit the transportation business from its portfolio,” it said.
Nigeria’s transport minister, Rotimi Amaechi, confirmed on Sunday that his government was in talks on the concession with Transnet, Reuters reported. “When we conclude we will sign the concession agreement and they will rehabilitate the entire 3,500km of railways,” Amaechi said.
Transnet’s consortium partners in the concession are APM Terminals, a Dutch-based global port, terminal and intermodal inland services provider, and SinoHydro, a Chinese state-owned hydropower engineering and construction business.
Transnet said on Monday that its Transnet International Holdings (TIH) division and its partners were conducting a bankable feasibility study to account for the change in consortium members and to enter into a 30-year concession agreement with the Nigerian government.
The concession would fund, rehabilitate and operate Nigeria’s western and eastern narrow-gauge lines, connecting Lagos in the southwest to Kano in the north, and connecting the oil terminal city Port Harcourt in the southeast to Maiduguri in the northeast.
“This will support the migration of traffic from road to rail and decongest Nigeria’s logistic infrastructure,” said Petrus Fusi, CE of TIH.
“The consortium will endeavour to reduce the cost of doing business in Nigeria and assist in knowledge sharing with all the partners involved,” said Fusi. Under the approved international operational model of TIH, Transnet’s domestic balance sheet was exposed to a “greatest minimum” in such transactions.
TIH was launched earlier in 2018 with a capital injection of R100m. Then CEO Siyabonga Gama said its revenue would be ring-fenced to avoid burdening Transnet’s balance sheet.
Nigeria is the largest economy in Africa and its biggest oil producer. Growth has been hampered by the poor state of its infrastructure.
GE told Reuters that Transnet had been a trusted partner for several decades and it had confidence in its ability and that of the other consortium members.
Transnet is Africa’s largest integrated freight transport operator. It announced revenue of R72.9bn for the year to end-March, resulting in a R4.9bn profit.