Rail operator given funding boost for growth in Africa
When a private US railroad company arrived in war-battered Mozambique at the end of the 1990s to take over the operation of that country's crucial northern corridor between Malawi and the port of Nacala, it took nearly a decade to raise the finance needed.
Africa was - and still is - a tough proposition for any railway business, and potential private investors have often been scared off by the various challenges of ruined tracks, wrecked locomotives and vicious competition from trucks.
Not so the Pan African Infrastructure Development Fund 2, which has closed a deal to acquire 30% of South African privately-owned locomotive and railway operator Sheltam for an undisclosed sum.
The fund, managed by Harith General Partners, invests in infrastructure projects in Africa, and opens a welcome funding pipeline to Sheltam, which hires out its locomotives, crews and operational expertise to mines, industry and a growing portfolio of state railways north of the Limpopo River.
"It's a billion-dollar fund for infrastructure that will position the company for growth in Africa," said Sheltam CEO James Holley this week.
Sheltam would not disclose numbers but Holley, who has been in the driver's seat since June last year, noted that "we now have no debt and no gearing".
Following the fund's acquisition, the remainder of Sheltam's ownership is split between private investment group Principle Capital, with a small majority stake, and Port Elizabeth businessman and company founder Roy Puffett.
Sheltam hauled its first train in 1988. From its early days of hauling coal trains in the Witbank coal fields, it is now the largest private rail operator in the country with a fleet of 44 diesel locomotives and 262 staff.
Operations are dotted throughout Africa, with contracts that include minerals and timber haulage in South Africa. It also provides locomotive hire and technical and operating expertise for power-strapped railways in, among others, the Democratic Republic of Congo, Zambia, Botswana, Tanzania and Mozambique.
From 2005 to 2009, Sheltam joined forces with Grindrod's rail and locomotive division to form Sheltam Grindrod as the shipping and logistics giant sought to make inroads into the locomotive leasing and rail operating business.
Grindrod subsequently expanded its rail services arm and opened a locomotive manufacturing plant in Pretoria.
Early growth was rapid as the company sold its heavy-haul locomotives to mine railways throughout Africa until the business faltered with the end of the commodities boom.
In March, Grindrod announced that it was restructuring its locomotive division and laying off most of its staff while it looked for a buyer for the unit, though it said it would continue to maintain and service the locomotives it had sold to other operators.
More recent unconfirmed reports suggest that the division has shut completely, with the remaining staff having been retrenched.
In a note on June 21, the Competition Commission recommended that an application from WBHO Construction and Faku Family Enterprises to buy Grindrod Rail Construction from its parent be approved without conditions.
Grindrod did not respond to questions sent to it this week.