Gordhan to lead visit to China over Transnet locomotives impasse

Efforts to end an impasse between Transnet and China Railway Rolling Stock Corporation (CRRC) e-Loco Supply will see Public Enterprises Minister Pravin Gordhan lead a delegation to China in April, the state-owned freight rail and ports operator confirmed on Tuesday.

Transnet and Gordhan’s department are hoping the trip will help fast-track the delivery of locomotives and spare parts from CRRC as part of a crucial overhaul of South Africa’s rail network.

Read: What’s behind Transnet’s ‘impasse’ with Gupta-linked locomotive supplier?

Transnet has been locked in an impasse with the Chinese state-owned rail equipment manufacturer, which was to supply it with much-needed spare parts for some of its locomotives which are sitting idle.

The original deal with CRRC was halted in 2019 after investigations found that the contracts, valued at more than R50 billion, had been irregularly and unlawfully awarded.

CRRC formed part of four entities that were meant to supply Transnet with 1 064 new locomotives.

Last year, Transnet turned to the courts to compel CRRC to supply it with spare parts, after the Chinese company refused.

The two companies later reached a settlement – a deal that would allow Transnet to procure spare parts to help maintain its locomotives.

Read: Transnet, China’s CRRC agree to resolve legal disputes

But talks between the two faltered earlier this year after Transnet said CRRC was unwilling to engage with authorities in South Africa, including the South African Revenue Service (Sars), in order to normalise its operations in the country.

CRRC, a Gupta-linked local unit of the Chinese parastatal, was implicated in state capture and found to have overstated the price of the locomotives sold to Transnet.

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In a statement on Tuesday, Transnet said Gordhan remains hopeful that talks with his Chinese counterparts will yield positive results, in the interest of both state-owned companies as well as relations between South Africa and China.

The contract is viewed as an instrumental element in Transnet’s efforts to rehabilitate its rail network, which has over the years crumbled, weighing on the hauling of critical bulk commodities such as coal and iron ore.

Transnet said the intervention follows a meeting with President Cyril Ramaphosa on Tuesday (28 March), which highlighted the declining performance of the freight rail division and its constraints on the country’s economy.

“The CRRC locomotives directly impact the performance of three key rail corridors [North, North-East and Cape corridors]. These corridors account for approximately 50% of Transnet Freight Rail’s revenue, and support three mining sector segments: export coal, chrome, and manganese,” Transnet noted.

It said a key requirement for CRRC, in order for them to continue doing business in South Africa, is that its relationships with regulatory authorities are “normalised”.

Transnet said up to now, CRRC has declined to normalise its relationships with the South African Reserve Bank (Sarb) and Sars.