Mr Chris Wells acting CEO of Transnet, biggest railway and ports company, consider the job of running the great South African railway. The system is creaking under the strain of decades of under investment.
A global recession crimps your traffic, even as the company that supplies the juice that powers your electric locomotives imposes a savage tariff hike. Scrap thieves hack your network to bits at night, stealing rails and making off with tons of copper wire from your overhead cables which, apart from the cost, also means marooned trains and big delays.
A fresh set of good financial results certainly helps, as does having a numbers man instead of an engineer at the throttle. Top line profits for the year are up more than 9% to ZAR 14.4 billion partly the result of an aggressive cost cutting drive and, despite the recession, revenue was up 6% to nearly ZAR 36 billion.
This has gone a long way to easing the hangover of the punishing three week strike during which trains were sabotaged and the country's reputation took a beating as ships turned back to sea without unloading their cargo. The strike was resolved by granting workers an 11% pay hike that will add ZAR 1 billion to the company wage bill.
Mr Wells said that "There was no need for the strike. People lost three weeks of wages. Every week people came back and more product moved. The coal kept on rolling to Majuba Power Station, as did critical jet fuel supplies to OR Tambo International Airport."
Along with its results, Transnet also announced that it planned to concession its non core branch railways to private operators, a revolutionary step for the state owned railway.
Mr Wells said that "Our strategy is to run a scheduled railway, regular product on long trains going long distances. That's the essence of a freight railway worldwide. Branch line services don't fit economically into our model."
Mr Wells noted that the branch lines were a big asset. If competently run, they could generate business for Transnet Freight Rail or help boost tourism and development. He added that "Nothing that works for our business or fits into our strategic model is on that list. There are branch lines that will be an attractive business proposition. And certain agricultural co ops have already shown an interest."
Transnet will grant concessions on particular lines as long as the business model is sound. The trick for the new operators, though, will be to earn enough money to fund this notoriously expensive business. Wells pointed to overseas experience where government has often stepped in with grants or subsidies to help keep short lines on the rails.
He said that "We're developing a model which we will issue to all in due course. I don't for one minute believe that all 7000 kilometers will end up being a profitable business for somebody. But there are several parts of it that I think can be run profitably."
Mr Wells said that "We want to invest ZAR 93 billion in the next five years and we can only do that if we maintain a strong financial position and our investment is at least greater than our cost of capital."
(Sourced from www.timeslive.co.za)
