State ports and freight rail company Transnet has announced that it will issue an open tender for eligible original equipment manufacturers to step in to rehabilitate locomotives supplied by CRRC E-Loco Supply.

According to Transnet, the supplier has not provided rehabilitation for at least 161 locomotives which are currently non-operational – causing revenue losses for the state-owned company.

“This is a critical intervention not only for Transnet’s sustainability, but for the South African economy.

“The CRRC locomotives directly impact three major corridors (North, Northeast and Cape Corridors) that account for roughly 50% of Transnet Freight Rail’s revenue, and support three primary mining sector segments, namely export coal, chrome, and manganese,” a Transnet statement read.

Off the rails

Between 2011 and 2014, the controversial supplier was awarded contracts to the value of some R25 billion to provide Transnet with locomotives – contracts that were subsequently highlighted during the State Capture commission hearings.

Transnet and the Special Investigating Unit has launched a review application in the Special Tribunal to set aside those contracts.

The locomotive company has also been flagged by the South African Revenue Service (SARS) and the South African Reserve Bank (SARB) and had some R4.2 billion, paid by Transnet, frozen by the Special Tribunal.

Last year, Transnet announced that it had entered into an in principle as well as a settlement agreement with CRRC for the maintenance of at least 161 locomotives in the state entity’s possession.

“Among others, the Definitive Settlement Agreement is meant to enable rehabilitation of non-operational 22E locomotives, long-term material and reliability support to Transnet, the repayment to Transnet of unjustified profits by CRRC and the delivery of the remaining 99 locomotives at the corrected price, subject to the outcome of Transnet and the SIU’s Review Application,” Transnet said.

Now, the state-owned company says CRRC has showed an “unwillingness…to engage with the [South African Revenue Service and the South African Reserve Bank]” to normalise its operations in the country” in order for it to supply the spares.

“A key contingent requirement introduced by CRRC at the time of the In-Principle Agreement and also included in the Definitive Settlement Agreement is the normalising of CRRC’s operation in South Africa by [SARS] and the [SARB] in order to allow Transnet to give effect to the Definitive Settlement Agreement.

“As independent organs of state, both SARS and the SARB are required to follow statutory prescript in considering applications by CRRC to normalise its operations in South Africa. Transnet respects the independence and processes of these organs of State,” Transnet said.

Transnet is also expected to issue a confined tender for locomotive repairs supplied by Wabtech, Mitsui and Alstom.

“The resolution of this matter is key in supporting Transnet’s efforts to normalise its operations, enhancing the service provided to customers, and boosting the national fiscus,” Transnet said.

Source: South African Government News Agency