[miningmx.com] – TRANSNET would spend up to R380bn in 10 years in terms of its Market Demand Strategy (MDS) – an effort that would double the size of the company, said acting CEO, Siyabonga Gama.
“We hope to double the size of the company in six years,” said Gama at the transport and logistics group’s interim results announcement. “We will spend R340bn to R380bn in next 10 year period,” he said. Total assets increased to R350bn in the six months ended September from R328bn at the halfway point in 2014.
If completed, Transnet will have injected half a trillion rands into the South African economy but the strains of the current commodity slump was having an effect on MDS with some projects, including its Waterberg coal plans, being deferred.
“We will make investments in line with what market requires,” said Gama. “Our view is that some of these investments inside that period may be deferred, but when you defer something it does not mean you have stopped,” he said.
Transnet had spent R337bn since MDS was first rolled out in 2012, but the 3.2% gross domestic product growth for South Africa on which the strategy was predicated had not materialised. This meant that certain iron ore and coal projects would be postponed, said Gama.
Nhlanhla Nene, South African finance minister, said in his medium-term budget policy statement last week that the country was on course for GDP growth of 1.5% this year.
“The growth we are experiencing is actually flowing counter to the GDP growth in the country. So we are quite excited by what we see,” said Gama.
Gama said iron ore exporters had alerted Transnet to likely falling export volumes which meant that the firm’s 82 million tonne (mt) export target might not be met. The expansion of the Waterberg coalfields would also be pushed out two years to 2021.
The downbeat commodity market also played a role in Transnet’s interim figures with the firm likely to undershoot its 77mt coal export target for 2015 by 2%.
Despite the prospect of lower rail volumes, which may effect its Transnet Freight Rail – the firm’s largest division in terms of revenue contribution – Transnet posted an 9% lift in interim pretax earnings to R13.9bn year-on-year.
A revaluation of assets, however, translated into hefty depreciation charge which took net profit down some 17% to R1.77bn.
