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Transnet and Broadband Infraco- Leading the Way in Infrastructure Development and CSR in South Africa

Article - January 13, 2012
Panorama Reports talks to H.E. Malusi Knowledge Nkanyezi Gigaba, Minister of Public Enerprises of South Africa; Mr. Brian Molefe, CEO of TRANSNET and Dr. Andrew Shaw, CEO of Broadband InfraCo, about private investment in infrastructure and social development in South Africa
H.E. MALUSI KNOWLEDGE NKANYEZI GIGABA, MINISTER OF PUBLIC ENERPRISES OF SOUTH AFRICA

As with many of the developing economies, South Africa’s increasing strength can be traced to the application of infrastructure. Since 1994, the ANC, South Africa’s ruling party, has been investing further into the state-owned companies in order to create greater efficiency and in turn attract further foreign direct investment. In a recent interview with the Minister for Public Enterprises, Mr Malusi Knowledge Nkanyezi Gigaba he stated:

“In developing countries and emerging markets, state-owned enterprises usually comprise between 10% to 30% of economic activities. The state has a key role in uplifting the poor and assisting to drive the development of the nation.”

Minister Gigaba cited companies such as Transnet and SCOM as institutions who have embraced their responsibilities in creating the infrastructure necessary so that, “both upstream and downstream industries can develop and benefit from their work.”

There has always been a historic necessity for trade between the developed and emerging markets. As the global market turns to Africa’s vast natural resources to support their domestic demand, the South African administration is well aware that these resources will eventually run out, at which stage it will be critical that the nation has a robust infrastructure as well as a diversified economy.

In advancing South Africa’s generation of renewable energy, the World Bank has recently authorized $250 million, which will be dedicated towards some of the continent’s largest renewable energy projects, not only benefiting the domestic market but that of their surrounding neighbours. ESKOM currently generates 95% of South Africa’s energy and an estimated 45% to the African continent. It comes as no surprise that aside from South Africa being a solid hub to enter the continent, the actual renewable energy business is reminiscent of the oil and gas rush to Africa and the Middle East in the 1960’s with both major and start up businesses looking for a foothold in order to bid for tenders. The difference being that many of the continents nations, South Africa included, have a far more savvy government at the helm. The government is certainly interested in partnering with international investors. However, it has become a priority that these ventures must create domestic opportunity and growth. There are a numerous projects currently in motion, the most exciting of which will be the South Africa’s new hydro project. This power station once operational will be expected to generate 40,000mw, the equivalent of providing electricity to about ½ billion households.

While the major players like Siemens, whose success in the wind turbine sector has offered great confidence to the international foreign direct investment market, South Africa is aware of its strategic relationship with Germany, in particular as its number two export market, second only to China. As with many nations the relationship goes deeper than just trade. Minister Gigaba commented:

“We have got to appreciate the investments that German companies are making in South Africa. It goes beyond investments. The Germans have established high quality schools in South Africa, which serve as a gateway for many South African children to European universities. There are many areas, social and cultural, where there are German communities. There are entire German-South African communities that have lived here for many decades now.”

South Africa’s acknowledgement of Germany’s cutting edge technology and engineering is complemented by South Africa’s bountiful resources and its strategic location offering Germany a secure hub from which to move into further African states.

One of the state owned enterprises that have felt the benefit of working in partnership with Germany is also one of South Africa’s oldest companies, Transnet.  For over 100 years Transnet has been the backbone for both passengers and freight, operating the rail networks, airlines and ports. Transnet is now a far more streamlined machine concentrating on freight rail, which has allowed the company to spend time on overhauling the infrastructure and in turn increase efficiency and capacity. In a recent interview, Transnet’s CEO, Mr. Brian Molefe had this to say:

“We have a very good relationship with Deutsche Bahn. They've been in the business for quite a while and are very advanced in everything they do. They also have the technology to run both an efficient freight and passenger railway. We are working with them constantly to learn how to improve our services and we regularly send our staff to train with them.”

The company isn’t just looking to improve its own networks but furthermore lead by example with corporate social responsibility.

“Our focus is also on health and education - The most important project has been the Pillow Pepper Train. This train has been converted into a mobile medical clinic which we have staffed and it serves rural areas. People can have their eyes checked, go to the dentist and get all the medical treatment they require. People in rural areas can go for a long time without getting their medical ailments seen to. This train goes to communities for a day or two at a time and provides medicine, dental services etc and all of this is supplied by Transnet. This train covers four provinces and we are just about to deploy our second train to cover other areas we can’t reach at the moment.”

Transnet is certainly not the only state enterprise to be committing to raising the standards of the nation. While a relatively new player, Broadband Infraco has hit the ground running, rivalling the former monopoly Telkom. Joining the governments focus on education it is the intention of Infraco that more schools in rural areas are able to access the internet and assist in raising the standards of education across the country. Panorama Reports had the opportunity to speak with Infraco’s CEO Dr. Andrew Shaw:

“There are different initiatives from the government to provide services to those areas, and for me schools are a key one, in the sense of transferring knowledge to those underdeveloped environments; as that will transform the nature of the country.”

While Infraco is able to support the nation in furthering its communication networks across the country, there have been several other benefits since arriving on their establishment. Firstly, cost.

“We came as a competitor and at the point we came into the market, the price of broadband dropped by 75%. That competitive dynamic meant a huge change in the environment.”

The second and probably the most important in terms of South Africa’s long-term development is that of being a driving force in developing the rest of the continent.

“There is a huge potential for growth for us not only in South Africa, but also in these countries to the north of our borders. We have what we call the “African Hub Strategy”, which means bringing cable access to Africa, leveraging the fact that we have huge infrastructure here.”

Indisputably, the development of South Africa’s foundations along with a weakened Rand is making it highly competitive in the global markets. This is not only important for South Africa as a nation, but also for the greater continent who will inevitably feel the benefits in the years to come.

  1 COMMENT



29/02/2012  |  0:18
100% of 1

Great article. Very informative. Job well done. What's next?