As it wraps up completion of a $3.7-billion high-speed railway line in South Africa this month, Bombardier Inc. says it has strong prospects for further rail contracts in Africa's richest country.
South Africa has announced an ambitious plan to upgrade its decaying rail system, with $14-billion to be spent on rolling stock over the next 18 years. Bombardier, banking on the success of its popular Gautrain project, believes it has a good chance of winning some of those contracts.
The 80-kilometre Gautrain line, the first high-speed train line in sub-Saharan Africa, is scheduled to be finished by the end of June, allowing passengers to zip between Johannesburg and Pretoria in as little as 26 minutes, with more than 100,000 daily passengers expected. Bombardier's share of the project is worth more than $2-billion.
The first phase of the project was launched just days before the beginning of the World Cup last year, wowing tourists with its sleek modern trains between the international airport and the Johannesburg business hub of Sandton. But the final phase this month is much bigger and more crucial to Bombardier's future hopes in the country, providing a full commuter service to compete with a traffic-clogged expressway.
The South African government will be looking for foreign financiers to support its railway upgrade plan at an investment conference in Cape Town on Monday and Tuesday. Nearly all of its existing rail fleet was built in the 1950s and 1960s, and its system is aging so rapidly that it was forced to curtail some of its intercity passenger services last year.
The government hopes to buy up to 9,000 new trains and carriages over the next 18 years, beginning next year. Most of the new rolling stock would be for commuter rail lines within the major urban areas.
Over the past several years, Bombardier has been lobbying the South African passenger rail agency to convince it that a fleet-replacement program would make practical sense.
"I'm quite optimistic that this is happening, and there are all the signs and symptoms that it's feasible and almost a bankable proposition in the national treasury," said Alan Flint, managing director of Bombardier Transportation South Africa Ltd.
Rail companies from around the world, including China, will be bidding for the South African contracts. Some observers suspect that Chinese suppliers will have the edge, especially after a railway investment agreement was announced during a trade mission to China last year by South African President Jacob Zuma.
Mr. Flint said he is confident that South Africa will not "trash" its principles by favouring any supplier in its bidding process. Moreover, he argues that Bombardier has an advantage over the Chinese bidders because it has a proven record of providing local employment in South Africa, while Chinese companies often tend to import labour from China. Job creation is the top priority of the Zuma government, and it hopes to create up to 100,000 jobs for skilled and semi-skilled workers from its railway upgrade program.
There are also media reports that South Africa could approve a $30-billion high-speed railway between two of its biggest cities, Johannesburg and Durban, with a Chinese company seen as the likely winner of the deal after lobbying hard for it. But while this scheme is on the government's agenda and Bombardier is following it, the project is still in early discussions and would face huge logistical and financial challenges, Mr. Flint said.
Meanwhile, local officials in Johannesburg say they would like to extend the Gautrain high-speed line to the east and south of its existing terminals. But Bombardier recognizes that this will be a "difficult sell" at a time when the national passenger system needs renewal, Mr. Flint said.
David Barry, vice-president of Bombardier's subsidiary in South Africa, says the company expects to keep 120 to 130 employees in South Africa over the next 15 years to maintain the Gautrain and seek new contracts. The Gautrain will need upgrades as it expands its passenger volume in coming years, he said.
The reliability of Gautrain will be a crucial selling point for Bombardier as it seeks further contracts in South Africa, he said.
RIDING THE RAILS
The value of Bombardier's high-speed railway line in South Africa.
The value of South Africa's planned spending on rolling stock over the next 18 years.
The number of minutes the Gautrain high-speed train line will take to travel between Johannesburg and Pretoria
The number of daily passengers expected on the Gautrain line.
Bombardier's share of the Gautrain project.