coal scenario in india i

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South Africa

Infrastructure Report

Compiled by:

Swiss Business Hub South Africa

Pretoria, February 2009

Abstact

It is undoubtedly true that South Africas infrastructure, in terms of rail and road transport, has de-

teriorated over the last ten years. This is essentially due to short sightedness and a lack of invest-ment both pre- and post-apartheid. However the transport sector is increasingly being seen as a keycontributor to South Africas competitiveness in Global markets and a crucial engine for economicand social development. This and the imminent FIFA World Cup 2010 has led to a wake up call inGovernment which is now investing heavily in inf rastructure

Overview

South Africa has a reasonably modern and well developed transport infrastructure which has declinedsomewhat over the last 10 years mainly due to a lack of investment and a skills shortage in the country. Theroad system is, however, extensive and in relatively good condition. The air and rail networks are the larg-est on the continent and the countrys ports provide a natural stopover for shipping to and from Europe, the

Americas, Asia, Australasia and both coasts of Africa.

The FIFA 2010 World Cup has provided an incentive and a ZAR 9 billion investment into improving infra-structure in the nine host cities in order to cope with the expected massive influx of visitors. This meansmajor upgrades to the countrys airports and improvements to the general transport system, including thetaxi recapitalisation programme, consolidation of passenger rail and a transformation of the bus industry.

PortsThe ports of southern Africa play an important role in the economies of each country and those ofneighbouring landlocked members of the Southern Africa Development Community (SADC).

Approximately 95 percent of all trade to the region passes through these ports and those of East Africa,providing a vital link in the logistic chain of southern Africa.

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Transnet, a state owned company, manages the ports in South Africa which are: Richards Bay and Durbanin KwaZulu-Natal, East London and Port Elizabeth in the Eastern Cape, Mossel Bay, Cape Town andSaldanha in the Western Cape. These ports service the approximately 96% of the countrys exports that areconveyed by sea. This amounts to some 183 million tons of cargo (2007). Durban is Africas busiest portand the largest container terminal in southern Africa and Richards Bay is the largest bulk coal terminal.

An eighth commercial port, Ngqura, is under construction off the coast from Port Elizabeth and should beready in J une 2009. This will be the deepest container terminal in Africa.

Transnet, after successfully negotiating a turnaround strategy, has recently set forward a four point growthstrategy and plan to invest R80 billion on revitalizing and extending their infrastructure over the next fiveyears.

www.transnet.co.zawww.ports.co.za

RoadsThe intercity road network comprises about 55,000kilometers (km) of paved roads; 2,500 km of whichmeet freeway standards. A further 126,000 km ofgravel roads are available. Roads not included inthese figures are the lower-order rural roads andthe majority of urban roads. 2 400km are toll roads.Maintenance is the responsibility of the South Af-

rian National Roads Agency and the local govern-ments of the nine provinces.

However, South Africa's road infrastructure has

come about because of under funding of road maintenance, overloading of heavy vehicles, and increasedvolumes of road freight vehicles. A recent Automobile Association report stated that 70% of South Africa'sroads were in need of urgent repairs that would cost R 65-billion. Overloading was said to be costing SouthAfrica ZAR 650-million a year in destruction to roads.

Public transport in SA is inadequate and in need of overhauling and development. There are approximately3,9 million public transport commuters. The 2,5 million taxi commuters account for over 63 percent of public

transport work trips, bus services account for another 22 percent of public transport commuters and thebalance are carried to work by train. In addition to the 2,5 million commuters who use minibus-taxis as themain mode of travel, there are another 325 000 commuters who use taxis as a feeder mode to other publictransport services.30 per cent of households in the RSA spend more than 10 per cent of their income on public transport.

In an attempt to alleviate some of the problems, particularly with a view to 2010, The Integrated TransportPlan for host cities' Cape Town, Tshwane, Durban, and Bloemfontein among several others will include aBus Rapid Transit system which will promote the use of public transport ahead of the 2010 soccer specta-cle. It involves the construction of "bus way corridors" on segregated lanes and modernised technology.

http://www.transnet.co.za/http://www.transnet.co.za/http://www.transnet.co.za/http://www.ports.co.za/http://www.ports.co.za/http://www.transnet.co.za/


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Phase 1A of the BRT System in J ohannsburg is expected to be completed by May 2009. This will include a40km route through J ohannesburg's city centre, 20 state-of-the art bus stations, 143 new buses, and asmart card system for commuters Phase 1B will add another 86 km and 102 stations to the system aheadof the 2010 soccer World Cup.

Unfortunately there is a lot of resistance form the taxi companies and most of the cities involved have faceddemonstrations against the BRT introduction.

Government proposals are to spend: R1,6 billion being spent on the capital expenditure (CAPEX) projects for 2010 R200 million on Intelligent Transport Systems R700 million on new and improved bus and taxi infrastructure R144 million on new intermodal interchanges and facilities R109 million on Non-motorised Transport Infrastructure Projects

The National Roads Association www.nra.co.zawww.aboutus.org/Public_Transport_and_Road_Safety_in_South_Africa www.sa2010.gov.za

RailwaysSouth Africas extensive rail network is the 10

thlongest in the world. The main heavy hauler is state-owned

Transnet and the companys network connects the ports with the rest of southern Africa. Only half of thenation's 20,000 kilometres (12,000 mi) of track is being fully utilized, and some 35% of the nation's trackcarries no activity or very low activity. Accordingly, Transnet is moving towards an emphasis on freight,rather than passengers, to keep the rail system profitable. Although as the majority of SAs lines are narrowgauge (1,067 mm), there are some limitations on heavy freight transport.

The Government has promised to invest ZAR 19.5 billion a year over the next four years on upgrading itsports and rail infrastructure.

The Gautrain, an 80km rapid rail link will connect J ohannesburg, Pretoria and OR Tambo International Air-port. The rail lines will be constructed on standard gauge (1,435 mm) due to the increased speed of thetrains. The ZAR 25 billion project is a public-private partnership between the Gauteng provincial govern-ment and Bombela, a Canadian-French consortium. The first phase of the construction between the airport, Sandton and Midrand is expected to be completed in time for the 2010 FIFA World Cup, the second phaseshould be finished by 2011.

Railroad Association of South Africawww.rra.co.zaSouth African rail Commuter Corporationwww.sarcc.co.zaBombela Concession Companywww.bombela.com

Ai r t ravelSouth Africa has ten principal airports of which three are major international airports situated in J ohannes-burg, Durban and Cape Town. The semi-privatised Airports Company South Africa (ACSA) is responsiblefor overseeing the infrastructure expansion. In 2007 a five-year capital expenditure programme was insti-tuted of ZAR 20 billion for this purpose. Cape Town and J ohannesburg airports have already been exten-sively refurbished and expanded to cope with the expected rush in 2010.

There are around 230 000 aircraft landings per year which carry about 33 million passengers. The top 6

source markets for arrivals were the UK, USA, Germany, Netherlands and France with Zimbabwe comingin seventh followed by Zambia and Italy.
http://www.nra.co.za/http://www.aboutus.org/Public_Transport_and_Road_Safety_in_South_Africahttp://www.sa2010.gov.za/http://www.rra.co.za/http://www.sarcc.co.za/http://www.bombela.com/http://www.bombela.com/http://www.sarcc.co.za/http://www.rra.co.za/http://www.sa2010.gov.za/http://www.aboutus.org/Public_Transport_and_Road_Safety_in_South_Africahttp://www.nra.co.za/


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Airports Company South Africa www.acsa.co.zaSouth African Airways www.flysaa.com

Energy infrastructure

Energy contributes about 15% of South Africas GDP, however the countrys strong economic growth, rapidindustrialisation, a mass electrification programme and a distinct lack of investment led to demand forpower outstripping supply in 2008. This resulted in load shedding (a euphemism for power outages) overmuch of the country. The power supply crisis has accelerated recognition of the need to diversify the en-ergy mix, such as nuclear power and natural gas, as well as various forms of renewable energy.

As a result a projected ZAR 343 billion over five years has been made available to fund new power sta-

tions. Eskom has started work on two new coal-fired stations (to come on line in 2013) and was consider-ing bids for a conventional nuclear power station which has now been shelved due to lack of finance. Therevised projection for nuclear increase is that the next plants will come on line in 2019, and 6000 MWemight be operating by 2025. Development of the Pebble Bed Modular Reactor (PBMR) technology forpower plants, scheduled for commercial use by 2014, has similarly been hit by the current global financialcrisis.

There are also plans to reopen three power stations that were mothballed in the 1990s, build two open-cycle gas turbines that will produce power by the end of 2009 and complete a hydro scheme in the Dra-kensberg mountains of KwaZulu-Natal.

Additionally there is a move to promote alternative sources of power such as solar and wind energy. De-spite South Africas abundance of sunny weather the former has not as of yet really taken off and there are

some concerns that SA is not an ideal land for wind generators.

As can be seen from the above the majority of SAs electricity is produced from coal, the major indigenoussource of energy and is consequently a significant emitter of greenhouse gases. South Africa is, however,a signatory to the UN Framework Convention on Climate Change and the Kyoto Protocol and is committedto reducing coals current 88% share to 78% by 2012 and to 70% by 2025.

Energy Overview

Proven Oil Reserves (Janu-ary 1, 2008E)

15 million barrels

Oil Product ion (2007E) 199 thousand barrels per day, of which 8% was crude oil.

Oil Consumpt ion (2007E) 505 thousand barrels per day

Crude Oil Refining Capacity(2008E)

485 thousand barrels per calendar day

318 billion cubic feet

Natural Gas Production(2006E)


Natural Gas Consumption(2006E)


Recoverable Coal Reserves(2007E)

54 billion short tons
http://www.acsa.co.za/http://www.flysaa.com/http://www.flysaa.com/http://www.flysaa.com/http://www.flysaa.com/http://www.acsa.co.za/


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Coal Production (2007E) 283 million short tons

Coal Consumption (2007E) 203 million short tons

Electrici ty Installed Capac-ity (2005E)

40 gigawatts

Electricity Production(2005E)

228 billion kilowatt hours

Electricity Consumption(2005E)

211 billion kilowatt hours

Total Energy Consumption(2005E)

5.0 quadrillion Btus*, of which Coal (75.4%), Oil (20.1%), Nuclear(2.8%), Natural Gas (1.6%), Hydroelectricity (0.1%), Other Renewables

(0%)

Total Per Capita EnergyConsumption (2005E)

114 million Btus

Energy Intensity (2005E) 10,006 Btu per $2000-PPP**

www.eia.doe.gov/cabs/safrica.html

www.southafrica.info/business/economy/infrastructure/energy.htmDepartment of Minerals and Energy:www.dme.gov.za
http://www.eia.doe.gov/cabs/safrica.htmlhttp://www.eia.doe.gov/cabs/safrica.htmlhttp://www.eia.doe.gov/cabs/safrica.htmlhttp://www.southafrica.info/business/economy/infrastructure/energy.htmhttp://www.southafrica.info/business/economy/infrastructure/energy.htmhttp://www.southafrica.info/business/economy/infrastructure/energy.htmhttp://www.southafrica.info/business/economy/infrastructure/energy.htmhttp://www.southafrica.info/business/economy/infrastructure/energy.htmhttp://www.dme.gov.za/http://www.dme.gov.za/http://www.southafrica.info/business/economy/infrastructure/energy.htmhttp://www.eia.doe.gov/cabs/safrica.html


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Synthetic fuels, Oil and Gas

SA has a highly developed synthetic fuels industry, in which state owned PetroSA and the petrochemicalsgiant SASOL are the major players. PetroSA manages the commercial assets in the petroleum industry,including the largest commercial gas-to-liquids plant at Mossel Bay in the Western Cape.

SASOL, the biggest local company listed on the J ohannesburg Stock Exchange, produces synthetic fuelsfrom low-grade coal and a small amount from natural gas. It produces 36% of the liquid fuels consumed inSA.

The coal-mining industry is highly concentrated, with six companies, Anglo Coal, BHP Billiton, Sasol Min-ing, Eyesizwe Coal, Kumba Coal, and Xstrata Coal accounting for 90 percent of coal production. Produc-tion and consumption of coal in South Africa have grown steadily over the past two and a half decades, atan average annual rate of 2.7 percent. In 2007, about 125 million tons or 64 percent was burned by Eskomin its power stations, with Sasol consuming another 47 million tons and industry and small consumers ac-counting for the remainder.

South Africa is an export led economy, and the depreciation in the price of commodities due to global de-mand that has shrunk to very low levels have resulted in some significant job losses. So far about 14,000mining jobs are on the line, South Africa's Chamber of Mines has said, but analysts say more than 40,000or 8 percent of the workers in a sector that employs close to half a million people are likely to lose theirjobs.

www.mineweb.comwww.sasol.comwww.petrosa.co.za

http://www.mineweb.com/http://www.sasol.com/http://www.sasol.com/http://www.sasol.com/http://www.petrosa.co.za/http://www.petrosa.co.za/http://www.petrosa.co.za/http://www.petrosa.co.za/http://www.sasol.com/http://www.mineweb.com/


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Information & Communication Technology (ICT) Industry

The South African ICT market is the largest in Africa and contributes about 6.4% to GDP. The Telkom longtime monopoly has now been challenged by a Second Network Operator (SNO)

cell / fixed line telephones

cell

fixed

called Neotel, which wasawarded a fixed network licencein 2006. The GSM cell phonemarket has three operators: Vo-dacom, MTN and Cell-C. Thereare currently about 18.7 millioncell phone subscribers versus 4.8

million fixed line users. The Afri-can mobile phone sector is fore-cast to grow at a rate of 20% in2009.

This is slower than the 25% expected for last year and well off its impressive growth rate of 70% in 2005.Revenues are expected to fall as increasingly more subscribers are connected due to increased competi-tion.

Internet usage: South Africa

YEAR Users Population % Pen. Usage Source2000 2,400,000 43,690,000 5.5 % ITU

2001 2,750,000 44,409,700 6.2 % IWS

2002 3,100,000 45,129,400 6.8 % ITU

2003 3,283,000 45,919,200 7.1 % Wide World Worx

2004 3,523,000 47,556,900 7.4 % Wide World Worx

2005 3,600,000 48,861,805 7.4 % Wide World Worx

2008 4,590,000 43,786,115 10.5 % W.W.W

Source: www.internetworldstats.com

A significant retarding factor has been the high cost of bandwidth in Africa. However, the Government has

committed to addressing this, and major projects are under way to lay submarine fibre-optic cables alongboth the east and west coasts of Africa to boost the continent's connection with the rest of the world. Satel-lite communication connectivity is also forecast to have healthy growth.

Yet analysts report that the ICT industry may suffer in 2009 due to a skills shortage predicted to be as largeas 25%. This is attributed in part to the fact that domestic supply is far below demand. Deep skills are evenscarcer than entry level skills.

Gautteng Economic Development Agency:www.geda.co.zawww.informationindustry.org.zawww.southafrica.info/business/economy/sectors/ic te-overview.htm

http://www.theworx.biz/http://www.theworx.biz/http://www.worldwideworx.com/http://www.internetworldstats.com/http://www.geda.co.za/http://www.informationindustry.org.za/http://www.informationindustry.org.za/http://www.informationindustry.org.za/http://www.southafrica.info/business/economy/sectors/icte-overview.htmhttp://www.southafrica.info/business/economy/sectors/icte-overview.htmhttp://www.southafrica.info/business/economy/sectors/icte-overview.htmhttp://www.southafrica.info/business/economy/sectors/icte-overview.htmhttp://www.southafrica.info/business/economy/sectors/icte-overview.htmhttp://www.southafrica.info/business/economy/sectors/icte-overview.htmhttp://www.informationindustry.org.za/http://www.geda.co.za/http://www.internetworldstats.com/http://www.worldwideworx.com/http://www.theworx.biz/http://www.theworx.biz/


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Future investmentIn the recent budget speech of Finance Minister, Trevor Manuel, it was announced that Government will bespending some ZAR 787 billion on public infrastructure over the next three years which will push SouthAfricas budget deficit to 3.8 per cent of GDP in 2009. Mr Manuel said that due to the decreased demand forSouth African commodities and lower output, coupled with decreased domestic growth meant that it wasnecessary for the Government to borrow more funds in order to finance planned public infrastructure pro-jects. However, he maintained that debt service costs should remain moderate at about 2.5% over the nextthree ears.

Of the budgeted ZAR 787 billion, ZAR 390 billion will be spent on state-owned enterprises. ZAR 25 billionwill go to the Rail Commuter Corporation to invest in new trains and new routes. The Bus Rapid Transitsystem will receive ZAR 12 billion over the next three years and ZAR 1.6 billion to South African Airways to

support its turnaround strategy.

SummaryAs can be surmised from the current investment into infrastructure the South African Government is heavilycommitted to improving and developing the situation as it currently exists. There are many opportunitieshere for enterprising companies to move into the South African market in any of the infrastructure sectorsand the financing is available. This is particularly true of areas that involve a high level of technology and/orknow-how. This situation is likely to continue as Government attempts to dampen the affects of the globalfinancial crisis by providing access to jobs in infrastructure by increasing public expenditure in that sector.

The situation was emphasised with the announcement (24.02.2009) that SAs economy had contracted by1.8% in the fourth quarter of last year, mainly due to a significant drop in production as the global financialcrisis hit exports. However, the bad news was offset by the construction figurers which rose by 10,18% and

has been supported by state infrastructure plans.

Date: Pretoria February 2009

Author: J onathan Lincoln Trade OfficerAuthors Address: Embassy of Switzerland, Pretoria, South Africa

Physical address: 225 Veale Street,New Muckleneuk 0075PretoriaSouth Africa

Postal address: PO Box 2508,Brooklyn Square 0075Pretoria

Tel: +27 12 452-06 60 / 452-06 90Fax: +27 12 346-26 21E-mail: [email protected]/pretoria

www.osec.ch/sbhsa
http://www.eda.admin.ch/pretoriahttp://www.osec.ch/sbhsahttp://www.osec.ch/sbhsahttp://www.eda.admin.ch/pretoria

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