with Transnet, Eskom, ACSA, SANRAL and Denel to optimize localization by eliminating the rewards for using middlemen who do not add significant value and import components, by maximum transparency in procurement, by involving the industry at an early stage in project design and by ensuring that designs are based on specifications which do not exclude local production. Port expansion and the proposed gas pipelines, water projects and housing are key areas which should be targeted for local production. In the second phase of implementation, the industry will aim to sign detailed memoranda with these entities which set out the procedures and targets and how they will be monitored. A scorecard could be agreed to support localization. 7.5 Transnet has committed itself to working with the Steel Master Plan and the dtic to maximize local content. The following are being considered or are in process: 7.5.1 Following initial engagement with Transnet, it has reviewed its requirement for rails which are not manufactured in South Africa. In order to stimulate a local industry which is able to supply the long, heavy and hard rails they require to replace much of the rail network, Transnet has issued a global RFI for a 20-year supply of rails at about 77 000 metric tons per year, to be manufactured in South Africa. The 20-year timescale is an incentive to investment in the capacity and technology required to produce the head-hardened, 60kg/m rails which Transnet will require in future. They may, however, retain some lighter rails (57kg/m). 7.5.2 Transnet has identified the role of middlemen in procurement as a problem. The middlemen increase the cost by taking a margin but adding no value. In the cases cited by Transnet, all of the material supplied was imported, usually from a large Asian exporter. Transnet states that the motivation for Transnet managers to use middlemen is usually to comply with BBBEE requirements, pointing to a need to review applicable codes. Another example is cranes assembled by Polish companies, which could be supplied by South African industry. Transnet wishes to eliminate middlemen in its procurement. 7.5.3 In order to improve its procurement, Transnet has agreed to cooperate with the dtic through the Steel Master Plan on the following projects. Discussions on the mechanics of the cooperation are taking place between the dtic and Transnet. 7.5.4 Transnet is working with the dtic to commission the development of a master plan for the rail industry supply chain. It would include, amongst other things, a comprehensive analysis of the existing and required capacity and capability of the South African steel and engineering industry to supply Transnet and projects in the region. 7.5.5 Transnet does not have a catalogue of components and spares and wishes to put in place an electronic procurement system. This would systematize and fast-track procurement and make it far more transparent. Transnet has therefore agreed to partner with the dtic and IDC to digitize the rail industry supply chain, in a manner similar to the project to digitize the mining industry supply chain. 7.5.6 Besides rail replacement and wagon-building projects, Transnet expects to carry out some major projects around the ports. For instance, the extension of the Durban port is a priority, including extending the rail lines right into the terminals and rerouting surrounding roads. The scope of the work in Durban is the subject of discussions between Transnet and the dtic . Possible pipeline projects present enormous possibilities for the country as exciting mega-projects. The private sector has shown great interest in supporting and taking forward these projects, to enable them to come on stream as soon as possible. 7.5.7 Transnet will work with the dtic to explore options for regional projects based on an SA Inc approach and utilizing the opportunities under the African Continental Free Trade Area. These projects will require extensive information about business and project opportunities on the continent. The projects are likely to require comprehensive user funding packages. Transnet believes that a new procurement framework similar to those used by Armscor and Denel will make its offering competitive on the continent. 7.6 Discussions with Eskom on its supply chain and tariffs need to be accelerated, following commitment from the Eskom CEO to working with the Steel Master Plan to increase localization.
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The South African Steel and Metal Fabrication Master Plan 1.0
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