Although the Southern African Development Community is able to manufacture, maintain, repair and upgrade rail rolling stock to high standards, the high costs of local manufacturing are driving railway operators to import from abroad instead, a panel of speakers agreed during the South African Rail Association Conference and Exhibition, in Johannesburg, on August 21.

Eswatini Railways CEO Stephenson Ngubane, who led the panel, expressed concern over railway operators' reliance on international markets.

“We have capacity to manufacture. We have capacity to maintain, repair, upgrade in the region, yet railways are talking about a lack of capacity. There are not enough vehicles. There are not enough locomotives. They talk about going overseas to get supply from China,” he said.

Rail component manufacturer Amsted Reelin business development manager Mervyn Chetty noted the associated costs with local manufacturing, but emphasised that higher costs were merely a signal of higher quality and that price should not be the only factor considered.

“There’s very good quality spares and parts being used. But with this comes an associated cost, especially where you have an item that’s going to last you up to 40 years,” he said.

Chetty further elaborated on the challenges posed by cost concerns, explaining that the mindset of focusing on immediate cost savings often led to missed opportunities in the long term. He emphasised the importance of investing in standardised, high-quality components that, while potentially more expensive upfront, offered better long-term benefits.

The discussion also highlighted the issue of inconsistent project pipelines in the region and how that plays into manufacturing capabilities and costs.

Original-equipment manufacturer (OEM) Siemens business development professional Ivan Bekker pointed out the challenges faced by suppliers owing to project delays and cancellations.

“We need to have a solid pipeline of projects. That has not happened in the Southern African rail market. Projects are brought to market, they are tendered, and then they fall into this perpetual validity, extension cycles. You know, projects are being extended, extended, extended and ultimately cancelled. That’s really a very difficult thing for suppliers to deal with, how to forecast, how to ensure employees are kept employed, kept busy, the overheads are being taken care of,” Bekker said.

FINANCING
Chetty noted that rolling stock were "very high-end capital, very capital-intensive type items," requiring substantial financial outlay. He underscored that sustainable finance in this sector involved not just the initial capital outlay for acquisition but also the ongoing maintenance necessary to maximise the asset's useful life.

He said the goal was to "… ensure that one gets the maximum benefit out of the useful life of the asset." To achieve sustainable finance, he advocated for leasing solutions, which he described as allowing " . . . operators and the mining companies and whoever is looking for a real solution to better manage their cash flows and budgeting."

A significant aspect of this approach, according to Chetty, was ensuring regular maintenance through close collaboration with manufacturers, suppliers and OEMs.

"For us, a key component is to ensure that we work with the manufacturers and the suppliers and the OEM to ensure there's key maintenance on a regular basis," he stated.

He mentioned that this involved not only the normal scheduled maintenance but also attention to the latter stages in terms of overhauls.

One of the main challenges in maintaining rolling stock, the panel agreed, was access to spare parts.

He emphasised that "… the worst situation is when you have rolling stock that is standing", as these are meant to be productive assets.

In addition to financial guarantees, Chetty emphasised the need for risk management, particularly in international contexts.

"There's the risk covers that we normally need to ensure, especially on an offshore basis, with regards to political risk insurance and your credit risk cover as well," he explained. These measures were crucial in mitigating the risks associated with long-term investments in rolling stock, which he noted could be particularly challenging when incidents or accidents occur.

"It's not like your vehicle that you book in the morning and you pick it up in the afternoon. These assets could be in those workshops for six months to a year,” he said.

Given the lengthy repair times for rolling stock, adequate cover and protection needs to be in place to maintain operations or access alternative rolling stock.

“Cheap is expensive. Everybody looks at cost, but when you go for cheap, that's when it costs you in the long run, because you're going to use something only for five years or seven years, as opposed to 40 years, and that's where your cost comes in,” Passenger Rail Agency of South Africa executive Sorin Balta added.