Over the next few years, we are going to see more and more investment into Africa’s rail industry. There is a real desire from individuals, businesses and governments to jump start one of the most important transport industries in any major economy. Naledi Rail Engineering is making things possible – this is company powering towards success…
“Globally, rail is seen as the backbone of any transport system,” says Dr Jackie Mphafudi, executive chairman of Naledi Rail Engineering (NRE).
However, in South Africa, the rail network has been somewhat neglected over the years falling victim to decades of underinvestment. In 2011, a government study found that most of the country’s passenger coaches were more than 35 years old. Today, other forms of transport, especially road, are favoured over rail, and the government has identified this issue as one which must be addressed. In the last ten years, a number of huge announcements have been made aimed at revitalising this ailing industry and NRE, similarly to many other local and international companies, has positioned itself to answer the call when it comes to manufacturing and design of coaches, signalling solutions, infrastructure management, perway, quality control, and all other areas associated with the upgrading of the country’s rails.
And it’s not just South Africa that is investing in rail. As the middle class grows across the continent, and as manufacturing nations such as China constantly require an inflow of raw material commodities, there is a growing need for infrastructure, especially rail, to move people and goods quickly and efficiently.
Because of this development, NRE is uniquely positioned to service a growing industry using knowledge that has been created, customised and perfected in South Africa. NRE CEO, Wahed Rasool says that the industry is in a good place and investment is not lacking, despite the economic challenges that hang over the country.
“The industry is thriving, without a shadow of doubt. South Africa has invested in what had been an ailing industry with little or no investment in the last three or four decades so there has been a backlog which we have acknowledged and started investing in both passenger and freight, and port and rail operations.
“We are a mining nation and there are many commodities that we export so freight rail and port infrastructure is important. To move any economy, you need to be mobile and have mobility as a key driver,” he explains.
“In 2010/11 the Department of Transport held an international conference in Cape Town and received overwhelming feedback and that is what led to the tender for new rolling stock. At the time, that tender was the largest single rail rolling stock project in the world at about R130 billion. It attracted all OEMs from all over the globe.
“In SADAC and the rest of Africa, there are similar investments happening in countries like Mozambique, Namibia, Zimbabwe, Zambia, Tanzania and others. They’re also mining nations that need mobility and need their commodities taken to port so Africa as a whole is dependent on investment into rail infrastructure.
“The AU took the decision that South Africa should be the hub for all manufacturing of all rolling stock on the continent which places SA at a vantage point when it comes to capabilities. The AU has now started refocussing on that commitment meaning that the capacity in SA needs to be accelerated and needs to be at a level where we can deliver international products and services to the African continent, especially with rolling stock,” says Rasool.
Most of the international OEMs now have a base or partnership in SA including GE, Siemens, Alstom, Bombardier, Thales, Ansaldo, Stadler, ABB, Knorr-Bremse and many more. “The future is looking very bright from a rail manufacturing perspective as these projects are medium to long-term. For example, the Alstom contract is a ten year contract for the delivery of 3600 coaches, then there’s maintenance that goes for 18 years beyond that.
“The rest of Africa such as Egypt, Morocco, Tunisia and others has major rail projects underway; the Middle East and India is spending money so from an investment and spending perspective things are very exciting,” Rasool explains.
NRE has already set its sights on big projects taking place across the continent. In particular, there are interesting developments happening in East and West Africa as well as on-going development in sub-Saharan Africa.
“We cast the net as wide as possible,” says Rasool. “The French speaking countries in North Africa have major projects, however, we are close to other mega projects that are taking place. For example, Senegal. They want to install something similar to what we have in Gauteng with the Gautrain. Thanks to our partnerships on the continent, we have been linked to that project with a major construction company that will undertake the work. That’s a multi-billion dollar project and there are others taking place; in Tanzania there are new lines being built to the port of Mombasa and Dar es Salam has projects in both passenger and freight.
“There is a big appetite from international OEMs to participate in infrastructure projects on the African continent purely because most other markets are saturated. There is a lot happening in Eastern Europe and Russia but apart from that, markets like Germany, and France are reaching saturation so Africa is possibly the last trading ground in terms of growth and major infrastructure projects. Whether it’s rail, dams, mines, ICT, energy or anything else, Africa is the place where development is taking place and will continue to do so for the next 30-50 years,” he says.
8 YEARS OF EXCELLENCE
NRE was founded in 2008 and its reputation has grown exponentially over the past eight years. What started as a small group of stakeholders with various complementary skills has blossomed into an internationally recognised organisation with around 200 people.
“Personally, I’ve been involved in the rail industry in South Africa for the last 27/28 years. I started my career in the railways and worked myself up to be the operations manager for the Johannesburg operation of Metrorail services,” says Rasool.
The developments within government departments and various parastatals meant that NRE was born through necessity for experienced, quality service providers to join the industry.
“The Department of Transport was undertaking a lot of work in the late 90s and early 00s researching what was required for the recapitalisation of the rolling stock and what sort of expertise was required. A that point in time, you had two main operators in the refurbishment industry; Transnet Engineering and Union Carriage and Works. Metrorail and the SARCC (South African Rail Commuter Corporation) were looking for new entrants into the market; I had left Metrorail and formed what was known as Newco, which became Naledi Rail Engineering with a host of other stakeholders. It started with around 12 different people and we diluted that down to the two directors and shareholders who own the company now, and that is Dr Jackie Mphafudi and myself – we are the founding members who originated the concept and put together the bid which was nominated by Metrorail as a service provider to them,” the CEO explains.
“We brought people on board with different types of expertise – people who were handling the funding, operations, management etc. and we founded the company that would eventually go on and be successful with the tender.
“We submitted the tender in 2005/06 and we were successful. Out of 52 tenders, there were only two that were successful and shortlisted and we were one of those and the rest is history.
“We started operating around 2008, we were given three prototype coaches by Metrorail to complete, we done that and handed them back within around three months and concluded around nine or ten coaches in the remainder of that financial year. We then signed three year and five year contracts with Metrorail and PRASA. We grew quickly; we started with 13 employees and now we have almost 200,” Rasool explains.
THE RISING STAR
Many of the organisations involved in the upgrade and renewal of SA’s rolling stock program are international companies and while there is a requirement for local content to be a part of development package, historically there has only been a small number of local companies that specialise in manufacturing and refurbishment. NRE is a local company, owned by South Africans, with a commitment to transformation, diversity and entrepreneurialism – this was proven at the 15thAnnual Oliver Empowerment Awards where NRE was awarded three separate accolades. NRE was also awarded by Impumelelo Top Empowered Companies for its contributions to transformation in 2016.
“We thought of using the name Naledi which means ‘star’. There’s a large district in Soweto called Naledi and a train station called Naledi and we want to be the rising star,” says Rasool.
“In the beginning, while attending contract meetings where all the other contractors were present, we were given the nickname ‘the new kids on the block’ and we used that to our advantage when it came to things like price negotiations and price discussions, we said ‘we’re the new kids on the block so we need to be treated with care and preference’ and we lost that nickname very quickly.
“It’s been an interesting journey; we’ve achieved a lot and it’s a beginning of a fairy-tale that will be told in years to come. We’ve taken our place in the rail industry; we’ve been engaging with all the national OEMs, we have exchange programs with companies around the world, we’ve submitted a bid for the new rolling stock contract in South Africa and partnered with the Swiss company Stadler and ABB. We have working arrangements with Chinese, Spanish and British companies and from an industry perspective we’ve made our mark – we’re on our way to becoming a global company,” he adds.
200 TO 500 PEOPLE IN THREE YEARS
As with any company, anywhere around the world, a company that provides high-quality services needs skills and expertise which are not always readily available in the workforce. This was certainly the case in South Africa where unemployment levels still sit at around 25%. NRE recognised this at an early stage and has taken steps to upskill its workers wherever necessary. This type of internal development is often at the foundation of the most successful companies in the world.
“When we started Naledi, we recognised that there was a skills gap and we wanted to put a model in place to address that,” says Rasool. “The fact that we’ve gone from 13 to 200 people in just under ten years is indicative of the growth that we’ve had at the company. We use a model where we take existing skills and partner those with people who are under skilled and train them up in-house and then send them on learnerships so that they can become qualified as artisans.
“We’ve sent junior management at shop floor level to other parts of the world to see how things are done in terms of systems and processes so that they can come back and share that with their colleagues here. These campaigns have been very successful and we were congratulated by the DTI,” he adds.
The country’s rolling stock fleet renewal programme is already creating jobs and, according to Dr Mphafudi, it has the potential to create more than 30,000 in total over the coming years. NRE is taking steps to speed up the creation of jobs and is being supported by the government. Even as far back as 2011, the Department of Transport said ‘establishing a local manufacturing base for the new rolling stock for PRASA and Transnet will have the benefit of creating a substantial number of local jobs and the redevelopment of rail engineering capacity and skills that have been lost over decades of underinvestment in the local rail engineering industry’.
“We’re doing things to make us sustainable going forward but there’s also a drive form the industry to look at accelerating this upskilling so that people can provide different types of programs and systems. We work closely with MERSETA and TETA and we’ve received learnerships from them. For us, it works relatively well.
“As a private sector company, we value our assets which is our people and we’re working towards empowering them so they can compete with the Chinese, Europeans and North Americans. What gets produced, welded or painted in South Africa should be able to compete with anything produced anywhere in the world and we’ve made huge inroads.
“We have an expansion program that will take us from 200 to 500 people in the next three years so we need skilled people and we have action plans to make sure we are not held up,” explains Rasool.
The South African rail network is one of the largest in the world and estimates place the total network at more than 21,000 km. it is vital that this resource does not go to waste and this is why the work of companies like NRE is so important. Too many passengers that could use rail are using the already stressed road network and too much rail-friendly cargo is also hammering the tarmac. When the rolling stock renewal program is complete and when the promised investment into the rail industry begins to bear fruit, rail could transform the country’s mobility in a big way, boosting performance and ability of many of the country’s industry leading organisations.
NRE is undoubtedly going to play its part. As a forward thinking industry frontrunner, this is a pioneering company with a leadership team that many others must envy. Revolution is certainly coming to this industry; now is a great time to be involved.