TRANSNET, the state-owned ports and freight company, has "stress-tested" its proposed seven-year R300bn investment strategy in view of a possible prolonged economic downturn, concluding that it could maintain infrastructure investment even if the economy slowed.

The stress tests were modelled using 2008 volumes, when SA last went into recession, Transnet CEO Brian Molefe said yesterday. Transnet's multibillion-rand market demand strategy was designed to allow it to triple its expansion programme and "tilt" investment from a maintenance catch-up regimen to a schedule allowing the company to invest in expansionary capacity.

The test had shown that Transnet would be able to continue investing even if the economy performed poorly, though it would mean it would spend closer to R250bn and not the envisaged R300bn.

"In any war you have a plan until the first shot is fired and then things change. This is our plan, this is what we are going with into the next seven years, but we acknowledge that we may change this," said Mr Molefe, speaking at a ports and rail conference in Sandton.

The same held true for an improvement in economic conditions which could warrant a "more aggressive" investment plan, he said. Any decision to make bolder investments would be made only "after about four years into the plan".

The strategy was projected to triple the size of Transnet and increase the group's revenue to R128bn from R46bn, it said.

While Europe's woes presented a threat to the investment programme, they also presented an opportunity for access to cheaper capital, Mr Molefe said.

"What about what is happening in Europe now? We see it as an opportunity if Spanish banks are downgraded. Emerging markets always offer an escape route for investors that are burning in Europe," he said.

Underpinning the tripling in Transnet's investment programme is the government's desire to use the infrastructure investment budgets of state-owned companies to stimulate economic activity, create jobs and revitalise industries.

The competitive supplier development programme is the state's plan obliging companies supplying capital equipment to state enterprises to develop local suppliers to meet minimum local-content targets.

Transnet has achieved local content targets of about 52%, Mr Molefe said. He said he was confident that the group would be able to achieve local content levels of at least 65% in its new contracts, and possibly "even higher".

The supplier programme would be crucial to Transnet meeting job creation targets, Mr Molefe said. Transnet would invest about R200bn over the next seven years in rail and rail-related infrastructure, with the balance of R100bn going to the group's other divisions such as ports and pipelines.

Rolling-stock manufacturers are on tenterhooks in anticipation of the group's expected announcement of a tender to acquire more than 1300 locomotives.

US-based General Electric (GE) and French power and transport company Alstom have indicated their interest in tendering.

GE is already building and supplying diesel locomotives in partnership with Transnet Rail Engineering and is achieving localisation targets of close to 37%, Thuli Phiri, GE SA spokeswoman, said last week.

Job creation had to be one of the hallmarks of the government's infrastructure investment programme, Raisibe Lepule, deputy director-general in the Department of Public Enterprises said.

Transnet and power utility Eskom had gained scarce skills in procurement and supplier development. Their experience would help the state to align development goals with state spending, she said.

smithn@bdfm.co.za