South Africa halts deal with world’s biggest train maker

South Africa’s rail freight company Transnet has suspended business dealings with the Chinese train manufacturer CRRC, over contract disputes, but it may have to reverse that ban to get its locomotives repaired.

Transnet is taking legal action against the Chinese company to enforce payment on penalties levied against the company for cost overruns in a contract to supply hundreds of locomotives.

CRRC, which is the world’s biggest train manufacturer, owes at least $3bn (£2.3bn), because of problems over a contract shared by four companies, to supply 1,064 locomotives to Transnet.

The South African Treasury discovered the tender was mired in irregularities and spiralling costs, so it enforced penalties in the contract.

Transnet suspended business with the company, but as the majority of its fleet, which is built by the Chinese firm, requires maintenance, the ban will have to be lifted.

Transnet’s locomotives will need to be reliable, as the company expects to increase rail freight operations, especially transporting commodities produced by the mining industry for export, as South Africa recovers from recession.

The American manufacturer GE has paid its fines and delivered 233 locomotives to Transnet, while Bombardier of Canada has cooperated with South Africa’s investigation into allegations of corruption.