Grindrod makes R27m rail investment

Grindrod has just added significant muscle to its rail section, acquiring a majority shareholding in the AltX-listed engineering services group, Racec, for just over R27 million. There’s also a strong BEE element in the purchase. The black empowerment group Solethu Civils Holdings holds the minority 25.1% shareholding in Racec. At the same time, the Grindrod group’s current rail operation, RRL Grindrod, is a 50% blackowned joint venture with Solethu Investments. And observers will note that this acquisition has a distinct synergy with Grindrod’s existing rail operations. RRL provides rail operations, shunting, locomotive leasing and rolling stock maintenance services, including supply of parts and components. It also builds, rebuilds and upgrades locomotives for clients as well as for its own lease fleet. New locomotives produced range from large main line 3000 horse-power (HP) diesel electric locomotives to lightweight shunting locomotives. Racec, meantime, specialises in rail construction, rail electrification and maintenance contracting – from construction, maintenance and upgrading of railway track systems to mechanised on-track plant and machinery and construction and maintenance of electrical overhead track equipment (OHTE). Dave Rennie, CEO of Grindrod Freight Services (port, terminals and rail), confirmed the complementary nature of the two groups. “This acquisition supports Grindrod’s Africa growth strategy to invest in strategic infrastructure assets along development corridors connecting commodities, countries and clients across Africa,” he said. Grindrod chief executive Alan Olivier also highlighted the African target market when he recently announced that the group anticipated having to consider a further rights issue within the next 18 months to help fund the expansion of its rail, ports and terminals business on the African continent. Referring specifically to rail, he added that Grindrod had also bought into the NLPI Zambian-Zimbabwean rail concession, which signalled the group’s movement into rail, but there were expansion opportunities “all up the Mozambican coast”. He also noted that the group was already operating on the Beira railway and would look to operate on the Nacala railway line in Mozambique when it opened. Grindrod has also pointed out that Africa now presents its rail operations with a developing market. The historic under-investment in rail, it said, together with the proliferation of large mining projects, supported by general economic growth, has provided a favourable environment for growth in the rail sector in Africa. Added to that, Grindrod has, since 2005, been engaged in the rail sector in Africa and has significantly expanded its rail service offerings and significantly increased the scale of its existing operations. RRL has operations in Sierra Leone, Mozambique, Republic of Congo and SA. Racec, meantime, has its head office in Brakpan, Gauteng, and maintains satellite offices in Cape Town, Richard’s Bay, Maputo, Mozambique, Freetown, Sierra Leone, and Mombasa, Kenya, according to CEO Gary Harrod. The company also headlined successful operations in the rest of Africa, specifically the rail construction project in Sierra Leone. It has also won further contracts in East Africa and is currently investigating opportunities in Mozambique, Ghana, Guinea, Kenya, Tanzania and Sudan. INSERT & CAPTION Investing in strategic infrastructure assets along development corridors connecting commodities, countries and clients across Africa. – David Rennie