New forged train wheel manufacturer to keep Transnet and PRASA on track

Naledi Forging (Pty) Ltd –
Inhlanganiso Forge Wheel Project is approved as a greenfield project.

Four years ago a friend of mine, who at the time had some insight into the rail industry in South Africa, asked me: “Why do we import so many wheels when we could be manufacturing them locally?”

My answer was guarded as I knew that we do manufacture cast wheels locally under license to a US rail transport and engineering company. I can now proudly inform him that yes we will in the near future be able to replace those imported forged wheels with those that are manufactured locally. And yes, the big difference is that they will be forged rather than cast.

Naledi Inhlanganiso (Pty) Ltd (Naledi) is a 100% black owned industrial group in the basic iron and steel manufacturing sector. In 2012 Naledi, through a consortium that included the Industrial Development Corporation (IDC), acquired a majority stake in the then listed Dorbyl Ltd. The only operational division in Dorbyl at the time was Guestro Automotive and Machining. The company included the existing foundry operations in Benoni, Gauteng, which are currently undergoing a R100 million upgrade to equipment and processes, and the machine shop.

In 2013 Naledi submitted a bid in a public tender process for the supply of 34” cast and/or forged train wagon wheels to Transnet Engineering, a division of Transnet SOC (Transnet).

After various stages of negotiations, the bid for the manufacture of forged wheels was awarded in September 2014 and the final supply agreement was signed end of March 2015.

Section 12I Tax Allowance Programme
Then in November 2015 it was published in the Government Gazette that The Minister of Trade and Industry, Dr Rob Davies – in terms of section 12I (19)d of the Income Tax Act, 1962 (Act 58 of 1962) as amended (herein after referred to as the Act) and the Regulations promulgated in the Government Gazette No. 33385 of 23 July 2010, had approved an application received by Naledi for the 12I Tax Allowance Programme.

The 12I Tax Incentive is designed to support Greenfield investments (i.e. new industrial projects that utilise only new and unused manufacturing assets), as well as Brownfield investments (i.e. expansions or upgrades of existing industrial projects). The incentive offers support for both capital investment and training.


Naledi Forgings is looking to export new forged train wheels worldwide. Photograpgh is for illustration purposes only

The objectives of the incentive programme are to support investment in manufacturing assets, to improve the productivity of the South African manufacturing sector and training of personnel to improve labour productivity and the skills profile of the labour force in South Africa.

“The award of the Transnet Engineering tender has provided Naledi with the opportunity to significantly expand its footprint in the industry and advance its vision of creating a significant industrial concern in the metals and engineering sector,” said Sibusiso Maphatiane, Executive Chairman of Naledi Inhlanganiso (Pty) Ltd.

“We needed to get these upfront approvals and contracts signed before we could even contemplate going full steam ahead on the project. Now that we have them in place we are hard at work implementing the project, and we envisage starting production in 2017,” continued Maphatiane.

“There are a number of motivations behind our decision to invest close to R1,8 billion in this project. The South African SOEs in the rail transport environment have multi-billion rand rail infrastructure projects that are currently being implemented. South Africa’s railway system is set to flourish under a boost of record investment aimed at turning the country into a key player in the global freight industry.”

“Transnet, for example, has six factories in South Africa where it has capacity to manufacture 4 000 new wagons and refurbish 3 000 wagons per year. Transnet Engineering also has capacity to build over 500 locomotives and refurbish 300. All of these facilities are going through major capital investment and production system investments.”

“According to reports the rail network in South Africa accounts for about 80% of the entire continent. Standard Bank estimates that Africa would need to invest $50 billion over the next decade to develop 4 000km of additional rail infrastructure. Rolling stock requirements are expected to be just as substantial.”

“Additionally there are a number of projects involving investment in the rail network for operators throughout Africa. All of this will involve locomotives, rolling stock and passenger cars that need wheels.”

“Besides Africa there are opportunities with other emerging countries, particularly in South America.”

“Various studies reveal details that the regional markets with the highest growth rates over the next six years are Latin America, Asia/Pacific and NAFTA. This is driven by major investments in rail projects in Brazil, Colombia, China, and the U.S. The Africa/Middle East region is expected to maintain its current high market level in the upcoming years. The total world market will amount to approximately €176 billion per year by 2017-2019.”

“New analysis from Frost & Sullivan’s Executive Analysis of the Global Rail Industry 2014 finds that passenger traffic is set to increase from 3 196.28 billion passenger-kilometers (pkm) in 2013 to 4 739.18 billion pkm in 2020, and rail freight traffic to increase from 10 168.37 billion ton-kilometers (tkm) in 2013 to 12 332.84 billion tkm in 2020.”

International IP and investment
The project will be implemented through a new company, namely Naledi Forgings (Pty) Ltd. The entity was initially 100% owned by Naledi. However, Naledi have now partnered with the IDC who together with a Chinese technical partner is expected to own a 40% equity stake.

The agreement with the Chinese company will allow Naledi to benefit from international IP, manufacturing practices, skills development and manufacture to AAR and ENI standards.

The Chinese company was established in 1964, has three manufacturing plants in China producing over one million wheels in 300 different variations a year, as well as two manufacturing plants in France where wheels are produced for the high-speed rail market and for the European metro and light rail markets.

“Railway wheels belong to the most stressed components of railway vehicles. They carry axle loads of up to 25 tons and more. They guide the train on the track, through curves and switches and are subjected to wear processes. They transfer acceleration and deceleration forces to the rails, and are exposed to thermal stressing due to sliding and block breaking processes. Moreover, considerable centrifugal forces are acting especially on high-speed wheels,” explained Maphatiane.

“This agreement is crucial to the project. We want to be recognized as a world player for the manufacture of wheels in future, and without a well established international partner this project could have been doomed.”

The forged wheel project
The project will result in the localisation of forged wheels manufacturing in South Africa. Currently all forged wheels are imported, mainly from Europe. The setup and establishment of the South African forged steel wheel manufacturing plant has a capital budget of R1.8 billion over the next three years.

The plant will be the first of its kind in Africa and as such will introduce new technology to the country and the continent’s heavy manufacturing industry.

More specifically the wheel production line is expected to have the capacity to produce 90 000 units per annum. The production range includes freight train wheels, passenger train wheels and locomotive wheels with sizes focusing mainly on 34” and 36” forged railway wheels, although the plant will be able to accommodate a range up to 40”.

The project will include the latest international technology in order to provide Naledi with the production efficiencies, which enables global competitiveness in the railway wheels market.

The project will be implemented in two phases – the first being the construction of the machining line or the cold manufacturing line, and the second is the construction of the forging or the hot manufacturing line. These phases will run concurrently in order to meet the contractual deadlines for local manufacturing.

The wheels will be produced from steel billets specifically designed for the purpose of the manufacture of forged steel wheels. The composition of the steel billets determines the properties of the steel and, ultimately, the final product. The special steel billets are not currently available in South Africa and is exported be imported from China. In order to produce 90 000 units per annum, 51 835 tons of steel billets is required per annum.

Turnkey manufacturing
The production facility will encompass the entire process to manufacture the wheels from hot forging to the wheel inspecting line. This includes the cut to size of the billet, pre-heating, forging and rolling, slow cooling, heat treatment, quenching, machining and finishing, testing and inspection.

“With the advantage of starting off with a clean slate it gives us an excellent opportunity to invest in the latest technology and make the South African plant the most modern forged wheel manufacturing facility in the world. We are busy with the procurement process and have started to approach the recognised equipment manufacturers. All equipment purchased will be the latest available,” explained Maphatiane.

Employment and training
“The plant will create more than 150 direct new jobs in the manufacturing industry which will include skilled and semi-skilled. Employees will benefit from training programmes which will involve visits to our IP partner’s plants in China and France, to internships and apprenticeship programs once the plant has been established.”

“The project will also create the opportunity to export forged wheels out of South Africa, and we are investigating the possibility of localising the production of the specialised steel billets required for the production of forged wheels,” said Maphatiane.

“We are very excited and happy that the IDC has joined the project as a partner and we look forward to working with them in establishing the new industry in South Africa.”

“We are also looking forward to supplying the other rail players in the South African market like Grinrod, as well as the mining sector with its forged wheels requirement. In addition the project would also assist companies like Alstom and Gibela in its localisation objectives.”

“There will be no concessions made on this project. With trains getting faster and freight wagons requiring heavier loads, wheels have to be manufactured using the latest technology. Worldwide the market remains competitive as the products are highly traded in international markets. Naledi will therefore strive to be competitive to its key local customer Transnet and those that we acquire in our export drive,” concluded Maphatiane.

For further details contact Naledi Forgings on TEL: 011 845 1546 or visit