Finance Minister Enoch Godongwana presenting the 2024 Medium-Term Budget Policy Statement, said yesterday that Transnet, the Department of Transport, and the Passenger Rail Agency of South Africa are working on a prioritised project list set to be released to the market in 2025/26.
In its MTBPS document, the Treasury outlined measures needed to optimise Transnet’s capital structure and restore profitability, which will involve divesting from non-core assets, reducing operational costs, and exploring alternative infrastructure funding, such as project finance, third-party access, concessions, and joint ventures.
Transnet’s poor performance over the past five years has been marked by decreasing freight volumes, inadequate maintenance, underinvestment, and rolling stock shortages, all contributing to financial strain and a weakening balance sheet.
Although a recovery plan, initiated in the last quarter of 2023/24, has shown modest improvements, the state-owned company continues to face severe operational challenges.
The recovery strategy aims to counter falling rail volumes and re-establish financial sustainability. Despite having access to capital markets, Transnet’s ability to secure additional funding remains limited due to high debt levels, resulting in unsustainable interest expenses, refinancing risks, and liquidity issues.
In December 2023, the government granted Transnet a R47 billion guarantee facility to support its recovery initiatives under the Cabinet-approved Roadmap for Freight Logistics. This roadmap, developed with the National Logistics Crisis Committee—comprising government bodies, rail and port users, and independent advisers—prioritises measures to enhance operational performance, including increased spending on operational equipment, rail infrastructure rehabilitation, and reactivating older locomotives.
Key projects involving Transnet assets include the Ukuvuselela Gauteng-Eastern Cape High-Capacity Rail Corridor, aimed at improving the South Corridor and expanding automotive port infrastructure, and Phase 2B of the Cape Town Container Terminal Expansion, which will increase landside capacity. This expansion entails rehabilitating container stacking pavement, enlarging the truck staging area, and adding new rail sidings to boost exports of products like table grapes, citrus, and other fruit.
Since 2018, Transnet Freight Rail has consistently missed volume targets, causing a decline in rail transport payloads by 12% in 2022, following drops of 6.9% in 2021 and 11.1% in 2020, while road transport grew by 25% in 2022 after a 10.4% increase in 2021. As a result, rail’s share of total land transport fell to 15.6% in 2022, from 20.6% in 2021 and 23.5% in 2020, diverging from Transnet’s strategic goal of 30%.
Treasury said missed coal and iron ore exports due to operational shortcomings could have added 1.3 percentage points to the 2022 current account balance, creating a surplus. Inefficiencies in rail were estimated to have cost R411 billion in 2022, with 2023’s cost projected around R350 billion, impacting revenue for mining companies and reducing tax receipts.
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