Transnet secures nearly R95bn in fresh government guarantees
The facility comes on top of a R51bn guarantee the government announced for Transnet in May, including R41bn to cover the company's funding needs over the 2025/26 and 2026/27 financial years, and R10bn earmarked for debt servicing and capital investments.
The new guarantee comprises R48.6bn to cover all debt redemptions over the next five years, and an additional R46.2bn to mitigate against further credit rating actions, the ministry said in a statement.
The government is supporting Transnet's five-year turnaround strategy, which seeks to restore freight rail volumes to 250-million metric tons per year by the end of the period. The volumes fell to 152 million metric tons in the 2023/24 financial year, from a peak of 226 million metric tons in 2017/18.
Transnet has failed to deliver reliable freight rail and port services due to equipment shortages and maintenance backlogs after years of under-investment. Its capacity has been further constrained by widespread cable theft and vandalism.
The company's debt has risen to R145bn from R138bn at the end of the 2023/24 financial year, according to its chairperson Andile Sangqu. Its loss widened to R7.3bn in 2023/24, from R5.7bn the year before .
Transnet's struggles have cost mineral exporters, primarily coal and iron ore producers, billions in lost revenue. The exporters account for nearly 70% of Transnet's freight volumes.
Due to a lack of railway capacity, most chrome exports now reach ports by road, raising costs, damaging roads and the environment.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
IOL News
18 hours ago
- IOL News
Want to reform South Africa's ports? We need to make room for rivalry
South Africa's ports are crucial for trade and economic growth, yet they lag in efficiency. As the National Ports Authority pursues long-term concessions, experts warn that without fostering competition, the country risks high costs and lost opportunities. Image: Armand Hough / Independent Newspapers South Africa's ports play a vital role in supporting trade, investment, and economic growth. Yet despite their strategic importance, they remain among the least efficient in the world – a situation that contributes to high costs, delays, and declining competitiveness. As the National Ports Authority (NPA) moves forward with long-term terminal concessions – often awarded to a single operator in joint ventures with other Transnet divisions – there's growing concern that the current approach may do little to resolve the systemic issues facing the country's port sector. One of the most prominent voices raising the alarm is Dr Ryan Hawthorne, director at Acacia Economics and a leading expert in competition and regulatory policy. In a paper presented at the 43rd Southern African Transport Conference*, Hawthorne argues that building rivalry into port operations is essential. 'If we're simply replacing public monopolies with private ones,' he says, 'we're missing the opportunity to build a more competitive, efficient port system that truly serves the country's interests.' Monopoly concessions: A risky strategy The core issue lies in how terminal concessions are structured. The NPA, still legally part of Transnet, has awarded a number of 25-year leases to single terminal operators, often involving Transnet Port Terminals as a joint venture partner. According to Hawthorne, this approach entrenches monopoly control and limits the potential for service improvement. 'Monopolies tend to charge more, deliver less, and innovate slowly,' he notes. 'We're seeing a pattern of partial privatisation rather than real reform.' There is an emerging pattern of monopolies being partially privatised by Transnet, with little consideration for rivalry and the benefits this might bring to consumers and port users. Rather than breaking up dominant positions, the current model risks reinforcing them – just with new stakeholders. These concerns are echoed by global benchmarking. The World Bank recently ranked Cape Town's container terminal dead last out of 405 ports globally in 2024, with Durban and Port Elizabeth also performing poorly. 'While private-sector participation is a welcome step, it risks becoming a missed opportunity if it doesn't introduce genuine competition,' warns Hawthorne. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad Loading The case for competition But can so-called 'genuine competition' actually work? Hawthorne believes there is ample scope for rivalry within South Africa's port system. Durban alone is expected to expand its container-handling capacity to more than 11 million TEUs – enough for multiple competing operators. 'Ports of similar size internationally to Durban's current capacity host four or more terminal operators competing on quality and cost,' he explains. 'There's no reason South Africa can't follow suit.' Legal framework already in place The Ports Act of 2005 provides the basis for introducing competition by separating the NPA from Transnet and mandating that port access be granted in a transparent and competitive manner. However, the key step of structurally separating the NPA has not been completed. 'If the NPA were truly independent,' says Hawthorne, 'it would have an incentive to lease space to multiple terminal operators – not preserve the dominance of its sister company.' What can be done now In the short term, Hawthorne proposes a number of practical reforms. 'We need to complete the structural separation of the NPA from Transnet, as envisioned in the Ports Act. This would allow the NPA to operate independently and invest in expanding port capacity and enabling rival terminal operators, rather than protecting Transnet's downstream interests,' he notes. Furthermore, the Minister of Transport should issue a policy directive requiring competition assessments in all future concession processes. The new Transport Economic Regulator (TER) should be given the authority to review and, if necessary, amend monopoly concession agreements. 'The Competition Commission could also be called upon to investigate exclusionary practices in port operations, including abuse of dominance or refusal to grant access to essential infrastructure,' he proposes. Long-term vision: Foster inter-port competition Beyond immediate fixes, Hawthorne encourages a return to inter-port rivalry, as seen prior to the 1910 formation of South African Railways and Harbours. At that time, ports like Cape Town and Durban competed actively for shipping traffic, spurring innovation and improved service delivery. Today, similar systems exist in countries such as Brazil, Canada, and Australia, where individual port authorities operate independently under national regulatory oversight. 'We need to stop thinking of South Africa's ports as a single block,' says Hawthorne. 'Independent port authorities promoting competition within and between ports could drive the efficiency gains we desperately need. 'Competition is the missing piece in South Africa's port reform puzzle. Without it, we risk pouring money into concessions that do little for users. With it, we unlock the real potential of our ports – for traders, for consumers, and for the economy as a whole.'
eNCA
3 days ago
- eNCA
Government backs Transnet again
JOHANNESBURG - Transnet has secured almost R95-billion in government guarantees as part of efforts to revive its failing operations. Is it a worthwhile investment or a waste of money? READ: Government approves additional guarantees for Transnet Mark Evans a partner at Oliver Wyman, a management consulting firm discussed the value of this investment with eNCA.
Daily Maverick
5 days ago
- Daily Maverick
The R145bn Transnet back brace to fix the spine of the South African economy
A visit to the Port of Cape Town reveals the complex reality behind Transnet's recovery efforts, and why the state's massive financial intervention might just be the lifeline the South African economy needs. 'You can't take a picture of that (the liquid bulk terminal) because many of our laws were written under apartheid,' harbour master Captain Alex Miya explains as the tugboat cruises past. 'In those years, Umkhonto weSizwe would use those images to plan sabotage attacks on these kinds of things.' The irony hangs heavy in the salty air. Here we are, three decades into democracy, still governed by security regulations crafted to protect infrastructure from liberation movements that now form the government. It's a good metaphor for Transnet – an entity born from colonial mineral extraction, shaped by apartheid social engineering, hastily commercialised to secure economic futures for the outgoing politically connected, and now tasked with serving the very democracy it once helped to suppress. There's something unnerving about how essential this state-owned freight logistics company is to South Africa's economic survival, and how precariously it's hanging on after years of underinvestment, operational decline and management chaos. But there's also a fighting spirit – a recovery plan in motion, and billions being poured into equipment, concessions and new infrastructure. Creaking of the old bones Transnet's DNA can be traced to 1860, but it was the mineral revolution – first diamonds in Kimberley in 1867, followed by Transvaal gold – that transformed modest colonial railways into the backbone of a national economy. The Union of South Africa in 1910 necessitated economic consolidation, and the disparate railway systems were amalgamated into the South African Railways and Harbours (SAR&H), controlling 11,000km of track and all major harbours. The decision to operate these assets as a state-owned enterprise, rather than private businesses, was driven by fears that a single private owner could wield excessive power over the nascent economy. This created a foundational contradiction that would define the organisation for more than a century: expected to operate on 'business principles' while serving a broad, often unprofitable, developmental mandate. High-value industrial freight subsidised below-cost transport of agricultural products – a cross-subsidisation model that opened the interior for development, but created mounting financial pressures. Dark history Under apartheid, like most of the state infrastructure, it became an instrument of racial engineering. While black employees (47,157) outnumbered white employees (39,024) in 1924, this was dramatically reversed by 1929, with white employment swelling to 58,562. It became a stronghold of Afrikaner nationalism, with 'job reservation' policies that excluded black workers from skilled positions. The birth of Transnet in 1990 was out of survival in the face of the fiscal crisis from international sanctions and economic stagnation. SAR&H was commercialised through the Legal Succession Act of 1989. It was a strategic compromise: adopting corporate form to instil financial discipline and access capital markets while retaining 100% state ownership. A sum of its parts Today, Transnet operates through several distinct divisions, each facing unique pressures: Transnet Freight Rail (TFR): the division best known as Brian Molefe's piggy bank remains the cash cow, contributing 51% of fiscal 2024 revenue. But it's undergoing radical surgery – the creation of the Transnet Rail Infrastructure Manager (TRIM) in November 2023 aims to separate track ownership from operations, potentially opening doors to private investment. Transnet National Ports Authority (TNPA): my host for the port tour serves as landlord to South Africa's ports, planning infrastructure and providing marine services. Notably, nine of Cape Town's 11 licensed terminal operators are private entities – a case study of successful public-private partnerships that could serve as a model for other divisions. Transnet Port Terminals (TPT) handles actual cargo movement, while Transnet Pipelines manages petroleum transport through regulated tariffs. Add Transnet Engineering, property, and the new LeaseCo rolling stock company, and you have a very complex logistics ecosystem. This complexity partially explains why rating agencies have grown increasingly concerned. S&P Global's July downgrade to 'B+' wasn't just about numbers; it reflected deeper structural issues. The agency cited 'persistent substantial negative free operating cash flow of approximately R13.5-billion annually' and an inability to meet regular capital expenditure and interest payments from earnings. Moody's kept Transnet on review for downgrade despite government guarantee commitments, underlining that even massive state support can't immediately fix operational realities. Rail volumes of 151.7 million tons in FY2024 fell well short of the 170-million-ton target for FY2025. One step at a time But these downgrades tell only part of the story. Standing in the boardroom of the TNPA, with an overhead photo of the Port of Cape Town and surrounds covering one of the walls, the recovery is visible. Ship turnaround times have plummeted from 103 hours in 2023/24 to just 65 hours in Q1 2025/26 – on track to undercut the 82-hour target by a significant margin. Marine operations delays dropped from 1.2% to 0.2%. These aren't marginal improvements; they're operational transformations reminiscent of the efficiency gains that first made these railways economically viable in the 1800s. The planned Culemborg Logistics Park represents transformational thinking rooted in historical precedent. This R2.5-billion, 30-hectare development aims to create 2,500 construction jobs and 25,000 indirect jobs by 2030, bringing logistics services closer to the port. It echoes the original railway strategy of reducing transport costs and travel times to unlock economic development. Infrastructure improvements at Container Terminal Phase 2B will expand capacity from one million to 1.4 million TEUs, with strengthened quayside infrastructure and improved rail connections. A dedicated truck staging area will remove 220 trucks from public roads – addressing congestion that has plagued the port since the original colonial designs proved inadequate for modern volumes. High-stakes roulette Nothing illustrates Transnet's economic importance quite like its relationship with Kumba Iron Ore. The mining giant recognised R942-million in penalty income from Transnet in the first half of this year due to logistics underperformance – a staggering figure that represents both the cost of failure and the value of getting things right. The government's crisis response has been unprecedented. Starting with a R47-billion guarantee facility in December 2023 (fully exhausted by March 2025), the state has progressively increased its commitment. The latest July 2025 announcement of an additional R94.8-billion brings total announced guarantees to R145.8-billion. Of Transnet's planned R127.7-billion capital expenditure over five years, R108.2-billion (84.7%) goes to sustaining capital – maintaining and refurbishing existing infrastructure. Without this investment, the system would deteriorate further, potentially triggering the kind of economic disruption the Union founders feared from private monopoly control. A new lease on life New equipment purchases tell the recovery story: a R240-million ship-to-shore crane for Port Elizabeth, 20 straddle carriers, and nine rubber-tyred gantries for Durban represent R3-billion in operational improvements. At Cape Town, shore tension units from Rotterdam have reduced the time the boats stay in the berth from 2,881 hours to 690 hours – technical solutions with a massive economic impact. The early signs from Cape Town are encouraging: operational improvements that translate directly into economic efficiency, private sector partnerships that leverage state investment and infrastructure developments that create jobs while enhancing capacity. The fog of frequent omissions is lifting over Cape Town harbour, revealing not just the port's operations, but perhaps a clearer vision of how this historical institution might finally evolve beyond its colonial and apartheid origins. DM
