Transnet bailouts? Government bends with R94.8bn more in guarantees

The Citizen

4 days ago

It will ensure all the group's debt redemptions are covered for the next five years and mitigate the risk of credit downgrades on its existing debt, says the Transport Department.
The further state support comes as international ratings agencies have in recent months either downgraded Transnet's credit rating or warned that it is running out of cash. Picture: Supplied
Government has approved additional guarantee support of R94.8 billion for struggling state-run ports and rail group Transnet.
On Friday the government approved an additional R48.6 billion guarantee for Transnet, to ensure that all debt redemptions will be covered over the next five years and the transport entity will maintain sufficient liquidity levels, according to the Department of Transport (DoT) on Sunday.
This comes as international ratings agencies have either downgraded Transnet's credit rating or warned that it is running out of cash in recent months.
The DoT added that the government had considered the impact of the credit downgrades on Transnet's existing debt and therefore also approved R46.2 billion for it to mitigate the risks of such ratings actions on its debt.
This additional 'guarantee support' for Transnet follows government's approval of an allocation of R51 billion in guarantees to Transnet on 22 May 2025.
That allocation comprised R41 billion for the funding requirements for the 2025/26 and 2026/27 financial years and R10 billion for liquidity management purposes.
The latest additional guarantee support for Transnet follows Minister of Transport Barbara Creecy's announcement on 12 June 2025 that the government had initiated a process to allocate additional guarantees to Transnet.
ALSO READ: S&P Global exposes Transnet's operational crisis as it fails to meet targets
Creecy said at the time the government had initiated this process given Transnet's debt redemptions, over its five-year corporate plan period of R99.6 billion, and to at least cover the entire redemptions over the corporate plan period.
She said this support from government will allow Transnet to ensure:
That all debt redemptions will be covered over the next five years.
The execution of its capital investment programme.
Short-term liquidity risk is adequately mitigated.
Creecy added that the government is determined to work with Transnet over the corporate plan period to focus on structural solutions to improve its capital structure to reduce its debt levels.
She said the government will monitor Transnet's performance to ensure it provides adequate support as Transnet implements government's required reforms.
The DoT said on Sunday the government will also continue to work with Transnet to ensure operational and financial improvements in the company and to accelerate implementation of reforms for the logistics sector, including private sector participation.
ALSO READ: Creecy punts private sector investment for five rail and port corridors
Creecy told the Southern African Transport Conference earlier this month that her department had just concluded a request for information (RFI) process to guide private sector investment in its five-priority rail and port corridors.
She stressed that the limited availability of state resources to fund infrastructure development makes private sector investment critical.
Speaking on the sidelines of the conference, Creecy said there had been 'an excellent response' to the RFI, with almost 163 submissions.
'We are now processing those submissions so that Transnet can begin the formal procurement process at the end of August 2025, through the issue of requests for proposals,' she said.
Creecy said the DoT will at the end of this month release the second batch of the RFI, which will be focused on passenger rail initiatives.
ALSO READ: R26 billion rescue from World Bank: Can the loan save Eskom and Transnet?
Infrastructure funding
She said funding sources for immediate rehabilitation of the five priority rail corridors include the current Transnet budget for rail and rolling stock maintenance and purchase of port equipment, submissions to the National Treasury's Budget Facility for Infrastructure, and private investment in refurbishing or expanding line capacity through existing customer agreements.
Creecy said Transnet itself makes annual allocations for maintenance, but this is insufficient, and they have also put in an application to the Budget Facility for Infrastructure. Overall, it will be applying for more than R30 billion.
'This would allow us to do maintenance and to buy equipment for the rail corridors and also in the ports,' she said.
The minister noted that there are two tranches: the July window application is already in, while they are still working hard on preparing the application for the October window.
ALSO READ: Government delivers R51 billion support to Transnet. Will it last?
'We won't be able to do all of the ports and corridors all at once, but we will be doing so incrementally as we process the information.
'What we can look forward to is some major investment in our rail corridors and also in our ports. Obviously, it's going to take our infrastructure to a different level moving forward,' she said.
Four of the six targets that Creecy highlighted in her Budget Vote speech in Parliament earlier this month are to:
Ensure by 2029 that Transnet moves 250 million tons of freight on its network each year.
Improve the speed at which ships are loaded and unloaded in South Africa's ports to the international benchmark of 30 gross crane movements per hour.
Ensure the passenger rail system provides safe, reliable and affordable transport to workers and their families, with the aim of ensuring 600 million passenger journeys a year by 2030.
Move 1.2 million tons of airfreight a year through the Airports Company of South Africa network of airports by the end of this political term.
This article was republished from Moneyweb. Read the original here.