Government delivers R51 billion support to Transnet. Will it last?
This follows the R47 billion guarantee Transnet received in 2023.
The government has approved a R51 billion guarantee facility for embattled Transnet.
This guarantee facility is effective immediately in support of Transnet's capital investment programme and to enable it to meet its debt obligations.
This follows a R47 billion guarantee the state-owned enterprise (SOE) received in 2023, which aimed to support the entity in meeting its debt obligations. However, less than two years later, Moody's Ratings Agency said Transnet might run out of money in less than three months.
For how long will the R51 billion last before the entity runs out of money?
ALSO READ: Transnet could run out of funds within three months — will the government step in to rescue?
The reason to support Transnet
In a media statement, Minister of Transport Barbara Creecy said Transnet plays a central role in the South African economy and the government's goal of inclusive growth.
'The entity is currently engaged in a wide-ranging reform programme with the aim of improving operational performance in the short and medium term. This programme aims to overcome operational, financial, and governance challenges hampering its ability to fulfil its strategic role,' she said.
At the end of March 2025, Transnet had succeeded in moving the equivalent of 161 million tons of freight on its rail network. In December 2024, the entity released the 2024/25 Network Statement, which facilitates private sector operators in freight rail. Announcements of the first successful bidders are expected by the end of July.
More funding solutions needed for Transnet
'Interim solutions to meet the entity's capital investment needs include project-based applications to the budget facility for infrastructure.
'Transnet is also working with the National Treasury and the Presidency to develop a joint collaboration and funding policy to support immediate capital improvements by the private sector in priority freight corridors.'
She said the R51 billion facility will be spread over the 2025/26 and 2026/27 financial years.
This package also includes a R10 billion guarantee that Transnet will have to use for liquidity management as it relates to servicing its maturing debt and capital investments.
ALSO READ: Are threats against Transnet over? CCMA sends revised offer to halt strike
What went wrong?
Transnet's challenges are due to a lack of maintaining infrastructure, failure to invest or under-investment in necessary infrastructure and not focusing on generating revenue.
Moody's acknowledged that Transnet's operational performance has improved under the recovery programme launched at the end of 2023. However, progress remains slower than planned, to some extent due to the continued high occurrence of theft, vandalism and adverse weather conditions.
Transnet's debt burden remains excessively high, resulting in unsustainable interest payments.
Recovery plan
Transnet's profits declined from R5 billion in 2019 to a net loss of R5.7 billion in 2023. In 2024, it carried a staggering debt burden of R120 billion, which means it costs R10 billion a month to service its debt.
Therefore, the company had to develop a recovery plan, which CEO Michelle Phillips believed would meet its 170 million ton target by the end of the financial year.
In 2024, she said she had always been clear that Transnet, under her leadership, wouldnever ask the government for a bailout. 'In my tenure at Transnet, we were always very clear that we would not approach the government for a bailout to ensure that we are never a drain on the fiscus.'
NOW READ: Is Transnet another Eskom? Government to offer financial support
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