Govt gives Transnet R95bn in guarantees
The allocation includes R48.6 billion to ensure all of the company's debt redemptions will be covered over the next five years, the Department of Transport said in a statement on Sunday. The other R46.2 billion is to mitigate the risks of credit-ratings downgrades on Transnet's debt.
Transnet had requested funding from a budget facility that prioritizes large-scale infrastructure projects needed to boost economic growth, with the cash to be used to finance upgrades and equipment orders. After years of underinvestment and state corruption, deliveries on some of South Africa's rail lines have dropped to the lowest level in decades, and its ports rank among the worst in the world.
The funds, which add to a R51 billion guarantee facility approved in May, are intended to help the indebted company become profitable.
'Government will 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,' the department said.
Transnet spokesperson Ayanda Shezi wasn't immediately able to comment on the announcement.
Transnet is entirely dependent on government support to service its debt, the ratings agency S&P Global said in a statement on July 10, when it downgraded the company's senior unsecured debt. It warned of a 'downside scenario' if government support weakened.
Similarly, measures that would result in an upgrade will take time, making a favourable revision unlikely in the next 12 months, S&P said.
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