R51b government bailout approved for Transnet
After receiving a R47b bailout in December 2023, the Minister of Transport, Barbara Creecy, has this week approved a R51b guarantee facility for Transnet for the next two financial years.
The money will be available immediately to assist the railway company to be able to pay its debt and support its capital investment programme.
According to Transnet, the facility will enable it to refinance maturing debt and ensure the organisation's continued access to adequate resources and facilities to be able to continue its operations as well as fund the capital investment programme for the foreseeable future.
It will also enable Transnet to focus on operational improvements and strategic reforms.
'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,' the Department of Transport said.
In line with existing Guarantee Framework Conditions, Transnet has made significant strides in implementing rail and port reforms.
In pursuit of enhanced partnership and collaboration, several key Private Sector Participation (PSP) transactions are being implemented.
PSPs are a key element of the organisation's strategy to modernise its operations and infrastructure and grow the logistics sector for the benefit of the economy.
'At the end of March, 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 on freight rail. Announcements of the first successful bidders are expected by the end of July.
'In March, the Department of Transport issued a Request for Information for private investors on five key freight corridors and associated ports with the intention of promoting private investment in the Transnet infrastructure while the network remains state owned. The RFI closes on 31 May, and Transnet is expected to issue requests for proposals by September this year,' the department said.
Interim solutions to meet capital investment needs by the entity include project-based applications to the Budget Facility for Infrastructure.
Transnet is also working with National Treasury and the Presidency to develop a collaboration and funding policy to support immediate capital improvements by the private sector in priority freight corridors.
'In recognition of the progress made to date, the National Treasury and the Department of Transport have been working with Transnet to find a solution to the company's immediate needs and the decision to grant the guarantee facility is a result of these discussions.
'The financial support package provided for the entity is a R41b guarantee facility for its funding requirements over for the 2025/26 and the 2026/27 financial years. This package also includes a R10b guarantee that Transnet will have to utilise for its liquidity management as it relates to the servicing of its maturing debt and capital investments,' the department said.
On 1 December 2023, a guaranteed support facility of R47b was announced.
This enabled Transnet to execute its Recovery Plan over the 2023/24 – 2024/25 financial years.
A Guarantee Framework Agreement between the Department of Transport and the National Treasury will include guarantee conditions that will be continuously reviewed and amended when deemed necessary.
Any drawdowns will be subject to Transnet meeting these conditions. These conditions will again focus on certain operations requirements and logistics sector reforms.
'With government's commitment to support its recovery and strong collaboration with customers and industry partners, Transnet is on course to recover and fulfil its strategic role in the South African economy,' Transnet said. – SAnews.gov.za
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