Latest news with #NetworkStatement
The Citizen
23-05-2025
- Business
- The Citizen
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
Daily Maverick
15-05-2025
- Business
- Daily Maverick
State still owns the infrastructure tracks while private investors line up at the station
For years, clogged ports, crippled freight corridors and an ailing rail network have choked the economy. Now, the state is opening up the door for private sector participation with one hand still on the latch. South Africa's long-delayed transport reforms are finally leaving the station in a stop-start slog along tracks groaning under decades of decay. 'For at least 15 years, our economy has not grown at a rapid enough pace to enable rising incomes and increase employment,' Deputy Minister of Finance David Masondo said at RMB's Think Summit 2025. Low growth, he added, has starved the state of resources to invest in critical infrastructure like roads, rail, water pipes and ports. 'There is significant evidence, in our own work as National Treasury, that the constraints on growth in South Africa are structural,' Masondo said. 'They require far-reaching reform of our network industries and change in the structure of our economy to increase potential growth.' And it looks like the logistics logjam, at least, is starting to crack. Unbundling Transnet Phase II of Operation Vulindlela, the state's flagship reform drive, is where the gears are finally grinding into motion. Masondo pointed to electricity as the poster child of what's possible when state monopolies are disbanded, saying that liberalising the electricity sector had unlocked 'trillions of rands' in new investments. 'A similar process is unfolding in the logistics sector, where we are on the cusp of introducing open access to the freight rail network to allow private rail operators to compete with Transnet,' he said. This is a model already playing out across other essential sectors. 'At a national level, we already have a high level of private sector investment. More than 60% of the 100 billion-odd worth of national water infrastructure projects that we currently are implementing are financed by the private sector,' said Dr Sean Phillips, director-general of the Department of Water and Sanitation. Private sector collaboration also plays a critical role in electricity transmission. 'The reality is that all the infrastructure that we build is delivered by the private sector. That's just the way it is. As an entity we don't manufacture, we don't do construction; it's all done by the private sector,' said Segomoco Scheppers, CEO of National Transmission Company of South Africa. In December 2024, Transnet published its final Network Statement, a document that sets the rules of the game for private sector involvement in the rail industry. The state-owned freight transports and logistics company is also being unbundled, separating the infrastructure manager from operations, mimicking Eskom's structural reforms. An independent Transport Economic Regulator (TER) is being established with a mandate to oversee the regulation of the entire transport sector and oversee open access and regulate tariffs. The network will, however, remain state-owned, said Minister of Transport Barbara Creecy. In 2024, Transnet reported a loss of R7.3-billion despite a revenue increase of 11.6% to R76.7-billion. (Graph: Transnet Annual Financial Statements 2024) Concessions, co-financing or BOT? But how, exactly, will the state pull in private cash without losing control? The answer, according to Creecy, is a 'menu' of models. 'There's an appetite to come back to South Africa,' she said, pointing to the cost advantage rail has over trucks. But investors shouldn't expect a free-for-all auction. 'I think the comparable model could be Sanral, where there was … a 30-year concession,' said Creecy. 'Obviously, concessionaires will have to charge tariffs that are determined by the regulator.' That's just one option on the table. Creecy described a buffet of possible models: Build-Operate-Transfer (BOT) schemes, co-financing deals via the Budget Facility for Infrastructure, or public-private partnerships (PPPs). The first test of investor appetite is already on the table. On 23 March, Transnet released a Request for Information (RFI) on five key rail and port corridors. This is a fishing exercise to gauge private interests, with Requests for Proposals (RFPs) expected by August. 'In June we hope to issue an RFI for passenger rail that will include operational areas such as signaling, depots and rolling stock as well as high speed rail corridors. This information will be used by Prasa to issue RFPs in October this year,' said Creecy. Nobody is expecting shovels in the ground tomorrow. Creecy admitted that it could take 18 months to two years to reach financial close on the RFPs. How does this affect you? When freight can't move by rail, it clogs the roads and your wallet feels it first. South Africa's creaking rail network has pushed more goods on to trucks, jacking up the cost of commodities like groceries and petrol. If the state's gamble to open the rails to private players work, it could bring down prices, take pressure off the road, and equate to more competitive exports. If it doesn't? South Africans will keep footing the bill in higher prices, fewer jobs and a stalled economy. No more 'bailouts' 'The National Treasury is not going to give bailouts to SOEs [state-owned enterprises any more,' Creecy said plainly. 'So, it means that you've got to apply through the budget facility for infrastructure on a project basis. And obviously, those facilities, it's some kind of low-cost loan.' In the meantime, short-term patch-up projects like collaborations between Transnet and private sector operators are being greenlit to get the worst of the network's bottlenecks unclogged. New regulations now allow private firms to collaborate with Transnet to repair and upgrade infrastructure. '[This is] to support cooperation between Transnet and the private sector in undertaking short-term interventions to address challenges while the longer-term reforms take effect,' Masondo noted. As the state scrambles to patch potholes in its logistics arteries, the private sector (and the economy) are still waiting for the trains to arrive. DM
