Private sector to the rescue

With no new bailouts in hand, Finance Minister Enoch Godongwana has announced that third parties will soon be able to access Transnet’s embattled rail network.

Transnet’s many struggles on its rail network and ports have been highlighted by many industries, ranging from retailers who can’t access their stock to mining companies who can’t export their goods.

These transport issues saw South Africa record historically low coal and iron-ore exports in 2023, with consultancy research group GAIN saying that the problems in Transnet Freight Rail (TFR) led to a projected loss of R353 billion (4.9% of GDP) in 2023.

At the 2024 Budget Speech, Godongwana said that the Cabinet approved the Freight Logistics Roadmap in December 2023 to address the nation’s increasingly unreliable logistics system.

The roadmap outlines plans for immediate ways to improve port equipment, locomotive availability and network security.

It also creates a clear path for improving efficiencies, facilitating the opening of competition and leveraging the financial and technical support of the private sector.

“In this regard, third-party access to the freight rail network will be introduced by May 2024,” the minister said.

Private-public partnerships have already been secured to upgrade Pier 2 of the Durban Container Terminal, which the minister said improves private investment in equipment and enhances technological capability and operational efficiency.

Despite expectations that the minister would announce further financial support – i.e. a bailout – for Transnet, he only alluded to the R47 billion guarantee facility that the entity was given last year as part of its recovery plan and to meet its immediate debt obligations.

“Like Eskom, the guarantee comes with conditions. These conditions require Transnet to focus on its core activities, and for the entity to introduce private sector partnerships. This will improve Transnet’s sustainability and support the implementation of the roadmap.”

Before the budget, economists predicted that the SOE would receive a bailout.

Economists at the Bureau for Economic Research said that the SOE needs to raise a larger capital injection as it has failed to generate enough operational revenue to service its R130 billion debt pile.

Nedbank’s economists expected bailouts of R25 billion a year in 2024/25 and 2025/26 for Transnet.

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