The Public Investment Corporation (PIC) says it has developed a framework to support key state-owned entities, with the asset manager having increased its exposure to Eskom’s bonds to more than R80bn, happy with the utility’s turnaround and the early signs of improvement at Transnet.
Deputy minister of finance and PIC chair David Masondo said the PIC was a significant investor in major state-owned companies through various instruments, primarily bonds.
“The PIC remains one of the biggest investors in Eskom contributing significantly to the utility’s financial sustainability, and its ability to keep the lights on Exposure to Eskom bonds was approximately R83bn by the close of 2023/24,” Masondo said, following the release of the company’s annual report and results.
“The PIC noted the R254bn debt relief package that the National Treasury allocated to Eskom. This may go a long way to reducing any repayment risk for bond maturities that become due.”
The power utility has been enjoying a purple patch, keeping the lights on for more than four months without load-shedding through a marked improvement in its energy availability factor (EAF).
Business Day reported in June that Africa’s largest bank by assets, Standard Bank, said it did not expect Eskom’s improved operational performance to relapse and this would boost economic growth.
The Bank of America has forecast that the SA economy could grow by about 2% in the medium term if Eskom maintained the momentum and kept the lights on for the rest of the year.
Masondo said the PIC was also backing Transnet through its challenges. He said the PIC had exposure of R4.7bn in Transnet short-term paper with a maturity date of November 6 2023.
“Due to the liquidity challenges, the PIC agreed to roll over the maturity into short-term notes for six months. Transnet settled the outstanding R4.7bn of the restructured short-term notes on March 31 2024,” Masondo said.
“As the investor in Transnet, we expect operational efficiencies and investment in rail and port infrastructure and increased private sector participation, given the importance of freight logistics in our economy.”
The poor performance of SA’s ports and rail network has been a drag on economic growth, hurting the mining sector the most. Congestion at the ports has given SA a bad reputation across the globe, with the ports ranked as some of the worst in the world.
The country’s largest iron ore producer, Kumba, has had to refine its production strategy as Transnet falters, opting for producing higher-quality iron ore that fetches premium prices rather than attempting to match previous years’ volumes of lower-grade material.
One of the challenges that have hurt Transnet’s rail performance has been lack of parts. Since 2019, Transnet has been struggling to get a service provider that can assist in supplying spare parts for some of the trains it bought in a controversial deal for 1,064 locomotives.
It has about 200 locomotives that remain idle and cannot be returned to the railway lines as the China Railway Rolling Stock Corporation refuses to provide it with spare parts.
However, Business Day reported last month that Transnet has reached a deal with original equipment manufacturers for spare parts to bring back to service 48 of 200 locomotives amid a legal impasse with CRRC
Transnet Freight Rail (TFR) CEO Russell Baatjies told the SA Heavy Haulers conference that an agreement reached with the original equipment manufacturers would be the first phase to bringing the locomotives back to service and that Transnet was still awaiting a proposal to bring the remaining locomotives back to service.
Baatjies said the long-standing locomotives were expected to come back into service within the next two years.
PIC CIO Kabelo Rikhotso said the asset manager had developed a framework on how to assist SOEs, stating that the entity was happy with moves by Transnet’s board.
“We are seeing a significant improvement at Transnet. We are comfortable with the strategy deployed by the board. The company was one of the key SOEs that held the economy back … for us as the PIC our position is that we will support Eskom [and] Transnet not at all costs. We have devised what we call the SOE strategy, which covers when we should support and under what conditions.”
With Thando Maeko
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