Boosted by improvements in petroleum and container volumes, Transnet reported its operational performance for the year to end-March has been positive compared with the previous year. This is despite its having lost a quarter of its locomotives since 2018 in its rail arm, constraining the mining sector in the height of a commodities boom.
In a trading update the rail, port and pipeline company said it generated cash from operations after working capital changes of R29.8bn. Gearing and cash interest cover levels are expected to be within debt covenant requirements.
By March 31, “Transnet had raised funding of R12.9bn, excluding call loans, and is progressing with its refinancing initiatives that began in the 2022 financial year for the imminent debt capital redemptions in 2023 financial year,” Transnet said.
Earnings before interest, taxation, depreciation and amortisation (ebitda) were up a sprightly 22.1% to R23.8bn.
Transnet said its audit for the year ended March 31 is in progress, with results expected in June.
However, the performance was negatively affected mainly by its Transnet Freight Rail (TFR) operating division, which operated with 25% fewer locomotives than the previous year.
This performance comes as a joint application with the Special Investigating Unit (SIU) is heard in the high court to review and set aside four locomotive supply contracts concluded by Transnet in 2014 to acquire 1,064 locomotives. The contract value was R54.4bn, making it one of the largest single procurement events undertaken by a state-owned company.
The shortage of available locomotives led to an estimated 15.7- million tonnes of freight volumes lost in the current financial year on the north corridor alone.
The introduction of independent rail operators through the slots system, which Transnet is taking bids for until May 31, is expected to make rail contestable and competitive for the first time.
TFR’s inability to safely rail commodities — such as coal, iron ore and manganese — to ports at the height of a commodities boom has been a thorn on the side of exporters.
The Minerals Council SA has raised concern about rail and port constraints, which it estimates led to a loss of R35bn in opportunity costs in 2021 based on railed tonnages compared with Transnet’s targeted tonnages.
It added that transport and logistics challenges caused a shift in the pattern of cargo flows as more cargo, specifically chrome ore, was being diverted from Richards Bay to Maputo in Mozambique.
CEO Portia Derby maintains that Transnet’s objective remains to bring as much freight off the roads and back to rail as is possible. Yet unabated vandalism, profit-munching inefficiencies and poor infrastructure continue to frustrate business and investment.
Persistent security issues led to the theft of more than 1,000km of cable from the rail operations, resulting in more than R1.6bn being spent on security and about R400m on replacing stolen cables. Related operational disruptions caused lost revenue estimated at R1.9bn in TFR alone.
TFR, whose rail infrastructure has been underperforming after years of underinvestment, widespread copper cable theft and vandalism, recently declared force majeure — invoking clauses in long-term rail contracts that allow it not to fulfil contracts due to circumstances beyond its control.
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