The Treasury is — at best — open to taking on a “large chunk” of Transnet’s R130bn debt, a move that would free up cash for the ailing state-owned transport behemoth but undercut finance minister Enoch Godongwana’s efforts to rein in public debt.
Transnet has been cited by economists and business leaders as one of the biggest reasons for the country’s economic problems as it runs a sprawling logistics infrastructure spanning ports, railways and container terminals — all of them underperforming.
Public enterprises minister Pravin Gordhan has reconstituted its board, which pushed out the senior executives and drew up a turnaround plan that rests largely on the state taking R61bn of its debt and pumping in R47bn in cash.
According to five people familiar with the Treasury’s thinking, the government is considering taking a significant portion of Transnet’s debt but it is unwilling to inject any cash.
The request for funds and debt relief comes days before Godongwana is due to present his medium-term budget policy statement (MTBPS), which is expected to show how spending pressures and lower revenues are throwing off course his bid to stabilise SA’s finances.
If the Treasury agrees to Transnet’s debt relief proposal, it would ease the financial strain on the company, which pays about R13bn a year in interest on its borrowings.
The sources said Transnet does not have money for a cash injection, which has become a routine solution to financial problems facing multiple state-owned enterprises.
In a compromise solution, conditions such as the sale of Transnet’s non-core assets and the fast-tracking of the road map to allow private sector funding of the freight rail operations in exchange for concessions have won favour across government departments.
Under the turnaround plan prepared by the board, led by former mining executive Andile Sangqu, Transnet proposes that R47bn be paid in two tranches over the next two years.
In the document seen by Business Day, Transnet also plans to raise R20.8bn from strategic deals to cut debt and state dependence. Some deals are in progress and more will be launched. Transnet needs debt relief and interim support for 24-36 months until these deals pay off and the business turnaround takes effect.
Answering questions by MPs in the National Assembly, Gordhan noted that about R6bn of Transnet’s debt is due shortly — and the funds have yet to be found. Between December and March 2024, another R6bn is due. “Creative financial solutions” have to be found, which might or might not involve partnerships with the private sector.
The minister did not respond directly to a question by ACDP MP Steve Swart about whether the government plans to take over R61bn of Transnet’s debt as part of its draft recovery plan as well as to service its debt obligations.
He praised the board for doing an “excellent job” in drawing up its turnaround strategy.
Gordhan said he will work flat out with Transnet ahead of the MTBS to ensure it gets all it needs to dramatically improve operational efficiency in the short, medium and long term without it requiring such a massive bailout for operational expenses to keep afloat.
“We can change the way Transnet runs from the inside and bring in outside support almost immediately.
“If we improve efficiency on key corridors, it guarantees a turnaround for the whole of Transnet within a year,” he said.
“A low-hanging fruit is also how assets in the freight rail area are utilised. What Transnet has presented in a draft, we will reach consensus on the way forward and what the ask is from the fiscus before the MTBPS,” Gordhan said. With Linda Ensor
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