Finance minister Enoch Godongwana says he can’t yet give a yes or no answer to the question of whether government will give Transnet an equity injection, over and above the guarantee it provided in December.
But he says he is watching Transnet’s cash flow closely and ‘trying to understand the nature of the problem’.
He was speaking at a media briefing on Thursday as cabinet ministers and business leaders prepared to jet off to Davos for the annual World Economic Forum (WEF) which starts on Monday (January 15) under the banner of “rebuilding trust”.
Godongwana said the key focus for him at Davos was attracting investment “because with investment comes growth and with growth I get better revenues”. SA’s challenges were well documented and the delegation would not hide them, but would sell SA on the basis that the government and business were working together to grapple with the challenges, he said.
But while the minter said business and the government were at one on this, some business leaders reportedly had sharp words for the cabinet ministers who attended a closed pre-WEF breakfast session on Thursday, saying the government did not seem to appreciate how hard a sell it was.
Godongwana’s comments on Transnet came ahead of his budget on February 21 which is expected to be a tough one, with economic growth and revenue likely to come in well below projections of a year ago.
In December, the minister provided Transnet a R47bn guarantee facility to help it deal with its immediate debt repayments and support its turnaround plan. But he held back from providing the cash injection Transnet had said it needed. He emphasised on Thursday that the issue was to fix SA’s logistics issues, not to fix Transnet. “We are still doing the numbers, we are looking daily at their cash flow. We need logistics to work, it is critical for the economy,” he said.
Transnet’s half-year results, published just before Christmas, showed it had a loss of R1.6bn for the six months to September compared with a R159m profit the previous year. Rail and pipeline volumes were down more than 7% and container volumes down 1.8%, but Transnet said its recovery plan was gaining momentum. Its gearing stands at 44% with interest cover at just 1.9 times.
The minister reiterated his view that he did not want to repeat with Transnet the mistake the government made with Eskom, putting R283bn into the power utility since 2015 without extracting any efficiencies.
Eskom is receiving a further R252bn over the medium term, for a total of about half-a-trillion rand, though Treasury imposed stringent conditions on the new bailout when it announced it in the February 2023 budget. Godongwana emphasised too that the issue is to fix SA’s logistics issues, not to fix Transnet as such.
Trade, industry and competition minister Ebrahim Patel will join Godongwana at Davos as will higher education minister Blade Nzimande, communications and digital technology minister Mondli Gungubele, electricity minister Kgosientsho Ramokgopa and health minister Joe Phaahla. Among the business leaders are FirstRand CEO designate Mary Vilakazi, Exxaro CEO Nombasa Tsengwa, Standard Bank CEO Sim Tshabalala, JSE CEO Leila Fourie, Naspers CEO Ervin Tu and Discovery group CEO Adrian Gore.
Asked about the steep fall in the number of listings on the JSE, Fourie said delistings from public markets were a global phenomenon and SA had in fact fared better than many developing countries.
From 2010 to 2022 Luxembourg’s bourse saw a decline of 56% and the London Stock Exchange 33% while the JSE was down only 23%. The broad macroeconomic situation had been worsened by a rise in private capital markets but Fourie said the question was whether there would be a correction in private equity and private capital markets with the cost of debt starting to increase.
The JSE had implemented a raft of reforms to make it easier for small and medium sized companies and just over a year ago launched a private placement solution, which has now attracted more than 35 companies seeking to raise capital.
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