Transnet could raise as much as R4bn in cash over the next 36 months from the sale of its noncore properties as it implements the 33 conditions of the guarantee facility that Treasury made available to it last year.
The sale of the properties, which include 5,300 houses and about 3,000 other properties, is one of the conditions of the R47bn guarantee, which aimed to enable cash-strapped Transnet to raise capital but required it to fix its balance sheet and implement a recovery plan to improve its operations, and to fast-track reforms to introduce competition in rail and ports.
Transnet CEO Michelle Phillips said on Monday that the state-owned logistics group remained compliant with 23 of the 33 conditions set by the Treasury and was on track with a further eight.
She was speaking after the group reported a R7.3bn net loss for the year to March 2024, up from the R5.1bn loss in the previous year.
But Phillips said Transnet aimed to turn profitable, to the tune of R1bn, in its 2024/25 financial year, as it continued to improve its performance. She said Transnet had completely embraced the reforms set out in the government’s Freight Logistics Roadmap and was working closely with the department of transport and Operation Vulindlela to fast-track the introduction of private sector participation in the group’s rail and ports businesses.
The group’s loss for the latest year would have been reduced to R3.8bn if not for provisions that had to be made for two “legacy” issues. One of these was the litigation between Transnet and the partners in the Natref refinery, Sasol and Total Energy, over historical pipeline tariffs. Transnet is appealing a court judgment that went against it, but it has had to set aside a R4.7bn provision.
The other issue involves a dispute over take or pay agreements with two customers, against which Transnet had to provide R2bn, so altogether put after-tax provisions of R3.5bn through its income statement, which inflated its operating costs and its bottom line loss.
The group increased revenue by 11.6% to R76.7bn, while its earnings before interest, taxes, depreciation and amortisation (ebitda) declined by 3.6% to R22bn. Net cash generated from operations was up 13.6% to R28.8bn while financing costs on Transnet’s R137.6bn debt burden climbed to R13.7bn.
The group drew down R26bn of the R47bn government guarantee facility during the year, raising R15bn on the domestic bond market as well as short-term funding required to meet its debt obligations. It has also secured approvals for a total of $2bn of low-interest, 30-year loans from two development finance institutions, the African Development Bank and the New Development Bank (NDB).
Phillips and NDB president Dilma Rousseff signed a loan agreement for R5bn of the NDB facility at the Brics bank’s annual meeting in Cape Town at the weekend.
Transnet, whose failing rail and port performance has weighed heavily on SA’s economy, managed to largely stabilise volumes in its rail and port operations but fell slightly short of improvement targets in rail.
Rail volumes edged up to 151.7-million tonnes, from 149-million tonnes in the previous year, but this was below the 154.4-million tonnes target in the recovery plan and far below the more than 220-million tonnes the group achieved just six years ago.
Transport minister Barbara Creecy recently urged Transnet to get back to railing 200-million tonnes of freight a year. Phillips said this was “doable”, though it would be a challenge to do it this year and Transnet could not do it on its own. It has set itself the target of lifting volumes to 170-million tonnes, and Phillips said Transnet’s customers had been clear it should only make promises it could keep because they needed to plan on this basis.
However, she has also set her team a stretch target of 193-million tonnes for this year. “We have had conversations with customers on how we get the network up to standard and that work continues,” Phillips said.
Transnet Freight Rail continued to be by far the group’s largest division, accounting for 44% of its revenue, while the Transnet National Ports Authority accounts for 16% and port terminals for 20%.
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