The ANC’s economic transformation committee wants state-owned logistics company Transnet to receive fiscal support in the February budget similar to Eskom’s R254bn relief package from the Treasury in 2023, to enable it to attract investment and expand the rail network.
This is despite the Treasury’s tough-love stance on state-owned enterprises in its efforts to maintain a prudent, disciplined approach and ensure sustainable public finances.
“We need something massive for Transnet,” committee deputy chair Zuko Godlimpi said on the sidelines of the ANC’s lekgotla on Sunday, without mentioning the sum the ANC considers to be sufficient for Transnet.
The proposal was discussed during the party’s two-day annual strategy meeting attended by ministers, deputy ministers and directors-general. The lekgotla informs the ANC’s policy positions in government.
The committee “noted the need for urgent interventions and solutions to sustain the local steel industry, noting its impact on other sectors, such as automotive and construction”, Godlimpi said.
“Had it not been for the R245bn support package [for Eskom], we would not be here and this was against institutional advice [because] everyone had given up on the capacity of Eskom. The debt programme was structured in a very detailed and specific manner in that it was not to deal with its overall company problems but towards a specific intervention.”
In 2023, the Treasury provided Transnet with a R47bn guarantee to support its recovery plan and to meet its debt obligations. The guarantee came with strict conditions to take specific actions to accelerate a turnaround, speed up reforms and encourage private sector participation.
Transnet has made marginal improvements, particularly in its rail division. In the six months to September 2024, freight rail reported that projects focused on improving rolling stock availability and the rail infrastructure condition would be prioritised while “building on improved efficiencies and customer projects that have aided improved volume performance on the general freight business and export coal lines”, Transnet said.
Business Day previously reported that R70bn would need to be invested in the rail network infrastructure over the next five years to get it up to standard. The group is in talks with customers and with the government on how to fund this.
Transnet remains highly indebted, which makes it hard for it to borrow more money. This debt is also causing high interest costs and other financial problems. To remedy this, Transnet is implementing a variety of options, including selling assets that are not essential, cutting costs and finding new ways to fund infrastructure and maintenance projects, such as partnering with other companies or using special funding models.
“If you give Transnet R47bn, you are not helping them to solve the large-scale capital requirements that they have... At a structural level, it’s still far less than what they require. [We] should we give them a comprehensive one-off,” Godlimpi said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.