Transnet has warned it might be forced to revise downwards the target to transport 250-million tonnes of freight per annum in the next five years should maintenance funding be delayed or come lower than its projections.
Transnet, in its five-year maintenance investment plan, said cash from operations (access fees), budget facility for infrastructure allocations and other private sector collaborations are required to fund the capital investment requirements.
However, the recently established Transnet Rail Infrastructure Manager (Trim) is gearing up for the allocation of the first route slots to private trains, after the landmark decision to allow third- party access to the country’s rail network.
Transnet said while revenue is projected to increase, it remains insufficient to cover the escalating capital and operational expenditure requirements.
“To address the funding shortfall, Trim must adopt a multi-source funding strategy, leveraging various mechanisms to secure the necessary capital over the next three years (access fees, leasing income, scrap sales, budget facility infrastructure funding, private sector funding, debt relief, project financing, debt and concessions),” the maintenance investment plan said.
“However, Trim requires a substantial cash injection during the two years preceding the implementation of the Catalytic PSP transactions outlined in the freight logistics road map.”
The interim funding is critical to ensuring timely capital investments that will enable the restoration of essential network capacity and reliability. It also lays the foundation for comprehensive rail reform during this transitional period.
“Delayed and or lower fund injections than required will cause a downward adjustment of volume capacity projections and a slower improvement in network performance and reliability and should be avoided.”
Though capital requirements for 2025/26 was R11.36bn, Transnet said this has now been reduced to R9.36bn to ensure “executability given the non-confirmation of funding and consideration to supplier lead times.”
The investment plan shows that Transnet’s six corridors will need about R65bn over the next five years in capital investment.
New corridor
Some of the projects Transnet wants to embark on is the development of a new corridor that will link the mines in Botswana to the SA ports via Eswatini for transportation of bulk commodities.
The investment plan says that to enable Trim to achieve its target of creating capacity for 250-million tonnes a year, maintenance works must be carried out ahead of actual demand to move traffic.
“Contracts and material orders must be placed at least six months before they will be required across the country to allow for logistics and delivery thereof.
“If required funding is only received in the year, the volume must be delivered, then the actual maintenance work will be delayed and if carried out will be for the following period’s benefit. So the timing of funding interventions are a key driver,” the plan said.
“The required funding will be sourced and be availed at least 12 months before the maintenance works must be executed to ensure that capacity is created in the year that the volume must be transported.”
Transnet, which operates the country’s 21,323km of rail infrastructure, last month reported a R2.2bn interim loss for the six months ended September.
Transnet is servicing its debt at a cost of R1bn a month. S&P Global in December put Transnet on a credit watch by S&P Global, putting the entity at greater risk of a credit downgrade.
S&P said that while it expected the entity’s operational performance to improve, this would not be complemented by robust growth in cash flow, with the group’s capital expenditure requirements and debt servicing costs remaining elevated and in its view “leaving limited room for operational underperformance”.
The ratings agency expects the state-owned entity’s debt to balloon to R151bn in 2025.
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