Transnet will seek private sector investment in the refurbishment or expansion of its rail infrastructure ahead of the finalisation of the formal private sector participation process that will take some time, transport minister Barbara Creecy said on Wednesday.
The limitations of the freight logistics network has severely hobbled the export of commodities and impeded economic growth.
Transnet has concluded requests for information regarding private sector participation in its five priority rail and port corridors and plans to issue requests for proposals in August, which will kick off the formal procurement process.
“Obviously the question that is uppermost in all our minds is how do we deal with the current state of the Transnet network while we are waiting for the private sector participation process to fall into place,” Creecy said during a media briefing ahead of her budget vote speech in the National Assembly.
“To sustain our economy, we cannot afford to wait until the private sector participations reach financial close before launching an ambitious programme to rehabilitate Transnet’s rail network and rolling stock, as well as port infrastructure and equipment,” the minister said in her speech.
“Funding sources for the immediate rehabilitation of the five priority rail corridors include the current Transnet budget for rail and rolling stock maintenance, the purchase of port equipment, submissions to the National Treasury’s budget facility for infrastructure (BFI) and private investment in refurbishing or expanding line capacity through existing customer agreements,” she said.
Creecy believed the appetite by the private sector to invest in the rail network would depend on the regulatory environment. She could not provide details on the nature of this involvement as the process was still being developed, but believed it would involve the private sector being repaid for its contributions.
The minister noted that two applications had been made by Transnet to the BFI — one of about R16bn made on Tuesday and a second for about R14bn that will be made in October.
“We have worked very hard on these applications and we have confidence that they will meet the technical standards of National Treasury,” she said.
The BFI is intended by government to support the development of large-scale infrastructure projects.
“What we are looking for is a legal mechanism that could allow contributions that the private sector have already offered. We have developed a framework and it is in consultation with National Treasury,” Creecy said.
“The limited availability of state resources to fund infrastructure development makes private sector investment critical.”
The minister reiterated a previous statement that consideration was being given to further guarantees for Transnet, with an announcement expected towards the end of this month.
The transport department announced in June that the government was considering granting further guarantees to Transnet in addition to the R51bn facility announced the previous month. Transnet has already used up the R47bn guarantee it received from the National Treasury in December 2023.
The additional guarantees were needed in view of Transnet’s R99.6bn debt redemptions that become payable over the next five years.
The parastatal has a debt burden of more than R138bn that consumes much of the cash it generates. It has a R9.9bn local bond due for repayment in August.
Creecy indicated that national airline SAA was firmly on the road to recovery after its exit from business rescue.
“The airline has begun a measured fleet expansion to meet growing demand,” the minister said. The airline reported a profit of R252m for the 2022/23 financial year for the first time since 2012.
“Now operating independently and no longer reliant on government guarantees, SAA is self-funding its operations and fleet growth, while remaining open to a strategic equity partner as part of its long-term restructuring.”
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