While Transnet’s new board is committed to fixing operations at the troubled rail logistics and ports company, the department of public enterprises will discuss ways to give the entity urgent support with government.
“The debt that Transnet carries is a challenge, but at the same time, its operations are also a challenge,” public enterprises minister Pravin Gordhan told Business Times after a parliamentary committee meeting in which the company presented its annual report.
“So, we are in deep discussions about how we mobilise the 50,000 people that work for Transnet to become a lot more productive, for Transnet to carry larger volumes and earn a lot more income as we have further discussions in government as to what form our assistance to Transnet can take,” said Gordhan.
Transnet is buckling under a R135bn debt pile, translating to debt servicing costs of R13bn a year. The Public Investment Corporation (PIC) — which invests on behalf of government pensioners — has given Transnet a four-month reprieve on a R7bn bond that was due last week. The asset manager rolled R4.4bn of its exposure to Transnet and received the balance of more than R250m, it announced.
Finance minister Enoch Godongwana has refused to commit any money to the SOE until it can prove it is fully implementing a turnaround plan and is facilitating the entry of private players into its rail network and port terminal operations, in accordance with the presidency’s freight logistics roadmap.
Gordhan told the committee Transnet was still battling to make progress in recovering locomotives and spare parts from a Chinese rail company embroiled in state capture.
Transnet interim chair Andile Sangqu said the huge debt burden hamstrings the ability of the company to generate the cash it needs to stay afloat and build a reservoir to catapult the company to growth and recovery.
“In terms of discussions with the Chinese, there still seems to be a gridlock that we can’t get past at this point in time, so new efforts are being made. Once we have another round of progress, hopefully we can report some news in this regard because the goalposts keep getting shifted in an unreasonable way by the company on that side,” he said.
The minister said discussions were taking place at cabinet level to see how Transnet could be assisted.
Transnet interim chair Andile Sangqu said the huge debt burden hamstrings the ability of the company to generate the cash it needs to stay afloat and build a reservoir to catapult the company to growth and recovery.
“In terms of debt, R130bn is more than Transnet can handle. Interest costs of R13bn per annum are too much. It cannot handle that. It needs help. Even if we were to improve everything that we do and get better operational numbers, that kind of a debt burden must be looked at dispassionately and [it must be] decided that it needs assistance,” he said.
“It is a reality that is not going to go away. What compounds this reality, in a high interest rate environment, is it is costing us more money to service that debt.”
Interim group CEO Michelle Phillips said irregular expenditure flagged by the auditor general must be ring-fenced and set aside while management deals with the entity’s financial and operational crisis.
“Part of the challenge in the majority of cases is of irregular expenditure, it’s for things such as advertising for 19 days when you are supposed to advertise for 21 days. The entire contract is deemed irregular. It does not mean that there was no value for money in that contract,” she said.
According to its 2022-23 annual report, Transnet incurred R556m in irregular expenditure, a reduction from R561m in the previous year.
