By Nelson Banya
JOHANNESBURG (Reuters) -South Africa’s government will give Transnet an additional 94.8 billion rand ($5.34 billion) guarantee facility to support the ailing state-owned logistics firm’s recovery plan, the transport ministry said on Sunday.
The facility comes on top of a 51 billion rand guarantee the government announced for Transnet in May, including 41 billion rand to cover the company’s funding needs over the 2025/26 and 2026/27 financial years, and 10 billion rand earmarked for debt servicing and capital investments.
The new guarantee comprises 48.6 billion rand to cover all debt redemptions over the next five years, and an additional 46.2 billion rand to mitigate against further credit rating actions, the ministry said in a statement.
The government is supporting Transnet’s five-year turnaround strategy, which seeks to restore freight rail volumes to 250 million metric tons per year by the end of the period. Those volumes fell to 152 million metric tons in the 2023/24 financial year, from a peak of 226 million metric tons in 2017/18.
Transnet has failed to deliver reliable freight rail and port services due to equipment shortages and maintenance backlogs after years of under-investment. Its capacity has been further constrained by widespread cable theft and vandalism.
The company’s debt has risen to 145 billion rand from 138 billion rand at the end of the 2023/24 financial year, according to its chairperson, Andile Sangqu. Its loss widened to 7.3 billion rand in 2023/24, from 5.7 billion rand the previous year.
Transnet’s struggles have cost mineral exporters – primarily coal and iron ore producers – billions of rand in lost revenue. These exporters account for nearly 70% of Transnet’s freight volumes.
Due to a lack of railway capacity, most of South Africa’s chrome exports now reach ports by road, raising costs, damaging roads and the environment.
($1 = 17.7563 rand)
(Reporting by Nelson Banya; editing by Clelia Oziel)
