Treasury announced on Friday that loss-making Transnet would get a bail-out to the tune of R47 billion to alleviate its debt crisis and help its restructuring and recovery plan over the coming months.
The department said in a statement that Finance Minister Enoch Godongwana had concurred with Public Enterprises Minister Pravin Gordhan to issue Transnet with a R47bn guarantee facility “effective immediately” in support of its recovery plan and to meet its immediate debt obligations.
Transnet posted a loss of R5.7bn for the 2022/23 financial period on the back of falling freight rail volumes that dipped by 23.6 million tonnes (mt) to 149.5mt over the year.
“Transnet plays a central role in the South African economy and the government’s goal of inclusive growth. The entity has suffered significant operational, financial and governance challenges in recent times and is struggling to fulfil this strategic role,” the departments said.
They added that they had worked with Transnet to find a solution to its immediate and longer-term problems, and during the discussions it had been decided to grant the guarantee.
“Government continues to pursue deep-running, broader reforms of the company and the logistics sector as a whole. Without a comprehensive reform of the sector, rather than that of a single entity, we risk being faced with similar challenges in the future,” the departments said.
The financial support package provided for the entity is a R47bn guarantee facility against which Transnet will draw down an initial amount of R22.8bn to deal with immediate liquidity matters such as settling maturity debt.
“Government has not considered an equity injection given that the budget for 2023/24 is closed and is confident that this guarantee facility alongside swift implementation of the Transnet Recovery Plan will be sufficient to resolve Transnet’s challenges,” the departments said.
“A Guarantee Framework Agreement between the National Treasury, Department of Public
Enterprises, and Transnet will include strict guarantee conditions that will be continuously
reviewed and amended when deemed necessary. Any further drawdowns will be subject to
Transnet meeting these conditions.”
According to the departmental statement, Godongwana is positive that the reforms needed to put Transnet back on track can be achieved if it commits to meeting the strict conditions of the guarantee and quickly implements reforms informed by input from the National Logistics Crisis Committee.
A Guarantee Framework Agreement must be concluded between National Treasury, the Department of Public Enterprises and Transnet within 14 days of the activation of the guarantee to ensure that any fiscal risks are mitigated and that all parties agree to the conditions.
The departments added that Transnet would also explore the divestment of non-core assets, reduction of the current cost structure, alternative funding models for infrastructure and maintenance requirements.
