Transnet’s multi-billion rand guarantee facility from the National Treasury has been roundly welcomed as a step in the right direction, but industry players have cautioned that it was not a panacea for all the long-standing challenges that plague the State-owned logistics company.
Treasury on Friday announced a R47 billion bailout for Transnet in a bid to support its recovery plan, but this amount is less than half of what Transnet had requested.
Finance Minister Enoch Godongwana concurred with the Public Enterprises Minister Pravin Gordhan to issue Transnet with a R47bn guarantee facility, effective immediately, in support of its recovery plan, including meeting its immediate debt obligations.
This comes as Transnet swung into a loss of R5.7bn for the year ending March 2023 mainly due to inefficiencies of its rail network, and has a massive debt of R130bn with interest costs of R13bn per annum.
In a turnaround plan produced by the board, Transnet last month asked the Treasury for a R100bn financial support package over the next two years which includes a R47bn equity injection or loan, and for the government to take over R61bn of the company’s debt.
In a statement on Friday, Treasury said the financial support package provided for the entity was a R47bn guarantee facility against which Transnet will drawdown an initial amount of R22.8bn to deal with immediate liquidity matters such as settling maturity debt.
However, the DA unequivocally rejected this guarantee, saying it heightened taxpayer risk exposure to the government mismanagement of the logistics and transport sector.
DA representative on finance Dr Dion George said Transnet’s recovery plan left much to be desired, adding that the DA did not have any confidence that the plan will address the structural issues that beleaguer the entity.
“No guarantee facility can address the root causes of this inefficiency and fiscal irresponsibility,” George said.
“In fact, the government’s safety net will ensure that the chaos is perpetuated while placing a substantial burden on our already strained national budget and further ballooning our growing debt bubble.”
Transnet has been plagued by crippling rail and port inefficiencies as hundreds of trucks have to transport coal into the Port of Richards Bay due to the collapsed rail network.
More than 100,000 containers carrying an estimated R7bn worth of goods are also stuck on vessels outside the Port of Durban due to poor equipment, lack of cranes and bad weather conditions.
Deal Leaders International CEO Andrew Bahlmann said no matter what cynics will say about the R47bn support package, the reality was that there was no alternative given the appalling impact that Transnet’s incapacity has on the economy, particularly the vital export markets.
“The reality is that Transnet is less a financial crisis than a governance crisis. To judge how business is viewing these events, ArcelorMittal has been particularly scathing in its recent criticism of the efforts of government and Transnet to turn anything around,” Bahlmann said.
“Consequently, I do not believe anyone thought that anything but a Transnet bailout would ultimately materialise – but the already harsh public spotlight that is on Transnet will only become even more focused in the wake of this support package.”
The Road Freight Association (RFA) said the allocation of funding to Transnet was a step in the right direction.
However, RFA CEO Gavin Kelly said Transnet has received allocations and presumably bailouts from Treasury before, and the question still remained whether the management, operational foresight and control that was required for many years, will now come into play.
“It has not done so before - so the question is whether this will "suddenly" now happen - or are we to see a similar experience as happened with South African Airways (SAA), where countless "bailouts" occurred without the desired result,” Kelly said.
“The RFA is fully aware that there are both infrastructure and equipment interventions that require capital, but it remains convinced that an attitudinal and management change is required within Transnet, as well as the core supportive State-owned entities that are in the logistics supply chain.”
Transnet has informed the market that it could take 12 to 18 months to get the equipment needed to fix the container terminals at the Port of Durban.
The massive delays in South Africa are affecting shipping lines’ worldwide operations, and some are giving the country a miss while others are imposing hefty surcharges on South Africa-bound goods.
Transnet National Ports Authority (TNPA) on Friday said it was enabling terminal operators to implement the Container Recovery Plan at the Port of Durban with agility by ramping up the helicopter service availability from a 12-hour to a 24-hour operation, and ramping up dredging service.
The TNPA helicopter service efficiently transports marine pilots to board vessels at anchorage for safe vessel navigation into the port.
TNPA managing executive for the Eastern Region Ports Moshe Motlohi said this was another recovery intervention of the port’s authority to ensure vessels were turned around quicker.
“Whilst TNPA operates a complimentary marine craft service with an option of deploying pilot boats for the same, the helicopter service is quicker and offers better efficiencies in vessel Movements,” Motlohi said.
“We are certain that the increase in helicopter availability will make a significant contribution to the clearance of vessel delays.”