THE government of South Africa has agreed to a Rand 51bn ($US 2.8bn) guarantee facility for state-owned rail freight and logistics company, Transnet.
The package announced on May 22 comprises a Rand 41bn guarantee for Transnet’s funding requirements in the 2025-26 and 2026-27 financial years, and a Rand 10bn guarantee to help the company service debt and support capital investment.
Transnet says the facility will enable it to continue operations as well as fund its capital investment programme for the foreseeable future, while allowing it to focus on operational improvement and strategic reform.
Reports from earlier this year suggest that Transnet has accrued debt totalling Rand 120bn, mostly within the last 10 years. The freight railway has struggled with equipment shortages and maintenance backlogs in recent years. Widespread cable theft and vandalism has also severely impacted the reliability of infrastructure, resulting in a sub-optimal service.
The company’s excessive debt is considered to have been a major obstacle to efforts to revitalise its rail and port facilities. A great proportion of its current income is also reportedly being used to service debt and pay staff wages.
This situation is pushing Transnet to pursue private sector participation (PSP) projects, inviting the private sector to invest in rail operations. Transport minister, Barbara Creecy, launched a request for information process to help with the development of PSP projects in April, with Transnet targeting the launch of three projects by the end of August.
Transnet is also looking to diversify its revenues by establishing a rolling stock leasing company, LeaseCo, which will provide prospective private operators on the South African network with access to locomotives and wagons. The deadline for responses for a request for qualifications from prospective private partners to help establish the company is July 4. According to the Ministry of Transport, there has been "unprecedented interest" with 162 formal responses from the private sector so far offering investment, skills, and expertise.
A second RFI focusing on passenger projects is set to be released in July.
“PSPs are a key element of the organisation’s strategy to modernise its operations and infrastructure and grow the logistics sector for the benefit of the economy,” Transnet said in a statement.
“With the government’s commitment to support its recovery and strong collaboration with customers and industry partners, Transnet is on course to recover and fulfil its strategic role in the South African economy.”
