The state-owned logistics company is slightly behind on its target of shipping 170m tons in the current year, though it expects to make this up in the coming months. From Moneyweb.
State-owned logistics operator Transnet expects to be back in the black for the 2025 financial year, according to CEO Michelle Phillips.
The group set itself a target of shipping 170 million tons (Mt) of cargo for the current financial year and is currently 2Mt behind target. This is an improvement on the 154Mt shipped in the prior year.
Speaking at a PSG Think Big presentation on Tuesday, Phillips said the group expected to recover this 2Mt deficit provided there were fewer operational disruptions, such as cable theft and vandalism, and fewer derailments.
The group reported a R5.7 billion loss in March 2023, citing a host of operational difficulties, including nearly 4 000 incidents of cable theft, floods in KwaZulu Natal and load shedding.
One of the biggest challenges facing Transnet is its R130 billion debt pile, which now costs more than R1 billion a month in interest charges alone. Of this, some R60 billion is reckoned to be the result of state capture. Transport experts have urged government to take over at least some of this debt so as not to burden private sector operators with unsustainable tariffs as Transnet readies itself for an open and competitive logistics environment.
“This [debt] is a huge challenge, and we can’t handle it on our own,” said Phillips. “Borrowing more is not the solution. We are mindful of what government can and cannot do. With interest at upwards of R1 billion a month, it is difficult to run a business like that …. We have been engaging with funders for cheaper long-term funding.”
Phillips said Transnet had avoided approaching the government for bailouts but had been granted R2.5 billion to help with recovery following floods in KwaZulu-Natal and a similar amount for the purchase of much-needed locomotives.
In December 2023, National Treasury agreed to provide a R47 billion guarantee facility to allow Transnet to increase borrowings, subject to conditionalities, one of which was the publication of a roadmap for the transformation of the logistics sector.
One of the key steps outlined in the roadmap is the corporatisation of Transnet National Ports Authority, which Phillips expects to be completed by April 2025. Progress has been made in the separation of Transnet Freight Rail from the rail infrastructure network, which will allow private sector operators to enter.
Phillips said it was uncertain whether the private sector was ready to participate in the network, as proposed in the roadmap. Transnet is setting up a separate business to provide rolling stock and refurbishment to the market to assist in launching a competitive rail environment.
Read: It may take R80bn and 10 years to fix Transnet’s core rail network
Plans are also in place to modernise port terminal facilities at Richards Bay and Port Elizabeth for bulk handling of commodities. The group plans to sell a portfolio of non-core businesses and 3 700 mainly residential properties to focus on its core business of logistics.
The draft Transnet Network Statement, published earlier this year to provide for an infrastructure manager to referee access to the country’s logistics network, has been open for public comment and should soon be made available in its final form.
Interest from the private sector to participate in a reformed logistics sector has been overwhelming, said Phillips. Transnet is obliged under the Public Finance Management Act to follow strict rules of engagement with outside firms. “We have received unsolicited proposals from companies with funding, asking how [they] can help, [how they] can invest in equipment. Some just want to work with us to improve performance. The challenge is when there is so much interest, we have to go through a process [of selection].”
Unless Transnet follows strict processes in selecting private partners, it could end up facing years of court challenges, as in the case of APM Terminals, Maersk’s operating company, which is attempting to overturn the selection of Philippines-based International Container Terminal Services (ICTSI) as the preferred bidder for the privatisation of Durban’s container terminal on Pier 2.
Read/listen: Maersk challenges Transnet Durban Pier 2 port contract
Phillips pointed out that cargo was being lost to neighbouring ports in Mozambique and Namibia due to Transnet’s inability to ship sufficient volumes to SA ports. She added that this was to be expected, as many customers prefer not to have a single-port strategy for imports and exports.
One of the major problems faced on the rail network was theft and vandalism and the lack of resources to protect a large network. Steps have been taken to improve network security, and an agreement has been signed with original equipment manufacturers for the supply of equipment for both rail and ports. This equipment should be delivered within the next 12 months.
