Transnet turns to government for debt relief lifeline

News 21 Aug 2024 by WCN Editorial

South Africa’s Transnet sets sights on government assistance to alleviate its US$ 7.3 billion debt.

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South Africa’s Transnet is seeking government assistance to alleviate its R130 billion (US$ 7.3 billion) debt, aiming to improve its freight rail and port capacities. According to Reuters, Transnet’s Chairman Andile Sangqu said the company is burdened with debt repayments exceeding 1 billion rand per month, which is hampering its recovery plan to boost freight volumes, which have fallen from 226 million metric tons in 2017/18 to 152 million in 2023/24.

“We will require the assistance of the shareholder to give us some form of debt relief,” Sangqu said. “As we begin to make this increase in volumes, as we begin to generate new operational cash flows, they all get wiped out by the debt service costs.”

Reuters reports that South Africa’s government had handed Transnet a 47 billion rand guarantee facility at the end of last year to help the company meet “immediate liquidity matters such as settling maturity debt”.

Recovery plans

Last month Transnet announced it had won a US$1 billion corporate loan from the African Development Bank Group to support its recovery and growth plans. Launched in October 2023, Transnet’s recovery plan aims to rehabilitate infrastructure and boost operations over 18 months. The plan addresses a weakened financial position, with revenue falling from R72.9 billion to R68.9 billion and operating expenses rising from R40.4 billion to R45.9 billion, resulting in reduced operating profits and increased borrowing.

Over the 18 months, Transnet committed to delivering 154.4 mt of cargo via rail, with targeted growth measures expected to boost this forecast to 170 mt for FY23/24. Without these measures, the volume is projected to reach 141 mt. Additionally, the port operator plans to increase container volumes from 4 million TEU to 4.9 million TEU by FY24/25.

Transnet has also started the corporatisation of TNPA aimed at the establishment of the National Ports Authority as a wholly owned subsidiary of Transnet. The plan is to establish TNPA as a financially autonomous entity capable of generating its own revenue and attract investments to bolster the competitiveness of South African ports.

In the meantime, Transnet Port Terminals (TPT) continues to take delivery of new equipment. The Cape Town Container Terminal (CTCT) received two Sany reach stackers and two Kalmar empty container handlers in May. The tractor fleet at the terminal has grown from 32 to 56 units. The terminal deployed 28 machines from TPT’s network in May. An additional 10 units from TPT’s Durban terminal arrived in June, following the delivery of 15 new terminal tractors in Durban.