One of South Africa’s most important companies going from zero to hero

Transnet has seen sustained improvement in its operations, with its decline halted and a gradual increase in rail volumes in the second half of 2025.

This has been coupled with enhanced efficiency at the utility’s ports. While most of South Africa’s busiest ports are still ranked among the least efficient in the world, they were also among the most improved in the World Bank’s 2025 rankings.

Transnet’s improved operational performance has also come with strong progress regarding the government’s reform agenda to open the logistics sector to private companies. 

These companies are set to operate key container terminals and several rail corridors, bringing significant investment that Transnet’s weak balance sheet prohibits it from doing. 

To sustain this improvement, Investec chief economist Annabel Bishop explained that Transnet’s investment in new equipment and infrastructure needs to be sustained by the utility or private players. 

Bishop explained that South Africa’s state-owned companies tend to have alternating quarters of expansion and contraction, with their fixed investment swinging between growth and decline. 

The latest data shows that despite deteriorating infrastructure and poor performance, fixed investment from public companies declined by 4% year-on-year in 2025. 

Within this sector, Transnet has been one of the standout performers in recent times, with its limited fixed investment budget bearing fruit for the company. 

Transnet has noted it has seen sustained improvement in operations, with rail volume performance for the six months to 30 September 2025 up 4.4%, Bishop said. 

She explained that the domestic freight crisis has been a key constraint on GDP growth in recent years, limiting exports and increasing the cost of doing business.

“Transnet’s volume performance has been on an upward trajectory since the 2024 financial year,” the state-owned company said. 

“The company will leverage private sector participation to improve efficiencies and fund capital investment requirements.” 

Transnet has a very weak balance sheet, which limits its ability to invest in infrastructure and equipment. It relies on around R200 billion in government guarantees to keep operating. 

Despite this, the company has made full use of its limited investment ability to acquire key equipment for its ports and improve the availability of its locomotives. 

This has translated into a significantly improved performance from the utility’s ports and rail units, which can be seen in the graph below, courtesy of Bishop.  

Reform stumbling blocks

Despite the operational improvements Transnet has made, for South Africa’s logistics sector to return to its 2017/18 highs will require significantly more investment. 

Transnet does not have the balance sheet to invest this heavily, which is why the government is pursuing reforms to increase private sector participation in the sector. 

This elevated participation will come with increased investment, with private companies sitting on over R1.8 trillion worth of cash in the bank.

However, while Transnet and the government have made progress regarding these reforms, there are still major hurdles for them to overcome. 

The Centre for Risk Analysis (CRA) has urged caution regarding Transnet’s turnaround, with the state-owned company still set to retain a monopoly over the sector. 

It said the utility remains committed to retaining its control over policy, legislation, and regulation in the sector. 

Thus, while private companies will be able to invest and compete with Transnet, this will be done under the utility’s control and not in a free market.

Towards the end of 2025, private rail operator Traxtion announced a R3.4 billion investment in South Africa’s logistics sector. 

This investment will see R1.8 billion go to locomotives and R1.6 billion to wagons, with the potential for spending to rise ot R5.8 billion over time. 

The CRA said this investment is very positive for the sector, enabling Transnet to move more freight, lower its operational and financial stress, and open the door for other private operators to invest. 

However, the investment also sees Traxtion investing and attempting to operate as a competitor to Transnet, while the state-owned company remains the custodian of infrastructure in policy and legislation.

In practice, that would mean that Transnet – and, in turn, the state – remains the entity that makes the ultimate decisions about capital allocation and who receives which rail slots. 

This would keep the possibility of inefficiency alive, coupled with potential political patronage and corruption.

The private sector is getting into position to throw Transnet a lifeline. But critically, it appears the country’s rail and trade policy framework will remain state-centred, suppressing growth and job creation over the long term, the CRA said.