Transnet’s underperformance poses a significant risk to the South African economy and requires urgent intervention.
This is according to the National Treasury’s most recent presentation to Parliament’s Standing Committee on Appropriations.
On Tuesday, the National Treasury provided Parliament with an update on Transnet’s performance in the current financial year, which revealed a marked deterioration in the state-owned entity’s performance.
The Treasury said ongoing security incidents, locomotive unavailability and the poor state of the rail infrastructure have negatively impacted Transnet’s operations.
“Inefficiencies of the Transnet’s freight rail network pose a significant risk to the South African economy and require urgent intervention,” the Treasury said.
“Transnet’s overall performance for the period has deteriorated in all the critical commodity segments and business flows, not achieving the targets set in the 2023/24 Corporate Plan.”
The Treasury said rail volumes for the first quarter of the financial year were 18.2% behind target due to commodities not meeting their budgeted targets.
In addition, container volumes handled by the ports were 2.2% lower than budgeted, and pipeline volumes were 25% below budget.
Treasury attributed the decline in freight rail to several factors, which included:
- Operational inefficiencies
- Theft and vandalism
- Underinvestment in the network
- Ongoing security concerns
- Locomotive failures and undersupply
- Continuous power failures at the mines, vandalism and community disputes
The Treasury said port productivity is also significantly lower than benchmark African and European ports.
“Maintenance of critical equipment is the main contributor as the port of Durban seldom has higher than 60% availability of container equipment.”
It added that the underperformance in ports results from operational inefficiencies, exacerbated by adverse weather conditions resulting in critical equipment breakdowns.
The underperformance in Transnet’s pipeline segment is due to the Natref shutdown and lower export allocation.
Transnet’s declining performance comes despite a government bailout of almost R6 billion awarded to the enterprise last year.
The Finance Minister’s medium-term budget policy statement in October 2022 awarded Transnet R5.8 billion – R2.9 billion to re-employ out-of-service locomotives and another R2.9 billion to deal with flood damages.
One of the conditions attached to this funding was that the National Treasury would undertake an independent review of all freight corridors, specifically focusing on identifying opportunities for operational efficiency improvements.
The request for proposal for the independent review has been issued with a closing date of 15 September 2023.