Transnet collapse must be fixed quickly – economist

Transnet has cost the economy billions over the past few years as the utility’s ability to transport South Africa’s freight has deteriorated, and the country’s ports face significant backlogs.

At the Nedgroup Pre-elections Treasurers’ Roundtable on 24 April 2024, Nedbank economist Isaac Matshego said the troubles at South Africa’s ports and rails must be sorted out “very, very quickly”.

As Transnet’s ability to effectively transport South Africa’s goods and commodities to the country’s ports has deteriorated, trucking has taken over a large chunk of the responsibility.

Matshego referred to vehicle sale statistics from Naamsa, which showed that heavy motor vehicle sales have tripled over the past two years.

He said this shows the shift from rail freight to road freight, causing significant troubles for organisations like SANRAL and costing the economy billions.

This problem is exacerbated by issues at South Africa’s ports, which face significant backlogs, particularly at the Durban port.

Matshego said transporting goods from this port should be far cheaper since it plays a massive role in South Africa’s economy.

He said 46% of the country’s local trade – exports and imports – come through the Durban port. For neighbouring countries, 40% of their trade volumes come through the Durban port alone. “So we better sort it out quickly,” he said.

The National Treasury estimated that the rail and port inefficiencies have cost the economy R411 billion in 2022 alone – almost 6% of GDP.

A study by the GAIN Group revealed that the collapse of South Africa’s rail and port utility is set to cost the country R1 billion a day in economic output, equivalent to 4.9% of annual GDP or R353 billion.

Director at GAIN Professor Jan Havenga expected the utility’s performance to improve markedly in 2023 due to cooperation between Transnet and mining companies.

However, this improvement did not materialise as the total freight transported by Transnet declined in 2023.

The Minerals Council of South Africa estimated that poorly run ports and freight-rail lines may have cost the country R150 billion rand in exports in 2022.

An analysis of 29 domestic mining companies by PwC in its South Africa Mine 2023 report showed that combined net income slumped to R108 billion in their latest financial years from a record R206 billion.

Transnet’s collapse can be seen in the graphs below, courtesy of Matshego.