One of South Africa’s most important state-owned enterprises stuck in a vicious cycle

Transnet’s financial crisis, compounded by its operational issues, means the ports and rail operator is stuck in a vicious cycle that costs the country billions each year.

In the latest instalment of PSG’s Think Big series, Transport Minister Barbara Creecy outlined the issues faced at Transnet.

The minister acknowledged the severe impact Transnet’s logistics crisis has on South Africa’s economy. She cited figures that place the cost to the economy at around R1 billion a day.

As Transport Minister, Creecy and her department oversee Transnet and, in particular, aid the state-owned operator in its reform process.

Trasnet’s collapse has been ongoing for years, as the utility has struggled to improve its operational and financial problems.

As a result, South African companies have begun to reduce their reliance on the utility by transporting their goods via road rather than railways and using ports outside the country to export their goods.

This forms the basis of Transnet’s vicious cycle – the operator’s financial struggles mean it cannot afford to invest in improving its rail network, which pushes customers away, decreasing Transnet’s revenue, and further worsening its financial position.

In its latest results for the 2024 financial year, Transnet reported a R7.33 billion loss and significant liabilities.

In May 2025, Moody’s Ratings warned that Transnet would run out of money for operations and debt servicing within three months unless it gets a government bailout.

The ratings firm placed Transnet under review for a possible credit downgrade, citing concerns over its “unsustainable” capital structure, deteriorating liquidity position, slow pace of operational improvements, and absence of government support.

To address this, Creecy, with the concurrence of the Finance Minister, agreed to provide Transnet with a R51 billion guarantee facility in May 2025.

At the time, the government explained that this guarantee facility was effective immediately in support of Transnet’s capital investment programme and would enable it to meet its debt obligations. 

Transnet needs more money

Creecy emphasised that Transnet’s access to more funding is crucial to address its struggling operational performance and, therefore, its financial situation.

According to Transnet, the guarantee facility received in May would enable it to refinance maturing debt and ensure its continued access to adequate resources and facilities.

This would allow the operator to continue operations and fund its capital investment programme for the foreseeable future.

However, the R51 billion facility came at a significant cost to South African taxpayers and the already overburdened fiscus. It was also insufficient to address Transnet’s struggling finances fully.

Therefore, rather than providing equity support for the operator, the Finance Minister emphasised earlier this year that Transnet should draw on the Budget Facility for Infrastructure (BFI).

The BFI is a budget reform initiative established to support priority infrastructure projects through a more rigorous project planning, appraisal, and selection process. 

It is designed to support enhanced project outcomes and improve value for money for the government. 

Creecy confirmed that Transnet has applied for this infrastructure funding through the BFI, which she described as a “short-term infrastructure injection”.

She explained that this funding would enable the operator to address some of its infrastructure needs, particularly its rail network, thereby improving operations in the short term and allowing it to focus on long-term reforms.

“The longer-term vision of rail reform is to re-establish rail as the backbone of transport for both people and goods in our country,” the minister said.

Creecy added that Transnet’s current focus on getting third-party operators to use its network will go a long way toward ensuring it is in a healthy and sustainable financial position.

“I think the vision is that Transnet, in the longer term, should be an infrastructure provider,” she explained. 

“Transnet Freight will still exist, but there will be other freight operators, and Transnet would be making its revenue from these different freight operators that would be operating on their network.”

However, she said this vision would take time to realise, as approving third-party operators is a years-long process.