South African taxpayers give Transnet R94.8 billion lifeline

South Africa’s government approved R94.8 billion in guarantees to further support the beleaguered state-owned rail and port operator Transnet.

The allocation includes R48.6 billion to ensure all of the company’s debt redemptions will be covered over the next five years, the Department of Transport said in a statement on Sunday.

The other R46.2 billion is to mitigate the risks of credit ratings downgrades on Transnet’s debt.

Transnet had requested funding from a budget facility that prioritizes large-scale infrastructure projects needed to boost economic growth, with thecash to be used to finance upgrades and equipment orders.

After years of underinvestment and state corruption, deliveries on some of South Africa’s rail lines have dropped to the lowest level in decades, and its ports rank among the worst in the world.

The funds, which add to a R51 billion guarantee facility approved in May, are intended to help the indebted company become profitable.

“Government will continue to work with Transnet to ensure operational and financial improvements in the company, and to accelerate implementation of reforms for the logistics sector, including private sector participation,” the department said.

Transnet spokesperson Ayanda Shezi wasn’t immediately able to comment on the announcement.

The ratings agency S&P Global said in a statement on July 10 that Transnet is entirely dependent on government support to service its debt.

When it downgraded the company’s senior unsecured debt, S&P Global warned of a “downside scenario” if government support weakened.

Similarly, measures that would result in an upgrade will take time, making a favourable revision unlikely in the next 12 months, S&P said.

Investment in new equipment is helping Transnet improve efficiency, with the company’s ports handling 101,295 twenty-foot equivalent units in the 16th week of its current financial year, Johannesburg-based newspaper Business Day reported on Monday, citing Transnet Port Terminals Chief Executive Officer Jabu Mdaki. That figure was the highest since 2017-18 and close to a record 101,871, it said.

Transnet Port Terminals is investing R4 billion in new equipment in the year through April 2026, up from R3.4 billion last year, the paper said.

The company is also set to transport 55.5 million tons of coal from mines to the Richards Bay export terminal this year, which would be about 7% more than in 2024, according to coal miner Thungela Resources Ltd.