Transnet on track to go from zero to hero 

Transnet’s operational performance has shown signs of improvement, with its relatively new leadership team driving increases in rail volumes and enhancing efficiency at the country’s ports. 

This improvement has been coupled with structural reforms of the logistics sector to enable significantly greater private-sector participation. 

As a result, investment in the sector is expected to pick up, with improved efficiency and transport volumes set to follow. 

This is expected to create a virtuous cycle, with improved performance attracting further investment from the private sector. 

Ninety One’s Thanzi Ramukosi and Alastair Herbertson said in a recent research note that the state-owned enterprise (SOE) is regaining credibility, and an improved logistics sector will unlock fresh investment opportunities. 

“Transnet is starting to show credible signs of a turnaround. That makes this a critical moment to reassess both risk and opportunity in relation to Transnet’s debt and the broader logistics investment landscape,” Ramukosi and Herbertson said. 

This stands in stark contrast to the Transnet of old, beset by years of state capture that had hollowed out the SOE’s capacity. 

Plagued by mismanagement and corruption, Transnet lost its ability to maintain its infrastructure and deliver reliable services to its customers. 

Its freight rail volumes were in freefall, driven by a sharp decline in operational locomotives, many idled due to a lack of critical spares and disputes with suppliers. 

Cable theft surged, with over 1,000 km stolen in FY23 alone, inflicting nearly R4 billion in losses. These operational failures compounded chronic underinvestment in infrastructure, leading to mounting maintenance backlogs and a spike in derailments.

At the ports, inefficiencies and equipment shortages turned Durban and Cape Town into export chokepoints. 

Financially, Transnet was equally distressed, with poor free cash flow, high gearing, and multiple breaches of bank covenants shaking investor confidence. 

Executive turnover and governance lapses deepened market uncertainty. Without decisive action, Transnet’s collapse looked inevitable, according to Ramukosi and Herbertson. 

This steady decline and the subsequent improvement can be seen in the graph below. 

The turnaround 

Transnet’s operational performance has stabilised and begun to improve marginally since 2023, when the government began reforming the logistics sector. 

With pressure intensifying from business, trade unions, and slowing economic growth, President Ramaphosa launched the National Logistics Crisis Committee (NLCC). This began the process of increasing private participation in the sector. 

Crucially, in parallel, Transnet unveiled a formal Recovery Plan in September 2023, backed by new executive leadership and a R51 billion government guarantee facility. This marked a clear pivot from crisis management to structural reform.

Since then, the results have begun to show. After Transnet’s rail volumes dramatically fell by 34%, from 226 million tonnes in FY18 to 150 million tonnes in FY23, signs of improvement have emerged.

Rail volumes have increased to 160 million tonnes for FY25, a 13% increase from the 152 million tonnes in FY24. The trajectory is clearly moving in the right direction, with Transnet targeting 181 million tonnes for FY26.

On the port side, Durban Pier 2, which handles nearly half of South Africa’s container traffic, was equipped with 20 new straddle carriers, reducing backlogs by 45%. 

In the coal corridor, where sabotage and theft had long disrupted flows, Transnet reported a 65% reduction in security incidents between September 2023 and March 2024, following joint efforts with customers and law enforcement. 

While this is a positive internal operational metric, it reflects progress specific to the coal line and not the broader network.

Deeper structural reform is reinforcing operational gains, with the initial R51 billion in government guarantees having stabilised liquidity and funded critical capital expenditures. 

The government has recently approved a top-up of R94.8 billion to further aid with infrastructure maintenance. Transnet has also received support through the National Treasury’s Budget Facility for Infrastructure to fund key projects.

Meanwhile, leadership renewal has sent positive signals to markets, with CEO Michelle Phillips, COO Solly Letsoalo, and CFO Nosipho Maphumulo bringing a blend of institutional memory and operational credibility. 

They have accelerated procurement, improved coordination with customers, and fostered investor confidence. Critically, they have also begun to open Transnet’s network to private participation. 

The sale of rail slots to third-party operators, establishing a Private Sector Participation (PSP) office to engage with the private sector, and appointing an independent Infrastructure Manager are early steps towards a hybrid model.

The implications are significant for bondholders and infrastructure investors. Government backing has underwritten Transnet’s recent issuances and mitigated refinancing risk. 

Free cash flow remains constrained, but improved volumes and capital discipline point to a medium-term deleveraging path.

Beyond credit, Transnet is fast emerging as a platform for co-investment. From rolling stock and corridor upgrades to terminal concessions, the post-crisis environment is creating new bankable infrastructure opportunities.