A financial bailout of Transnet, to capacitate it to its full potential as proposed by the African National Congress’ (ANC) Economic Transformation Committee over the weekend would, while necessary, have to be used craftily because of the entity's importance to economic growth and the seeding of entrepreneurs, industry stakeholders said Monday.
This comes after ANC’s deputy head of economic transformation committee, Zuko Godlimpi, told the media on the sidelines of a policy-strategy meeting that Transnet required a similar package to the R254 billion guarantee given to power utility Eskom in 2023.
The business sector has said that while the specifics of the bailout have yet to be determined including the amount, this potential intervention raised important questions about the future of Transnet and the role of the private sector.
Warwick Lord, chairperson of the Multi-Modal Inland Port Association (MIPA), said a bailout for Transnet like Eskom’s, on one hand, represented a necessary lifeline for a critical State-Owned Enterprise (SOE) that has been facing financial and operational challenges, but also raised concerns about the sustainability of repeated bailouts for SOEs on another.
Lord said as much as a bailout for Transnet also represented a significant opportunity to address its financial challenges and to repair its balance sheet, it also required careful consideration of the role of the private sector and a clear focus on strategic priorities.
By leveraging the bailout effectively and fostering private sector collaboration, Transnet can enhance its operational efficiency, infrastructure, and overall contribution to South Africa's economy, Lord said.
“Additionally, the financial burden on the National Treasury could impact other areas of public spending, like schooling and water, straining the country's fiscal health,” he said.
“Critics argue that bailouts can lead to a dependency on government support, reducing the incentive for internal reforms and efficiency improvements.”
Lord said if Transnet received a bailout, the private sector’s role had already been established in the Network Statement, which was issued by the Minister of Transport late last year and clearly set out the path to be followed.
According to the Network Statement, private operators will be able to commence train operations by the end of March 2025.
Transnet Freight Rail (TFR) is now becoming a focused Train Operating Company (TOC) and the rail network is going to be maintained and operated by TRIM.
Mesela Nhlapo, CEO of the African Rail Industry Association, said Transnet definitely had to be given a bailout because not only was it practically the backbone of the economy in its services, it also supported a wide transformation agenda as well as the private sector.
“Transnet also has a transformation agenda, not everything in the economy has to be about pure profit. The turnaround strategy and some of Transnet's programs indicate it is indeed starting afresh,” Nhlapo said.
“Not giving a bailout amounts to killing Eskom and the transformation programme so many small businesses are benefiting from.”
Transnet is about R140 billion in debt and was last given a R47bn government guarantee by the National Treasury in 2023.
Mark Burke, spokesperson for the DA on Appropriations, said the Government of National Unity the (GNU) committed itself to limiting any further fiscal support to SOEs in the 2024 Medium-Term Budget Policy Statement, and he was expecting that to remain in place.
“South Africa cannot afford to spend more money on failing SOEs, and past bailouts have led to a Debt-to-GDP ratio at 75% while SOEs remain trapped in a debt spiral, Burke said.
“If Transnet continues to frustrate the reform progress, the DA is of the view that it is time for the immediate devolution of Transnet’s operational components, as well as bold and far-reaching reforms that bring private sector competition into port and freight rail logistics.”
BUSINESS REPORT