Improving Transnet’s performance key to bolstering economic growth – BLSA
Recent statistics have underscored how crucial it is to fix State-owned enterprise (SOE) Transnet, with second-quarter GDP growth of 0.4% still insufficient to achieve the necessary progress in the country, and the rail operator reporting a R7.3-billion loss in the year to end March, compared with the R5.1-billion loss in the previous year, business organisation Business Leadership South Africa (BLSA) CEO Busi Mavuso writes in her weekly newsletter.
However, she acknowledges that a large part of Transnet’s loss stems from provisions for litigation, which may see the SOE having to refund R9.1-billion to clients for previous overcharging.
Transnet also achieved a small increase in the volumes hauled across its rail network to 151.7-million tonnes.
However, it still has some way to go to reach the 170-million-tonne target set out in its recovery plan, and the 228-million tonnes record it achieved in 2018, Mavuso avers.
“Getting closer to those targets must be Transnet’s priority, and accelerating the concessioning of infrastructure to private sector operators will get it there faster. Transnet says it is on track to report a profit next year and is selling noncore assets to help relieve its cash constraints, but it is the volume figures from improved operations that the rest of the economy will be watching most closely,” she states.
Mavuso stresses that a sustained and substantial shift in the performance of Transnet is vital to improving the economic growth outlook and to driving business sentiment overall.
“While electricity stability is certainly helping, investors remain unwilling to commit to large new projects. The GDP figures showed gross fixed capital formation falling 1.3% from the already weak previous quarter, and a clear indicator that business is still not willing to put capital at risk,” she posits.
In light of President Cyril Ramaphosa’s trip to China last week, Mavuso said South Africa’s engagement must deliver to its own interests and aim to find a market in China for higher value-added outputs.
She adds that global trade will be considerably enhanced if the country can address the logistics crisis that affects the transaction costs faced in exporting goods.
“Structural reforms should ultimately improve competitiveness, supporting export-led growth in the country. Markets everywhere become more accessible, including in China,” she emphasises.
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