State-owned freight logistics group Transnet insists that it has made “considerable progress” in implementing reforms in line with government policy changes. It also argues that government guarantees remain crucial for it to proceed with its capital investment programme, while also refinancing maturing debt, accessing funding and maintaining sufficient liquidity.

Transnet made these assertions in response to questions posed by Engineering News following the publication of a letter by Business Leadership South Africa CEO Busisiwe Mavuso in which she argued that the entity was “resisting change and moving too slowly”.

Mavuso also linked a recent S&P Global downgrade of Transnet's credit rating both to its financial predicament, as well as a lack of reform progress. She also urged government not to approve further bailouts and/or guarantees, unless the conditions were made stricter.

“Private sector partnerships (PSPs) in ports and rail concessions must be accelerated.

“Companies are ready to invest in our logistics infrastructure, but they need certainty that political interference and Transnet’s resistance won't undermine their investments,” Mavuso wrote.

Transnet is already trading with the support of a R47-billion government guarantee extended in 2023, and a further R51-billion guarantee facility was recently approved.

In response, Transnet said the reforms were a focal point in its strategy to improve operational efficiency and included steps to corporatise the Transnet National Ports Authority and the Transnet Rail Infrastructure Manager, while disposing of noncore assets. 

This commercial separation of the port and rail infrastructure from operations is designed to enable open access to the network, including by introducing private train operating companies into freight rail. 

“The integration of the private sector through PSPs is an important element of the reform process.

“This is in line with our efforts to modernise rail assets, such as locomotives and freight wagons, and optimise rail operations by leveraging private-sector efficiency and capital,” Transnet said in its response.

It said it welcomed the recent conclusion of the Department of Transport’s request for information process to gauge market interest for PSPs in selected rail and port infrastructure and operations.

“Private sector participation in key freight logistics corridors such as those for iron-ore and manganese exports represents a proactive and strategic move towards the revitalisation of the country’s freight logistics infrastructure.”

However, it also underlined the importance of the government guarantees, arguing that they enabled Transnet to fund much-needed capital investment, which was necessary for modernising ageing infrastructure and improving port and rail efficiencies. 

“The government guarantees will be deployed to ensure that the appropriate level of liquidity is maintained to service all Transnet’s obligations.”

The group stressed that its immediate priority was on actively implementing focused interventions to enhance its operational and financial performance.

“These measures will enable Transnet to deleverage its balance sheet and focus on optimising its capital investment programme to restore the network.”

Transnet also underlined its participation in the National Logistics Crisis Committee (NLCC), which had been set up to collaboratively address South Africa’s transport and logistics challenges.

It described the NLCC as a “structured and appropriate forum for Ms Busi Mavuso to contribute to constructive dialogue and problem solving”.