State-owned Transnet has welcomed Transport Minister Barbara Creecy’s announcement of a R51-billion government guarantee facility to support its sustainability and long-term growth.

Creecy this week approved this guarantee facility for Transnet, with the concurrence of Finance Minister Enoch Godongwana.

The guarantee facility is effective immediately in support of Transnet’s capital investment programme and to enable it to meet its debt obligations. 

Transnet says the facility will enable it to refinance maturing debt and ensure the organisation’s continued access to adequate resources and facilities to be able to continue its operations as well as fund the capital investment programme for the foreseeable future.

It will also enable Transnet to focus on operational improvements and strategic reforms.

In line with existing Guarantee Framework Conditions, Transnet says it has made significant strides in implementing rail and port reforms.

In pursuit of enhanced partnerships and collaboration, several key private sector participation (PSP) transactions are being implemented, the utility says, describing PSPs as a key element of the organisation’s strategy to modernise its operations and infrastructure and grow the logistics sector for the benefit of the economy.

“With Government’s commitment to support its recovery and strong collaboration with customers and industry partners, Transnet is on course to recover and fulfil its strategic role in the South African economy,” it says.

In a media release, the Department of Transport (DoT) notes that Transnet plays a central role in the South African economy and the government’s goal of inclusive growth.

It explains that the entity is currently engaged in a wide-ranging reform programme with the aim of improving operational performance in the short and medium term.

This programme aims to overcome operational, financial, and governance challenges, hampering its ability to fulfil its strategic role.

At the end of March, the DoT notes that Transnet had succeeded in moving the equivalent of 161-million tons of freight on its rail network.

Additionally, in December 2024, the entity released the 2024/25 Network Statement, which facilitates private-sector operators on freight rail. Announcements of the first successful bidders are expected by the end of July.

In March, the DoT issued a request for information (RFI) for private investors on five key freight corridors and associated ports with the intention of promoting private investment in the Transnet infrastructure while the network remains State-owned.

The RFI closes on May 31 and Transnet is expected to issue requests for proposals by September this year.

The department notes that interim solutions to meet capital investment needs by the entity include project-based applications to the Budget Facility for Infrastructure.

Transnet is also working with National Treasury and the Presidency to develop a joint collaboration and funding policy to support immediate capital improvements by the private sector in priority freight corridors.

“In recognition of the progress made to date, the National Treasury and the DoT have been working with Transnet to find a solution to the company’s immediate needs and the decision to grant the guarantee facility is a result of these discussions,” the DoT says.

The financial support package provided for the entity is a R41-billion guarantee facility for its funding requirements over the 2025/26 and the 2026/27 financial years.

This package also includes a R10-billion guarantee that Transnet will have to use for its liquidity management as it relates to the servicing of its maturing debt and capital investments.

On December 1, 2023, a guaranteed support facility of R47-billion was announced. This enabled Transnet to execute its Recovery Plan over the 2023/24 – 2024/25 financial years, which has seen increased capital investments and improved liquidity.

A Guarantee Framework Agreement between the DoT and the National Treasury will include guarantee conditions that will be continuously reviewed and amended when deemed necessary.

The department says any drawdowns will be subject to Transnet meeting these conditions, noting that these conditions will again focus on certain operational requirements and logistics sector reforms.

The DoT says Creecy is confident that the additional support provided to Transnet in the form of guarantees will enable the entity to continue to drive operational improvements in the business and implement reforms in line with the Freight Logistics Roadmap.