Business Maverick


Transnet’s turnaround plan is premised on securing a R100bn ‘capital injection’ from government

Transnet’s turnaround plan is premised on securing a R100bn ‘capital injection’ from government
Illustrative image | Sources: A Transnet logo at the Port of Cape Town. (Photo: Dwayne senior / Bloomberg via Getty Images) | iStock

The more than R100bn financial support package that Transnet has asked the National Treasury for includes a R47bn equity injection or loan, and for the government to take over R61bn of the company’s debt.

The Transnet board has a turnaround plan that it believes could help arrest the state-owned transport group’s decline, help it return to profitability by 2025 and make its rail and port operations reliable for SA’s economy.  

But there is a caveat: the plan can only succeed in turning around Transnet’s operations and fortunes if the government gives it a taxpayer-funded bailout, or what the company’s board calls a “capital injection”.

The Transnet board has come up with a 31-page turnaround plan that requires funding of more than R100-billion from the National Treasury over the next two years. Transnet wants an immediate release of cash from the Treasury amounting to R3.4-billion before the end of its financial year in March 2024.

The more than R100-billion financial support package includes a request for the Treasury to provide Transnet with R47-billion in an equity injection or a loan that can be converted to equity if the state-owned enterprise (SOE) demonstrates progress in turning its operations around. By this point, the SOE has even committed to start paying the government in the form of dividends.

The second part of the support package includes the Treasury taking over a portion of Transnet’s total debt of R130-billion. A minimum of R61-billion of Transnet’s debt would be taken over — similar to the debt relief measure offered to Eskom.  

Read more here: Government comes to Eskom’s rescue by taking over R254bn of its debt 

Transnet chairperson Andile Sangqu would not be drawn into confirming the quantum of the money requested from the Treasury despite it being mentioned in the turnaround plan. However, Sangqu said he believed the SOE would get support from the government despite SA’s public finances being under strain. 

When the government unveils the Medium-Term Budget Policy Statement on 1 November, it will miss the 2023/2024 February Budget targets by a mile, given the likelihood of tax revenue undershooting requirements by at least R50-billion, forcing it to cut department budgets and crucial service delivery programmes.

The government’s medium-term expenditure framework tabled in the February Budget did not include any allocations to Transnet. However, some adjustments to the in-year allocations and expenditure framework are expected, possibly paving the way for the financial support to Transnet to be mentioned.

What is clear from the Transnet board is that funding from the government will be crucial.

“If the government does not agree to the funding, we will not be able to deliver on the turnaround plan,” Sangqu said during a media briefing on Thursday. 

Transnet debt problem 

Transnet has no financial room in its balance sheet to fund any plan that seeks to reverse the dysfunction of its operations. This dysfunction can be seen in its rail volumes, which have been continuously declining from a peak of more than 200 million tonnes a year in 2019 because of mismanagement of the rail network, cable theft and vandalism. The dysfunction is also at its port operations, which are ranked poorly around the world in terms of efficiency and loading times.  

Transnet has a debt of R130-billion, on which it pays interest of R1-billion every month. By 6 November, Transnet must settle maturing bonds (or debt) worth R7-billion, with its acting CFO, Hlengiwe Makhathini, saying the borrowings could be settled from existing cash resources. Lenders are wary of lending Transnet more money because it is increasingly at risk of defaulting on debt repayments.

Reform proposals in the turnaround plan

To turn Transnet’s fortunes around, the board is targeting reforms in its rail network, which is a crucial cog in the economy as it is responsible for ferrying most of the iron ore and coal that SA produces to countries around the world. When Transnet isn’t operating properly, SA business does not operate and the country’s exports are held hostage.

The turnaround plan, which has been presented to the ministers of public enterprises and finance, has targets that should be achieved over the next six to 18 months. The plan proposes a split of Transnet’s biggest unit, Transnet Freight Rail (TFR), into two new divisions — Transnet Freight Rail Operating Company and Transnet Rail Infrastructure Management.  

One division will be responsible for running trains efficiently by increasing volumes and restoring network capacity. The other division will ensure that the infrastructure is maintained and protected to lessen incidents of vandalism and cable theft. Details of TFR’s reorganisation into two divisions will be articulated in a draft network statement in November. 

Another aspect of the plan is predicated on Transnet embracing the private sector as a partner for delivery. Transnet has ruled out the privatisation of the rail network. However, it wants to partner with private sector players by auctioning rail slots, allowing such players to use their skills to run trains/railway lines for a set period, while also pouring in money to upgrade the rail infrastructure. This process is set to start by April. 

If implemented, these measures will not result in big changes to Transnet’s financial situation. Acting Transnet group CEO Michelle Phillips said the turnaround plan was premised primarily on a recovery of rail volumes from the 149 million tonnes reported last year to between 154 million tonnes and 170 million tonnes by the end of March. She described the 170 million tonnes goal as a “stretch target”.

Even if Transnet achieves 149 million or 170 million tonnes, Transnet is expected to be in a financial loss position of between R1.5-billion and R4.3-billion in the 2023/24 financial year. This will be a much lower financial loss than the R5.7-billion loss it pencilled in during its 2022/23 financial year. The turnaround plan expects Transnet to be profitable from 2025. DM


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  • Angus Walsh says:

    I would be flabbergasted if this didn’t turn out to be a situation where the pigs are watching the feeding trough fill before the frenzy of corruption begins.

    How much of the R100 bn would actually go to Transnet’s recovery and in turn would the recovery actually come about?
    I would venture to say none and no to the two questions respectively.

    • Jimbo Smith says:

      Spot on. These incompetent morons know how to play the game! Just get another tax funded bail out and the looting floodgates get the oil they need. How many “plans”, how many bail outs? The sad reality, nothing changes. No sign of turn around. It just gets worse!

      • Nic Bosveld says:

        That is what you get with economics illiterate cadres in charge, as well as those that are supposed to exercise ”oversight”. All 30 percenters. Derby purged most competents with little or no foresight of the consequences.

        But hell, this is how they roll – destroy, then the begging bowl comes out.

    • Exactly. The sad part is that no more do they hide their stealing. They do it in front of the starving people because they don’t care. Normally Politicians serve the the people. But these serve themselves and greedily I might add.

  • Nick Griffon says:

    R100 billion so that they can steal that as well???

    • William Kelly says:

      If we had R100B to blow it might be nice to give it back to the taxpayers it was forcefully taken from. Transnet have had their chances, no more. Let it die. Something else will come up in it’s place.

      • D'Esprit Dan says:

        Unfortunately that’s not an option, much as I would like to see it. Almost every single business in SA is dependent on Transnet at one level or another, so letting it die would destroy much of what’s left of our productive economy. What should happen is that it is concessioned off to actual companies that are actually capable of running efficient, modern ports and rail systems: in almost every one of our neighbours this is or has happened in the recent past, and they will both eat our lunch and divert trade away from us. Very sad.

      • Michael Jones says:

        Privatisation is the only way it’s going to turn itself around and make a profit.

    • Brian H says:

      That’s exactly what they’re going to do. Steal it. Blatantly, from right under our noses, knowing there’s nothing we can do about it. The ANC is disgusting.

  • Daniel Cohen says:

    If past history is any indication of the future……..

  • Val Ruscheniko says:

    Smash the Transnet cookie jar once and for all. Let them eat pap instead!

  • Richard Baker says:

    And precisely what-pray-is this “Turnaround Plan”? Transnet is a serial failure due to the fundamentally flawed economic policies of the governing party and shareholder, destruction of its human and physical capital due to blind ideology and incompetence and criminality. And with the rapidly approaching meltdown of government debt there are no actual funds or rational sources of finance which will be misspent at best but most probably stolen. Sad and perverse to say but complete and rapid collapse of all the SOE’s is now the best thing that could happen. Then serious and well structured rebuilding of a few with the private sector and funders having full control. The present slow poison of state interference without inkling of a plan and ongoing corruption is killing the country and its people.

    • Jimbo Smith says:

      And the eternal question; where is that tired, hopelessly incompetent “Minister of SOE destruction”, Gordhan? It is beyond human comprehension and simple logic as to how this wrecking ball character is still in office!

  • Ukraak17 says:

    The trough will open.

    There is no infrastructure plan that can deal with incompetence and cadre appointments. The more money you put in, the worse it gets spent through badly managed contracts where the BBBEEE (whatever) middlemen get rich.
    Then there is the little issue of conflict with the road freight sector. The one cannot afford to have the other working.

    But like all SOE’s our ruling party has hollowed them out of skills, and the debts are huge.

    Similarly Eskom is owned by Govt, National, Provincial, and Local Government, owes Eskom million/billions in unpaid electrity accounts. These three entities are all funded BY the National Govt who then owns Eskom – see where this is going? Government owes itself the cost of electricity it has used but has run out of money, so it pretends that each arm owes the other money.

    I would say the same applies to all the SOE’s

    Bottom line is that the ANC Government is absolutely BANKRUPT and this is just a creative way of BORROWING more money.

    And all the while the taxpayer funds the merry-go-round!


  • Pierre Cornelissen says:

    An elephant can only be eaten by byte for byte. The restoration of Transnet is possible with byte size chunks of funding to the entity by being giving the public access to audited expenditure statements, make the public the watchdog. But blindly, even with the best of intentions, handing over the money to the Transnet “money handlers” and people with no brain capacity, it will be just another fruitless exercise.

  • hilton smith says:

    i have an idea for a business.
    step 1 – give me 100 billion rand.
    i’ll tell you step 2 after step 1 is done

  • Middle aged Mike says:

    “By this point, the SOE has even committed to start paying the government in the form of dividends.”

    That’s a little more credible than offering unicorn horns but not much. Have they even got a gravy trough big enough to hold R100 billion of the stuff?

  • Alastair Moffat says:

    This R100 billion will be a total waste of money unless the turnround plan also includes stringent measures to prevent corruption, has no cadre deployment, and only employs on the basis of merit and competence irrespective of race or gender.
    If it continues to embrace the disastrous ANC policies that have ruined the country it will be a total failure.

  • Frank Fettig says:

    What a pain to see ones tax money being stolen by the “government”…again.

  • D'Esprit Dan says:

    Another opportunity for the feeding trough elite of the ANC to gorge, I’ll bet. There should be a law against shelf companies getting government contracts, especially where there is no demonstrable track record beyond being politically connected.

  • Gregory Scott says:

    Can journalists please stop referring to ‘a bailout from government’ or ‘funding from the government’.
    It is ‘a bailout from taxpayers’ or ‘funding from taxpayers’.
    A turnaround plan for an SOE is worth nothing without a cleanout of cadre deployee’s and the incompetent folk from the board level down to each worker. In other words, a significant cleanout, not a reshuffle, is what is needed or privatise, the benefit of which is the prioritisation of service levels, efficiency and profitability (the things that the private sector does to survive instead of putting out the begging bowl, just saying) with the added upside of improving our shrinking GDP.
    Another monumental ANC induced stuff up at the expenses of every citizen

  • Dhasagan Pillay says:

    Here’s something we can all agree on: there should be referendums on all state expenditure, because it’s clear that the current signatories are either too incompetent, too stupid, too uninterested or too corrupt to manage large amounts of money without making a mess of a messy situation and we have a lot of messy situations waiting in the wings for their 15 minutes of shocking headline fame.

  • Iain Maricich says:

    You are joking, giving these incompetent clowns more money is like allowing an alcoholic to manage a liquor store.

  • George 007 says:

    A rail monopoly like Transnet should be making money, lots of it, not losing it, and then taking money from the Treasury to survive. It’s really hard to lose money when you have a monopoly but these guys did it and did it repeatedly. Amazing.

  • Ashley Stone says:

    Am I missing something? The SOE is already owned by Government. How do you then convert a Government loan to the SOE into equity when the Government owns all the equity to begin with?

  • Fuad XXX says:

    No! first get rid of the cANCer cadres or better still the entire cANCer. Surely this is insanity – doing the same thing & expecting a different outcome. How many more opportunities do the incompetents still expect to destroy our country even further.


    WHY,WHY, WHY ??? Nobody asks them WHY they mismanaged and screwed it up. Corrupt, incompetent THIEVES steal and plunder, screwing up EVERYTHING in this country – and NOTHING is done about it. In fact, they are rewarded by giving them MORE to steal ! Me, as a single taxpayers says a categorical NO !

  • Rae Earl says:

    And just this week Ramaphosa defended the ANC’s destructive and useless cadre deployment policies. I wonder why. Could it be that the R100 billion injection into Transnet’s bank account would once again enable the siphoning off mega funds into the bankrupt ANC’s cadre feeding trough?

  • A Z says:

    A table perfectly set for The Chinese State and its myriad finance, infrastructure and corporate arms to ‘take care’ of the problem for their comrades / the cadres in Transnet, The Union Buildings and more to the point – Luthuli House. Just look to the recent awarding of 3 massive SANRAL contracts to Chinese firms on the most spurious grounds. This government knows that if they want their Big Brother in Beijing to bail them out and help keep them in power beyond 2024 (with a little help from the red berets) then they’re going to have to pay the piper. Look for announcements of public/ private partnership deals on our ports and railways then to who those deals are with. It doesn’t take a crystal ball to see what’s coming.

    • Brian Cotter says:

      Another News channel reported that China was chasing Pravin for an answer to a huge chunk of money they want to invest in infrastructure, Eskom and Transnet. Obviously, a tithing contribution to ANC funds goes with it.

  • Penny Philip says:

    Aside from the obvious threat of funding being syphoned off into cadre pockets, is it logistically possible to turn Transnet around in 18 months?

  • Dyllon Symington says:

    Assuming the R100,000,000,000 actually ends up being allocated properly and restores Transnet to its former (pre-anc) glory, what prevents their voters from stripping the infrastructure for scrap metal again? no one is ever held accountable, and theres no repercussions for their crimes… they might as well just give the R100B to the people and remove the middle man – same outcome, just a lot more efficient!

  • Patterson Alan John says:

    Come on people . . Paul Mashatile, our Deputy Pres, tells Parliament that the ANC has a sophisticated and demanding training program to develop and then appoint the ‘best of the best’ as cadres in senior roles.
    “Don’t be worried about cadre development policy. It’s a very good policy because it ensures that you prepare your people for these tough processes, you train them and a lot of people are being trained in the ANC.”
    “We train people all the time because we want the best of the best to go and do the job”.
    And on that informative comment, I have the utmost confidence that with the resignations of two senior Transnet executives this month, the ANC’s OR Tambo Leadership Academy has suitably prepared replacements to drive the turnaround program in record time.

  • Peter Dexter says:

    Transnet, our other SOE’s, municipalities, and most government departments are dysfunctional due to incompetent and in many cases, dishonest management. Until appointments are based on merit alone the decline will continue. We’ve thrown taxpayers’ money at so many SOE bailouts before but the trajectory remains the same. Appoint competent people of integrity then the money is worth spending. Otherwise it’s just wasteful expenditure.

  • David Mark says:

    Please someone tell government that to turnaround means to turn 180 degrees, and 360 like they’ve been doing with all the other “turnaround plans”.

  • Brian Doyle says:

    They should sell Transnet to private companies even if it is for a token R1. This would save the government R100 million plus the salaries of the board and possibly senior appointed cadres. The government would then start getting revenue from the new entity in a few years when Transnet returns to profitability under new private company management

  • Is this the same recovery plan that SAA had for their bailout

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