The R145bn Transnet back brace to fix the spine of the South African economy

“You can’t take a picture of that (the liquid bulk terminal) because many of our laws were written under apartheid,” harbour master Captain Alex Miya explains as the tugboat cruises past. “In those years, Umkhonto weSizwe would use those images to plan sabotage attacks on these kinds of things.”

The irony hangs heavy in the salty air. Here we are, three decades into democracy, still governed by security regulations crafted to protect infrastructure from liberation movements that now form the government. It’s a good metaphor for Transnet – an entity born from colonial mineral extraction, shaped by apartheid social engineering, hastily commercialised to secure economic futures for the outgoing politically connected, and now tasked with serving the very democracy it once helped to suppress.

There’s something unnerving about how essential this state-owned freight logistics company is to South Africa’s economic survival, and how precariously it’s hanging on after years of underinvestment, operational decline and management chaos. But there’s also a fighting spirit – a recovery plan in motion, and billions being poured into equipment, concessions and new infrastructure.

Creaking of the old bones

Transnet’s DNA can be traced to 1860, but it was the mineral revolution – first diamonds in Kimberley in 1867, followed by Transvaal gold – that transformed modest colonial railways into the backbone of a national economy.

The Union of South Africa in 1910 necessitated economic consolidation, and the disparate railway systems were amalgamated into the South African Railways and Harbours (SAR&H), controlling 11,000km of track and all major harbours. The decision to operate these assets as a state-owned enterprise, rather than private businesses, was driven by fears that a single private owner could wield excessive power over the nascent economy.

This created a foundational contradiction that would define the organisation for more than a century: expected to operate on “business principles” while serving a broad, often unprofitable, developmental mandate. High-value industrial freight subsidised below-cost transport of agricultural products – a cross-subsidisation model that opened the interior for development, but created mounting financial pressures.

Dark history

Under apartheid, like most of the state infrastructure, it became an instrument of racial engineering. While black employees (47,157) outnumbered white employees (39,024) in 1924, this was dramatically reversed by 1929, with white employment swelling to 58,562. 

It became a stronghold of Afrikaner nationalism, with “job reservation” policies that excluded black workers from skilled positions.

The birth of Transnet in 1990 was out of survival in the face of the fiscal crisis from international sanctions and economic stagnation. SAR&H was commercialised through the Legal Succession Act of 1989. It was a strategic compromise: adopting corporate form to instil financial discipline and access capital markets while retaining 100% state ownership.

A sum of its parts

Today, Transnet operates through several distinct divisions, each facing unique pressures:

Transnet Freight Rail (TFR): the division best known as Brian Molefe’s piggy bank remains the cash cow, contributing 51% of fiscal 2024 revenue. But it’s undergoing radical surgery – the creation of the Transnet Rail Infrastructure Manager (TRIM) in November 2023 aims to separate track ownership from operations, potentially opening doors to private investment.

Transnet National Ports Authority (TNPA): my host for the port tour serves as landlord to South Africa’s ports, planning infrastructure and providing marine services. Notably, nine of Cape Town’s 11 licensed terminal operators are private entities – a case study of successful public-private partnerships that could serve as a model for other divisions.

Transnet Port Terminals (TPT) handles actual cargo movement, while Transnet Pipelines manages petroleum transport through regulated tariffs. 

Add Transnet Engineering, property, and the new LeaseCo rolling stock company, and you have a very complex logistics ecosystem.

This complexity partially explains why rating agencies have grown increasingly concerned. S&P Global’s July downgrade to “B+” wasn’t just about numbers; it reflected deeper structural issues. The agency cited “persistent substantial negative free operating cash flow of approximately R13.5-billion annually” and an inability to meet regular capital expenditure and interest payments from earnings.

Moody’s kept Transnet on review for downgrade despite government guarantee commitments, underlining that even massive state support can’t immediately fix operational realities. Rail volumes of 151.7 million tons in FY2024 fell well short of the 170-million-ton target for FY2025.

One step at a time

But these downgrades tell only part of the story. Standing in the boardroom of the TNPA, with an overhead photo of the Port of Cape Town and surrounds covering one of the walls, the recovery is visible.

Ship turnaround times have plummeted from 103 hours in 2023/24 to just 65 hours in Q1 2025/26 – on track to undercut the 82-hour target by a significant margin. Marine operations delays dropped from 1.2% to 0.2%. These aren’t marginal improvements; they’re operational transformations reminiscent of the efficiency gains that first made these railways economically viable in the 1800s.

The planned Culemborg Logistics Park represents transformational thinking rooted in historical precedent. This R2.5-billion, 30-hectare development aims to create 2,500 construction jobs and 25,000 indirect jobs by 2030, bringing logistics services closer to the port. It echoes the original railway strategy of reducing transport costs and travel times to unlock economic development.

Infrastructure improvements at Container Terminal Phase 2B will expand capacity from one million to 1.4 million TEUs, with strengthened quayside infrastructure and improved rail connections. A dedicated truck staging area will remove 220 trucks from public roads – addressing congestion that has plagued the port since the original colonial designs proved inadequate for modern volumes.

High-stakes roulette

Nothing illustrates Transnet’s economic importance quite like its relationship with Kumba Iron Ore. The mining giant recognised R942-million in penalty income from Transnet in the first half of this year due to logistics underperformance – a staggering figure that represents both the cost of failure and the value of getting things right.

The government’s crisis response has been unprecedented. Starting with a R47-billion guarantee facility in December 2023 (fully exhausted by March 2025), the state has progressively increased its commitment. The latest July 2025 announcement of an additional R94.8-billion brings total announced guarantees to R145.8-billion.

Of Transnet’s planned R127.7-billion capital expenditure over five years, R108.2-billion (84.7%) goes to sustaining capital – maintaining and refurbishing existing infrastructure. Without this investment, the system would deteriorate further, potentially triggering the kind of economic disruption the Union founders feared from private monopoly control.

A new lease on life

New equipment purchases tell the recovery story: a R240-million ship-to-shore crane for Port Elizabeth, 20 straddle carriers, and nine rubber-tyred gantries for Durban represent R3-billion in operational improvements. At Cape Town, shore tension units from Rotterdam have reduced the time the boats stay in the berth from 2,881 hours to 690 hours – technical solutions with a massive economic impact.

The early signs from Cape Town are encouraging: operational improvements that translate directly into economic efficiency, private sector partnerships that leverage state investment and infrastructure developments that create jobs while enhancing capacity.

The fog of frequent omissions is lifting over Cape Town harbour, revealing not just the port’s operations, but perhaps a clearer vision of how this historical institution might finally evolve beyond its colonial and apartheid origins. DM