Transnet’s deteriorating performance means government must act fast

Government must do something about Transnet and fast as its performance deteriorates largely due to severe operational problems which affected volumes on critical economic corridors and in turn hit Transnet revenues.

Transnet’s deteriorating performance, highlighted by the release of its 2023 financials last week, points to an organisation under deep duress and the urgent need for private sector investment to arrest the decline, says industry body African Rail Industry Association (ARIA).

The state-owned entity reported a R8.8 billion loss for its 2023 year (before tax and fair value adjustments). This loss follows from a loss of R4.7 billion in the previous financial year on the same basis. The loss is in line with what ARIA anticipated due to the 24 million ton drop in volumes moved by Transnet Freight Rail in the financial year.

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Mesela Kope-Nhlapo, CEO of ARIA, in her reaction to the dismal Transnet results, highlighted the drop in freight rail volumes from 226 million tonnes in 2018 to 149.5 million tonnes in 2023 as a huge cause for concern.

“ARIA believes the biggest challenge facing Transnet Freight Rail is the collapsing physical track and signalling infrastructure. We have been highlighting the fundamental underinvestment in maintenance for the past 12 months.”

Transnet underinvested by R4.4 billion

Nevertheless, this has continued into the current year with Copex underinvestment by R4.4 billion. In addition, ARIA estimates that the entity should have spent R6 billion on maintenance in Transnet Freight Rail, while it actually spent R2.8 billion, taking the total under-investment in maintenance over the last decade to R30 billion,” she says.

Transnet states in its integrated annual report that it plans to spend R84.9 billion over the next five years on infrastructure in Freight Rail and it plans to engage the private sector to help it do that. Transnet has a R129 billion total debt burden which is in ongoing debt covenant breach. With a constrained national fiscus, Transnet must turn to the private sector.

“Our primary concern is that unless we see huge investment in the national track infrastructure and quickly. We do not think that this ‘binding constraint’ on Transnet’s performance can be overcome. Failing infrastructure will render solutions to the long-standing locomotives and cable theft moot.” 

Kope-Nhlapo says a detailed understanding of the true condition of the infrastructure is now critical so that Transnet, government, business and labour can craft solutions.

“ARIA welcomes the comments by the new chairman in his commitment to work with the National Logistics Crisis Committee to resolve this and we stand by to assist wherever possible,” Kope-Nhlapo said.