Don’t let Transnet’s R47bn bailout vanish, say experts

In averting what could lead to billions being thrown into a Transnet bottomless pit without any return on investment, National Treasury should set stringent conditions for the stateowned enterprise’s (SOE) board and executives to run the company with financial prudence, experts have warned.

Marking a departure from his mid-term budget policy statement, when there was no mention of plans to bail out financially ailing Transnet, Finance Minister Enoch Godongwana yesterday announced a R47 billion guarantee in support of its recovery plan.

Conceding that Transnet had suffered significant operational, financial and governance challenges in recent times and was struggling to fulfil its strategic role, Godongwana’s intervention included:

• Providing a guarantee facility against which Transnet will draw down an initial amount of R22.8 billion to deal with immediate liquidity matters, such as settling maturity debt.

• A guarantee framework agreement between the National Treasury, department of public enterprises and Transnet, which will include strict guarantee conditions to be continuously reviewed and amended when deemed necessary.

• The conclusion of a guarantee framework agreement between National Treasury, the department of public enterprises and Transnet within 14 days of the activation of the guarantee to ensure any fiscal risks are mitigated.

Independent political analyst Sandile Swana said: “The key is going to be how National Treasury offers support and how new conditions of discipline in the rehabilitation of the SOE are to be enforced.

“The instrument to be used should be that which gives National Treasury some form of leverage to put pressure on Transnet to start behaving with financial prudence.

“The Transnet crisis is deepening, with the mining industry losing R1 billion a day. Adding other industries, it could easily reach R5 billion.

“But what is clear is that Treasury is not going to take a huge sum of hard cash and give it to Transnet. “Bailouts, without addressing the matter of wrong leadership and corruption orchestrated by political leaders from Luthuli House, is a problem.

“Cadre deployment and political interference is a cancer that has killed SOEs – as documented by the Zondo commission.”

While welcoming the financial injection into Transnet as “an investment by government in SOEs”, the SA Federation of Trade Unions said the company had “failed due to corruption and neglect by state officials”.

Its spokesperson, Trevor Shaku, said Transnet was “milked of its resources by state officials because, as comprador bourgeoisie, they want to use the state as an instrument and a site of capital accumulation”.

“The plundering of Transnet through overpricing during outsourcing has brought it to its knees,” he said. “They neither understand the economy, nor its value.

“They do not understand that if one link of the economic totality gets broken, this will cause failure with ripple effects, especially in the logistics sector, an important part of commerce and circulation, which should run uninterrupted.”

Privatisation, said Shaku, was “not the solution”. “Government must reinvest in Transnet and change its management, as this is what is killing it.

“Appointing comrades who have got no clue how to revitalise Transnet will be detrimental.”

University of Johannesburg associate economics professor Peter Baur said: “It is vital that Transnet receives a bailout, especially as the risk of a collapse of one of South Africa’s most vital infrastructural centres could result in a catastrophic impact for supply side chains, trade development, negotiations, jobs and economic stability.

“The impact of a Transnet collapse could span both the private and the public sector. “While a portion of the freight capacity has moved into the private sector, a large amount of goods, including mineral exports, are reliant on a functioning rail infrastructure.

“Clear and concise port logistics and container handling capacity is necessary for goods to be moved between the ports and the shipping vessels,” Baur said.

“Breakdowns in this process create extended delays, resulting in costs to both the shipping companies and suppliers of goods.”