Transnet needs R51 billion to restore rail and infrastructure network

Transnet chief executive officer (CEO) Michelle Phillips has detailed just how steep the entity’s uphill battle is.

The CEO gave a presentation to the Standing Committee on Public Accounts on Tuesday, flanked by Transport Minister Barbara Creecy and the Auditor General of South Africa (AGSA).

Phillips was appointed on a permanent basis on 1 March after serving as the acting CEO since late 2023.

77-million-ton freight volume drop

Transnet is in the early phases of its recovery plan and Phillips stated one of its key goals was to return to a 2017/18 freight volume high of 226 million tons.

To do so, eliminating debt and restoring the rail network to an optimal operating state was paramount.

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Phillips told the Standing Committee on Public Accounts (Scopa), chaired by Rise Mzansi’s Songezo Zibi, that the entity had a R51 billion maintenance backlog “purely to restore the network”.

Additionally, Transnet will need to spend a further R19 billion over the next five years to ensure future network sustainability.

Replacing an ageing fleet and equipment, Phillips said this would be hampered by an industry turnaround time of 18 to 24 months.  

Despite the bleak numbers, Transnet did report a freight volume increase over the last financial year from 149 to 154.4 million tons 

Ineffective debt incurred over seven years

The AGSA had last week given their presentation on the entity’s debt and financial standing.

Phillips elaborated that the entity was saddled with historic debt incurred between the 2011/12 and 2017/18 financial years.

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Transnet has R60 billion of ineffective debt, which is debt incurred that Phillips said had no positive value as the assets were not able to enter the market as expected.

She added that Transnet’s annual interest payments exceeded R1 billion a month, with the total amount owed in borrowings hovering around R130 billion as of the end of the 2022/23 financial year.  

WATCH: Transnet appears before the Standing Committee on Public Accounts

Strong asset base

The foundation that Transnet’s fresh set of executives will hope to build upon is solid, with six operating divisions employing 15,994 professionals.

Among their flagship assets, Transnet has eight commercial ports, 16 cargo terminals, 132 maintenance depots, 11 engineering yards and 3000km of pipeline infrastructure that moves liquid petroleum.

Digitisation, invitations to third-party players and the optimisation of these assets are what Phillips hopes to hinge the recovery plan on.