Moody's warns of imminent financial crisis for Transnet amid potential downgrade
Global rating agency Moody’s has warned that Transnet could run out of money within three months
Image: Leon Lestrade/ Independent Newspapers
Global rating agency Moody’s has warned that Transnet could run out of money within three months unless the government steps in with a bailout, as the state-owned company struggles with debt and weak cash flow.
In a statement issued to the media last week, the rating agency said it had placed the state-owned transport and logistics company on review for possible downgrade.
"Today's rating action reflects our growing concern over Transnet's unsustainable capital structure, its deteriorating liquidity position, lack of formal agreement so far on additional government support, and the slower-than-planned pace of operational improvements," the rating agency said.
Moody’s also pointed out that, although the government had provided a R47 billion guarantee facility in December 2023, this funding has been fully exhausted.
In the past Transnet has faced significant operational and financial challenges, including infrastructure damage, equipment shortages, and maintenance backlogs. The company reported a loss of R7.3 billion for the 2023/24 financial year.
"This facility has been fully exhausted and expired on 31 March 2025. While Transnet still has undrawn available loan commitments of around ZAR7 billion and some cash as of the end of March 2025, we expect this amount of available liquidity sources will only be sufficient to reliably cover the company's operating and investing needs as well as upcoming debt maturities for the next three months".
The rating agency also emphasised that Transnet requires additional government support to refinance its upcoming debt maturities and secure funding for its expanded capital expenditure program.
"We believe the company requires additional government support to refinance upcoming debt maturities and secure funds for its expanded capex program.
"The company faces debt amortization payments on a near-monthly basis during the 2025/26 financial year ending March 2026, with the next substantial maturity comprised of a ZAR9.9 billion local bond due on 19 August 2025.
"We believe the government remains supportive of Transnet and will provide additional guarantees or other assistance to prevent default on its upcoming debt maturities. However, the lack of a formal announcement so far creates uncertainty and heightens default risk,".
mthobisi.nozulela@iol.co.za
IOL Business