By Helmo Preuss

Finance Minister Enoch Godongwana took centre stage on Wednesday, tabling the 2025 Budget before the National Assembly with a clear message: South Africa’s state-owned enterprises are getting a lifeline, but not a free ride.

Godongwana spotlighted logistics parastatal Transnet as a key focus of new public-private partnership (PPP) regulations set to kick in on June 1, 2025. These rules, finalised after much anticipation, aim to slash red tape, boost capacity for managing PPPs, and lay down clearer guidelines for unsolicited bids while tightening fiscal risk oversight.

Godongwana said the regulations will allow national departments to set up sector-specific PPP units, driving private sector participation (PSP) to shore up the balance sheets of struggling state firms.

Transnet and the Department of Transport are already eyeing market engagement on PSP projects, targeting heavy hitters like the ore, chrome, coal, and manganese lines, alongside expansions at Richards Bay’s ferrochrome and magnetite terminal. The container and automotive sectors are also in the mix, with talk of positioning South Africa’s container port system as a regional trans-shipment hub for major shipping lines. An independent rolling stock leasing company is on the table too. If Transnet needs gap funding for these ventures, Godongwana pointed to the Budget Facility for Infrastructure (BFI), though only after proper financial structuring.

Meanwhile, the National Treasury’s 2025 Budget Review paints a stark picture of Transnet’s years-long decline. Rail volumes have cratered, sliding from 226.3 million tonnes in 2017/18 to 151.7 million tonnes in 2023/24, thanks to derailments, inefficiency, and infrastructure decay.

Yet there’s a glimmer of hope. With support from Operation Vulindlela, Transnet’s recovery plan is showing signs of life - estimates suggest rail volumes will hit 165.4 million tonnes by the end of 2024/25, the Review noted.

Still, the financials are grim. The company posted a net loss of R7.3 billion in 2023/24, up from R5.1bn the year before, driven by finance costs that ballooned to R14.3bn amid additional debt and rising interest rates. Transnet’s earnings before interest, taxes, depreciation, and amortisation slipped from R22.8bn in 2022/23 to R22bn, with revenue gains wiped out by soaring operating expenses.

Transnet is also battling debt. Since 2018, Transnet has funnelled funds from capital expenditure into servicing its borrowings, staving off default but leaving critical infrastructure to rot. Total borrowing climbed by R7.6bn to R137.7bn between March 2023 and March 2024. The government stepped in with a R47bn guarantee in December 2023, which Transnet used to refinance maturing debt and take on fresh loans. But the Treasury’s clear: no broad debt relief or balance sheet bailouts are coming - —just targeted support for projects like the Cape Town container terminal expansion.

The stats tell a broader story. Statistics South Africa data shows rail transport payload tanked by 12.0% in 2022, after drops of 6.9% in 2021 and 11.1% in 2020. Meanwhile, road transport roared ahead, surging 25.0% in 2022 after a 10.4% rise in 2021. Rail’s share of total land transport payload slumped to 15.6% in 2022 from 20.6% in 2021 and 23.5% in 2020—well shy of Transnet’s 30% target. By 2024, that share nudged up to 16.9% from 15.7% in 2023, but it’s hardly a victory lap.

To turn the ship around, Transnet’s working with the National Logistics Crisis Committee - , rail and port users, and independent experts - to boost performance. Short-term fixes include speeding up capital spending on equipment, rehabbing rail infrastructure, and resurrecting old locomotives. Two big projects stand out: the Ukuvuselela Gauteng-Eastern Cape rail corridor, set to upgrade the South Corridor and expand port capacity for automotive handling (with 10 000 short-term jobs in tow), and the Cape Town Container Terminal Expansion Phase 2B, with R320 million allocated for 2025/26 and R888m for 2026/27 to boost export volumes of table grapes, citrus, and deciduous fruit.

Labour federation Cosatu said, "Whilst government is naturally reluctant to provide further debt relief to SOEs (state-owned enterprises), Transnet should be assisted to settle its debt to free up capital for the modernisation of its port and railway network as these will unlock the mining, manufacturing and agricultural sectors and create thousands of badly needed jobs and boost state revenue."

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Transnet gets tough love as PPP regulations set to transform SOEs