Minister of Transport Barbara Creecy has approved a R51 billion guarantee facility for Transnet, effective immediately, in a bid to bolster the State-owned freight and logistics group.
This financial backing, which was granted with the concurrence of the Minister of Finance, aims to support Transnet’s vital capital investment programme and assist the entity in meeting its debt obligations amidst ongoing reforms.
Transnet’s significance cannot be understated; it serves as a cornerstone of the South African economy, playing a critical role in facilitating the government’s goal of inclusive growth.
Currently, Transnet is undergoing a comprehensive reform programme designed to enhance its operational performance as it strives to address longstanding financial, operational, and governance challenges that have impeded its ability to deliver on its strategic mandate.
As part of its trajectory towards improvement, Transnet reported a successful record of transporting the equivalent of 161 million tons of freight on its rail network by March 2025.
Notably, the entity had also released its 2024/25 Network Statement by December 2024, which introduces private sector operators into the freight rail domain. Anticipation builds as announcements of the first successful bidders are expected to be made by the end of July.
In a continued effort to promote private investment, the Department of Transport issued a Request for Information (RFI) earlier this year for private investors focusing on five pivotal freight corridors and associated ports.
With the deadline for the RFI closing on 31 May, the department said Transnet was on track to issue Requests for Proposals by September, aiming to attract further capital while maintaining State ownership of the network.
To navigate immediate capital investment needs, Transnet has introduced project-based applications to the Budget Facility for Infrastructure. Additionally, collaboration is underway with National Treasury and the Presidency to formulate a joint funding policy aimed at facilitating swift capital improvements through private sector involvement in priority freight corridors.
The decision to grant this crucial guarantee facility resulted from ongoing discussions between National Treasury and the Department of Transport, recognising the progress Transnet has made.
The financial package, amounting to R41bn, is set to address the entity’s funding requirements across the 2025/26 and 2026/27 financial years, complemented by a R10bn guarantee specifically allocated for liquidity management, focusing on the servicing of maturing debt and related capital investments.
This marks a continuation of support initiated in December 2023, when a R47bn guarantee support facility was announced, enabling Transnet to implement its Recovery Plan for the fiscal years 2023/24 and 2024/25. This plan has been pivotal in galvanising increased capital investments and enhancing liquidity for the entity.
A Guarantee Framework Agreement will formalise the responsibilities between the Department of Transport and National Treasury, establishing reviewable conditions for the guarantees. According to the department, any drawdowns by Transnet will be contingent on compliance with these conditions, which will centre on operational requirements and reforms in the logistics sector.
Creecy expressed her confidence that the additional financial support provided to Transnet will catalyse further improvements in operations and accelerate the reforms laid out in the Freight Logistics Roadmap. She said this bold move was seen as a significant step towards fostering a more efficient and robust infrastructure for South Africa’s freight and logistics industry.
Meanwhile, Transnet welcomed the government guarantee facility to support its sustainability and long-term growth.
Transnet said the facility will enable it to refinance maturing debt and ensure the organisation’s continued access to adequate resources and facilities to be able to continue its operations as well as fund the capital investment programme for the foreseeable future.
“It will also enable Transnet to focus on operational improvements and strategic reforms. In line with existing Guarantee Framework Conditions, Transnet has made significant strides in implementing rail and port reforms. In pursuit of enhanced partnership and collaboration, several key Private Sector Participation (PSP) transactions are being implemented,” Transnet said in a statement.
“PSPs are a key element of the organisation’s strategy to modernise its operations and infrastructure and grow the logistics sector for the benefit of the economy. With government’s commitment to support its recovery and strong collaboration with customers and industry partners, Transnet is on course to recover and fulfil its strategic role in the South African economy.”
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