Transnet creditors press government for another bailout

• Treasury stands firm, gives parastatals wide berth

Transnet’s creditors are putting pressure on the Treasury to give the state-owned logistics group a bailout, but that is unlikely to happen until it services its existing debt, finance minister Enoch Godongwana says.

“People ... want to be paid because they know their debt is unsecured. We are engaging with Transnet to be able to do the right things to service their debt,” Godongwana said in the prebudget briefing on Wednesday.

Transnet, like other overly indebted state-owned entities, was allocated no bailouts for 2024/2025 as the Treasury continues its “tough love” approach and moves to reduce government debt and stabilise borrowing.

The entity will have to rely on the R47bn guarantee that the government allocated to it in 2023 to meet its debt obligations and to support its recovery plan.

As with Eskom, the guarantees are attached to various conditions which require Transnet to focus on its core activities, and also require the entity to introduce private sector partnerships.

“This will improve Transnet’s sustainability and support the implementation of the [freight logistics group’s] road map,” Godongwana said during his speech.

Transnet has been granted approval to use only R14bn of the guarantee between December 2023 and March 2024 to pay off maturing debt.

“Government and Transnet have agreed on conditions required to improve sustainability at Transnet and in the sector, encapsulated in Transnet’s recovery plan.

“Transnet is required to divest noncore assets, reduce its current cost structure and explore alternative funding models for infrastructure and maintenance, including project finance, third-party access, concessions and joint ventures,” the Treasury said in the Budget Review.

Eskom, arms maker Denel, SAA and the Post Office were also not allocated any new bailouts for the year.

The Treasury said no new money would be made available for the entities as they had become a drain on the fiscus.

“State-owned companies have failed to implement their turnaround plans.

“This has resulted in deteriorating profitability, an increased need for guarantees to borrow and more requests for bailouts,” said the Treasury.

“State-owned companies are struggling to access capital markets without government guarantees and, increasingly, request bailouts to service debt and fund turnaround plans which is unsustainable.

“These bailouts erode policy space, as they require the redirection of resources from key public service priorities, such as education, public safety and criminal justice, to entities that are meant to be financially self sufficient.”

Denel was allocated R3.4bn in 2022 to fund its turnaround plan, and to date drew down R2.2bn from the package.

The Treasury says the balance of R1.2bn has been ringfenced and will be accessible once Denel makes progress on the implementation of the turnaround plan.

Eskom received a debt relief package of R254bn in 2022, of which R44bn has already been transferred.

“Eskom continues to be a key role player in the electricity sector. And the debt relief plan allows the entity to focus on its core business,” said Godongwana.

“We will release the report on the independent review of Eskom’s coal-fired power stations in the coming week.

“The review was done to inform part of the conditions attached to the debt relief plan.”