Transnet recovery plan ‘on track’ with aim of breaking even by 2025
Transnet board chair Andile Sangqu says the state-owned logistics company, which is battling debt of R130bn, aims to break even by 2025 as it continues to implement its recovery plan.
The new executive has implemented its 18-month recovery plan, Sangqu said at a conference organised by financial services company PSG on Thursday. The entity previously said that was on track to meet its rail and port recovery targets, reporting it transported total rail volumes of 151.7-million tonnes in 2023, close to its 154.4-million tonnes target.
“We had to embark on a process of bringing in new leadership who had an understanding of the industry and fortunately for us we have a CEO and a rail person running our rail business,” Sangqu said. “By 2025 we will get our rail volumes to the right kinds of levels. We hope that as far as the losses that the company has been making, we will break even.”
The National Treasury has provided Transnet with a R47bn guarantee facility to support its recovery plan and to meet its debt obligations, but it provided for no bailout in the 2024/25 budget. The guarantee issued to Transnet in December came with strict conditions to take specific actions to accelerate a turnaround, speed up reforms and encourage private sector participation.
Transnet has initiated a process to open its rail network to private sector participants by publishing a draft network statement that details the rules, time limits, timelines, procedures, services, charging principles, and terms and conditions which would govern the agreement between Transnet Freight Rail (TFR) and train operating companies. The document is out for public comment until May 20.
“How we have been able to secure funding to help us with the recovery plan has been through the National Treasury putting some milestones in terms of where we should be in the policy reform agenda,” Sangqu said. “We are in the process of creating a space where in the way which we operate we will not be able to be the owner of the track and also the operator ... the process of opening that up in a highly regulated environment requires a lot of rail reform. The intention is there but the speed may take a bit longer than we all anticipated.”
Transnet saw several highlevel resignations in 2023. These included former CEO Portia Derby, CFO Nonkululeko Dlamini, chair Popo Molefe and TFR CEO Siza Mzimela.
That raised concerns of a leadership crisis in the rail, port and pipeline company as it battles inefficiencies, theft, vandalism and a deteriorating financial performance, with a devastating effect on the economy.
In February, Transnet veteran Michelle Phillips was appointed to lead the company and Nosipho Maphumulo was appointed as group CFO.
Sanqgu said the leadership changes were necessary to stabilise the entity, whose dysfunction was diminishing SA’s export volumes.
“In terms of the targets we have set for ourselves across the business units ... we are on course. The only issue that is completely outside our control is the procurement and the lead times ... it takes 12 to 18 months after you have procured before you can have the equipment on our shores,” Sangqu said.