Transnet, State-owned logistics company is to receive its first cash injection from the fiscus in decades as it battles to recover from flood damage and a shortage of locomotives due to contractual problems with manufacturers.
Finance Minister Enoch Godongwana announced R5.8 billion of support for Transnet in the Medium-term Budget Policy Statement. The money is allocated specifically for repairing infrastructure damaged by the recent floods (R2.9 billion) and R2.9 billion to procure spare parts and new locomotives from China’s CRRC Corporation.
Transnet has been in dispute with CRRC for several years after it terminated an extensive procurement programme for new locomotives mid-stream, as the contracts were tainted by corruption. In response, CRRC refused to supply the locomotives that had been procured with spare parts.
Due to the dispute with CRRC and other manufacturers, Transnet Freight Rail (TFR) has 331 “long-standing locomotives” that it has been able to use. Earlier this month, the company announced that it had reached an agreement with CRRC and that the supply chain would be reinstated.
The cash injection for Transnet will assist the TFR to arrest falling volumes and revenue. Volumes have been falling since 2018. In 2018, it moved 215.1 million tons (mt) but by 2021/22 this had fallen to 172.7mt.
The company is in a race against time to improve its revenue flows to avoid recurring liquidity constraints. In July, facing a liquidity crunch, Transnet raised a $1.5 billion loan and a R12 billion bridge-to-bond facility which it will need to convert to a longer-term loan during 2023/24.
Finance minister Enoch Godongwana said in a briefing to journalists before his speech: “It is more effective to fund state-owned enterprises to do the right thing and increase efficiencies because revenue foregone exceeds the support they would need (at a later point).”
Source: News 24
