The Minister of Finance has endorsed a R47 billion guarantee facility for Transnet, aligning with the Minister of Public Enterprises to support the company’s recovery plan and meet its immediate debt obligations.
Transnet is a linchpin in the South African economy, spearheading the government’s vision of inclusive growth. However, the entity has grappled with operational, financial, and governance hurdles, straining its capacity to fulfil its strategic role. Acknowledging the gravity of these challenges, the National Treasury and the Department of Public Enterprises have collaborated with Transnet to devise solutions for its immediate and long-term issues, culminating in the decision to grant the guarantee facility.
The government’s focus remains on implementing comprehensive reforms across the logistics sector. Without systemic overhaul, we risk encountering similar challenges in the future.
The financial support consists of a R47 billion guarantee facility, from which Transnet will initially access R22.8 billion to address immediate liquidity concerns, such as settling maturing debts. The government has opted against an equity injection, confident in the efficacy of this guarantee facility and the swift implementation of the Transnet Recovery Plan to resolve the company’s predicaments.
A Guarantee Framework Agreement involving the National Treasury, Department of Public Enterprises, and Transnet will impose stringent conditions, subject to continuous review and amendment as necessary. Subsequent drawdowns hinge on Transnet meeting these conditions.
Minister Godongwana is optimistic about steering Transnet towards reform, contingent upon the company’s adherence to the guarantee’s strict conditions and promptly executing reforms outlined by the National Logistics Crisis Committee.
Minister Pravin Gordhan underscored Transnet’s pivotal role in the South African economy, emphasizing the significance of a well-functioning logistics company in light of the country’s economic dispersion, export reliance, and distance from crucial export markets.
A Guarantee Framework Agreement must be finalized within 14 days following the guarantee’s activation, mitigating fiscal risks and securing unanimous acceptance of the facility’s conditions. Furthermore, the National Treasury will collaborate with Transnet to explore additional initiatives for revitalizing its operations and financial viability.
Transnet will delve into divesting non-core assets, curtailing the current cost structure, and exploring alternative funding models for infrastructure and maintenance needs, encompassing project finance, third-party access, concessions, and joint ventures.
For inquiries, contact media@treasury.gov.za
Issued by National Treasury.
