S&P Downgrades Transnet, Warns of Cash Burn Through 2027 Without Government Support
Transnet, South Africa’s state-owned freight rail and ports operator, is expected to burn cash for at least the next three years, according to a new forecast by S&P Global Ratings, as reported by BusinessLive on Tuesday.
Citing an unsustainable capital structure in the absence of ongoing state support, S&P downgraded Transnet’s credit rating.
The agency also warned that the company is unlikely to meet its goal of transporting 250 million tonnes of freight by 2030.
To keep the struggling logistics giant afloat, the South African government extended a R51 billion guarantee in June, following concerns that Transnet would run out of cash within three months.
The support package includes R41 billion earmarked for fiscal years 2026 and 2027, and an additional R10 billion to manage short-term liquidity needs.
A portion of this funding has already been used to resolve a long-standing tariff dispute with Sasol, with Transnet agreeing to a nearly R5 billion out-of-court settlement.
“Given the extent of network rehabilitation required due to years of deferred maintenance, aging infrastructure, and persistent security threats, we expect Transnet’s volume recovery to fall short of projections,” said Omega Collocott, a representative of S&P Global Ratings.
S&P noted that Transnet continues to face negative free cash flows and high debt levels, making it dependent on state backing to service its obligations.
The agency projects that the company’s cash flow deficit will only begin to ease by fiscal 2027.
The June guarantee adds to the R47 billion in government support announced in December 2023. Over the next five years, the Department of Transport is preparing to manage R99.6 billion in debt redemptions, while Transnet’s total debt now exceeds R130 billion.
Transnet CEO Michelle Phillips acknowledged the company’s ongoing financial and operational challenges but emphasized that government guarantees have helped stabilize liquidity.
“We are making progress in addressing inefficiencies and strengthening our financial position,” Phillips said, highlighting that the support allows Transnet to maintain critical operations while reforms are implemented.
