South Africa’s state-owned logistics company, Transnet, is requesting debt relief from the government as it attempts to repair its balance sheet and restore its freight rail and port capacities, according to the company’s chairman, Andile Sangqu, on Tuesday.
Transnet is burdened with 130 billion rand ($7.30 billion) in debt and has faced difficulties in providing adequate freight rail and port services due to equipment shortages and maintenance backlogs, stemming from years of underinvestment.
In December 2023, the South African government extended a 47 billion rand guarantee facility to Transnet to address “immediate liquidity issues,” such as settling maturing debt obligations.
Chairman Sangqu informed journalists that Transnet’s debt repayments were averaging just over 1 billion rand per month.
He attributed part of this debt to the “state capture” era, a corruption scandal that plagued South Africa between 2010 and 2018 under former President Jacob Zuma. This scandal cost Transnet and other state enterprises billions of rand in corrupt procurement deals.
“We will require the assistance of the shareholder to give us some form of debt relief,” Sangqu stated.
He explained that efforts to increase Transnet’s freight volumes, as part of a recovery plan announced in October 2023, are being undermined by the costs of servicing the company’s debt.
“As we begin to increase volumes and generate new operational cash flows, they are all wiped out by debt service costs,” Sangqu said.
Transnet’s freight volumes have sharply declined, dropping to 152 million metric tons in the 2023/24 financial year from 226 million tons in 2017/18.
