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Tuesday / 12 November 2024
HomeFeaturesFall from grace – From R5-billion profit to R6-billion debt

Fall from grace – From R5-billion profit to R6-billion debt

Transnet, South Africa’s national rail and port company, has experienced a monumental fall from grace, going from profitable to debt-ridden in just five years.

In 2019, the state-owned entity (SOE) posted a profit of R5 billion, which dropped to a net loss of R5.7 billion by the end of 2023.

Costing the country millions

Transnet operates a nationwide freight rail network of approximately 21,000 route kilometres, as well as seven port terminals.

Its collapse is the result of its poor performance and a lack of much-needed investment in infrastructure upgrades required to boost its operational capacity, writes Daily Investor.

The company’s shortcomings have had a direct impact on South Africa’s economic performance, as its rail and port systems are a vital lifeline for transporting goods both in and out of the borders.

Its ports are ranked among the worst in the world in terms of operational efficiency with container vessels hanging around for far longer than they ideally need to be, which has led to severe backlogs for businesses trying to import resources.

Transnet’s dysfunctional railroads, meanwhile, have led to many companies shifting their transport operations to trucks, which are far less efficient in terms of time and running costs, and also contribute towards increased traffic and deteriorating road conditions due to their heavy loads.

The consequence of these factors is that the SOE is estimated to have cost the local economy as much as R353 billion in 2024.

Furthermore, Transnet’s worsening conduct means that it has been operating at a loss for years, with its accumulated debt stretching to R120 billion.

The biggest sector to be impacted by Transnet’s decline is commodity exports, as South Africa’s natural resources are not reaching the ports to be shipped overseas in a timely and cost-efficient manner.

An analyst at Coronation, Humaira Surve, penned a recent research note on the state of South Africa’s second-largest SOE and how it could be turned around.

Surve said Transnet first needs to crack down on the rampant theft and vandalism of its rail infrastructure, which spiked during the pandemic lockdowns and have left key lines in disrepair.

For example, more than half of the substations along the vital Gauteng to Durban corridor are offline as a result of vandalism, which means that cost-efficient electric locomotives cannot run on this line.

In a similar vein, the theft of signaling systems has led to manual authorizations and speed restrictions that reduce efficiency.

The company also needs to repair its ageing infrastructure, and build extended rail sidings across its network, recommended Surve.

Many of the existing sidings are relatively short, which prevents longer locomotives from docking and passing one another, limiting how many train cars a single engine can haul.

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