Siyabonga Gama. Picture: ROBERT TSHABALALA
Siyabonga Gama. Picture: ROBERT TSHABALALA

State-owned railway company Transnet expected an external investigation into allegations that it overpaid for locomotives and consultancy services to be concluded in three months, it said on Monday.

Transnet, commenting on its results, said it was financially well positioned to proceed with its multibillion-rand railway modernisation programme and would not need government guarantees on any further debt.

Despite this, Transnet is starting to feel the effects of the downgrade of SA’s foreign-denominated debt to junk through its bond auctions.

The cloud of state capture continues to hang over state-owned entities, including Transnet, with the railway company likely to remain in the spotlight because it has been identified by the government as one of the key vehicles through which to drive economic growth and transformation.

Transnet posted a R2.8bn profit for the year ended-March 31, up from R393m a year earlier. Transnet CE Siyabonga Gama attributed this to stringent cuts to discretionary spending such as the use of consultants.

During the year volumes in general freight increased 4.9% and coal 2.4%. Iron ore volumes fell 1.5% while manganese volumes rose 17.5%.

Operating expenses grew 5.6%, mainly because of a 10.1% increase in electricity costs and 7.5% in personnel costs.

Transnet is in the midst of its market-demand strategy, through which it is spending billions on rail, ports and pipeline modernisation, with R22.4bn expected to be spent in the current financial year alone.

SA’s downgrade to junk status by two major ratings agencies in April has raised questions whether borrowing will become too expensive.

Transnet has failed to raise sufficient funds through a number of bond auctions this year. It said it had received offers, but found these too expensive.

"I can tell you there was appetite, it is just that Transnet didn’t allocate at the prices the market was asking for," Transnet chief financial officer Garry Pita said.

Gama said the company was liquid and had high cash flow, and had optimised its capital expenditure in line with expected demand.

The external probe should be done in three months, he said.

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