Transnet’s recovery plan includes lifting rail freight to 170-million tonnes

Transnet set a “steep” target of increasing its freight rail volumes to 170-million tonnes by the end of the 2023/24 financial year as part of a recovery plan it hopes will help boost the economy and regain the trust of its customers.

Volumes carried by Transnet Freight Rail (TFR) plummeted to a low of 149-million tonnes in 2022/23, hurting the company's revenue. It blamed a shortage of locomotives, spare parts, inadequate money for maintenance and rampant theft and vandalism of rail infrastructure for its poor performance.

Three top executives — group CEO Portia Derby, TFR head Siza Mzimela and CFO Nonkululeko Dlamini — have left the company as a result of persisting weaknesses. 

Transnet’s new board on Thursday unveiled a recovery plan that aims to reverse declining volumes at rail and ports that have hamstrung the country’s exports as miners struggled to move commodities from their operations to ports for export. 

Delivering the plan to media, acting group CEO Michelle Phillips said Transnet will focus on growth measures that will improve volumes to 170-million tonnes in the 2023/24 financial year. She warned that if nothing is done volumes will fall even lower to 141-million tonnes. 

“All our customers require is that we are clear about what we want to achieve, what our plans are, who’s going to do what and what the timelines are. We put a number of 170-million tonnes, that is a steep target,” said Phillips.

The company expected to move 154-million tonnes over the next six months to meet the expectations of its customers. If all interventions are in place — including a financial injection from the government as the shareholder — it could ramp volumes up to 191-million tonnes by 2024/25. 

“We feel over the next six months we are capable of achieving 154-million tonnes. We believe it is a doable number. It will not come easy. If we are able to achieve this it will be the first time in 10 years that Transnet is able to achieve more volumes in the second half of the year than it has achieved in the first half. It is a steep target.” 

Transnet has reached out to the Treasury to absorb R61bn of its R130bn debt and inject R47bn into the business as part of a turnaround that will get the entity back into shape. 

Board chair Andile Sangqu said Transnet was no longer in a position to borrow further as it had breached debt covenants and was paying R13bn a year to service existing debt. 

“We will not be able to deliver on the turnaround plan without the equity injection. We have maximised our gearing ratio. This means we no longer have the ability to apply for more finance to fund the turnaround plan. We are already sitting with R13bn annual debt costs and we no longer have legroom to absorb any other costs.”  

Sangqu said reforming the group was key to its success. Rail and port operations will focus on the highest margin traffic. As per the National Rail Policy and the Freight Logistics Roadmap, TFR's operations are being separated from the infrastructure division which will become an independent infrastructure manager facilitating the entry of private players onto the rail network. 

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