Treasury approves R47bn support package for Transnet

Finance minister Enoch Godongwana and National Treasury agreed to a R47bn credit guarantee facility to ports and rail company Transnet, effectively a support package to help ease the entity's financial challenges. 

On Friday the Treasury said Godongwana agreed with his counterpart at public enterprises, Pravin Gordhan, to issue Transnet with a R47bn guarantee facility effective immediately to support its recovery plan and meet its immediate debt obligations. 

Transnet has a R135bn debt and has breached debt covenants, meaning it is no longer able to borrow from the market. One of its creditors, the Public Investment Corporation, last month gave it a four-month reprieve on a R7bn bond that was due to mature. 

The Treasury said Transnet will be able to draw down an immediate R22.8bn from the facility to deal with immediate challenges, including settling maturing debt.

It said the government had not considered a direct bailout as the budget for 2023/24 had closed but was confident the credit guarantee facility and implementation of the recovery plan would help resolve Transnet's challenges

Transnet asked the government for a direct R100bn bailout, split between a R47bn cash injection and absorption of R61bn of its debt, similar to the debt relief offered to Eskom. This was declined by Godongwana in November when presenting the medium-term budget. He said the company would have to show commitment to the implementation of the freight logistics road map and its recovery plans, especially the need to open its rail and ports network to private players. 

Treasury was confident the R47bn facility and Transnet’s recovery plan would be enough to resolve the company’s challenges.  

“A guarantee framework agreement between the National Treasury, department of public enterprises and Transnet will include strict guarantee conditions that will be continuously reviewed and amended when deemed necessary. Any further drawdowns will be subject to Transnet meeting these conditions,” it said .  

In terms of the recovery plan, Transnet said it is confident it can turn a R5.7bn loss into a R5.1bn profit in the next two years. This is premised on increasing rail volumes to 170Mt by the end of the 2023/24 financial year and 191Mt by 2024/25, from a low of 149Mt reported in 2022.  

A guarantee framework agreement must be concluded between Treasury, the department of public enterprises and Transnet within 14 days of the facility being activated. 

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