MARK BURKE: Hostage to failure — why SA should reject Transnet’s bailout demands

Transnet is in effect out of money. It will ask for a bailout. Proponents have already started asking for a bailout. A bailout the country can’t afford and that won’t solve the problem.

We must not give it to them. The DA has been thoughtfully preparing for the future and it includes honouring our joint GNU commitment to no further bailouts.

The background is that Transnet is stuck in a spiralling doom loop. It can’t make enough money to pay the interest on its R140bn in loans and invest in maintenance as well as the upgrades needed to complete its turnaround plan. 

To make ends meet, Transnet spends ever less on maintenance and capital upgrades, while also borrowing more money to cover its interest payments. This creates more debt, resulting in more interest and a turnaround that’s too weak to increase revenue fast enough.   

Giving access to private rail operators will not save Transnet. Getting revenue from these companies in the form of tariffs will take time Transnet doesn’t have; those tariffs are a slow drip through a broken pipe.

The rail companies are also dependent on Transnet to fix the railway network. To do so it needs to spend north of R50bn just on railways, never mind ports. But where will it get that money from? Transnet has burned through more than half of its R47bn debt guarantee the Treasury gave it in the most recent bailout.

So how does this doom loop end? Well, it’s an old movie we’ve watched before, and scene by scene I can tell you what’s going to happen. Within the next fiscal year Transnet will tell us it’s burned through its debt guarantee and it can’t raise new money, except at loan shark rates. It will ask for an enormous bailout.

However, this time Transnet won’t be asking, it will be a demand. The message will be: unless you cough up the ports will shut down, freight trains will stall. It’s not a bailout, it’s a ransom payment. To escape, the Treasury will contemplate negotiating some kind of arrangement with “conditions”. Conditions that didn’t save us last time, and won’t work next time.   

It’s a boring, tragic and expensive movie with guaranteed sequels. It’s Groundhog Day with bad actors. We’re giving money to an alcoholic.

MK and the EFF will tell you this is all noise aimed at driving privatisation. They’re wrong — the crisis is real. But they are right in that the DA does want to privatise where appropriate. We’re not ashamed of it. How can we have a single dysfunctional company responsible for every freight line, every port, and every significant fuel pipeline in SA?

SA is in a toxic relationship with Transnet. It doesn’t need one more chance. It doesn’t need a bailout. It needs a break-up. We need to devolve the parts of Transnet that can be devolved and privatise those parts that it makes sense to privatise.

To do this successfully we need to move now, not in a few months when Transnet invariably derails and comes demanding a bailout. SAA and Eskom should have taught us that breaking up state-owned enterprises takes time. In many ways Transnet is far more complex. Unlike them, there is no solar panel or generator or commercial airline alternative.

To avoid another Transnet hostage situation the DA insists that the parastatal immediately does a full asset, process flow and portfolio analysis so that we can understand how to split everything up. So that investors can understand what they’re investing in, and government can make sure it’s getting a fair price for its stake. 

The next shot of money coming into the split-off parts of Transnet must be private sector money — we don’t have any more taxpayer money to give.

• Burke is DA finance spokesperson.