INFRASTRUCTURE: A slow train
Transnet reins in spending due to lack of customers
One of the major disclosures in the budget was that logistics and railway operator Transnet will cut back on capital expenditure due to lower demand.
This comes on the back of a modest 5.3% increase in the company’s revenue to R65.5bn for the year ended March, assisted by a small tariff hike in the fuel pipeline business.
Overall, government will cut expenditure by R85bn. A large part of this will hit national projects, including those at Transnet.
"Over the next three years, Transnet will scale back its capital investment plans due to weaker than expected demand," treasury says in the Budget Review.
Transnet, which operates the country’s ports, fuel pipelines and goods trains, has over the past few years spent hundreds of billions of rand on expanding its rolling stock capacity.
The most high-profile of these tenders was the R54bn acquisition of 1,064 locomotives from Canada, the US and China over the past four years.
The transactions have been mired in controversy amid allegations of corruption involving Transnet management and the Gupta family. Reports allege that the Guptas creamed off about R5.3bn in bribes from South China Rail during the process.
Together with other allegations of corruption in state infrastructure projects, the Transnet locomotive deal contributed to an apparent reluctance among lenders to extend credit for such projects.
Treasury has this to say on the matter: "To maintain investor confidence, Transnet will have to address concerns about governance lapses, including concerns about its supply-chain management practices."
The company’s governance structures have been earmarked for overhaul, along with those of other state-owned companies.
The government will soon appoint new, more credible boards and management teams, as it dramatically did at Eskom last month.
What Transnet is not skimping on is expanding its pipeline business. Treasury says in the Budget Review that this division will double over the next three years.
Other than Eskom’s continuing investments in power stations, the next biggest slice of capital will be spent on improving water and sanitation infrastructure.
Government will allocate more than R118bn — or 14% of the public sector infrastructure bill — to this over the next three years. Of this amount, 25% will be transferred to regional water boards for the provision of bulk sanitation infrastructure.
The Passenger Rail Agency of SA is also in line for a big investment programme, with R41bn allocated to it over the next three years. The passenger rail operator will use some of the money to acquire 125 trains.