- The South African government says it will immediately grant Transnet R47 billion to begin fixing its problems in the hopes of getting traffic again moving at the country’s ports.
- Backlogs at South Africa’s seaports have been mounting up in recent months, with delays now reaching near-month lengths.
- Transnet will first use R22.8 billion of the total grant to clear its debts.
As recent backlogs at South Africa’s ports cost the economy millions if not billions of Rands, the National Treasury has announced that it will grant Transnet, the national rail and port authority, R47 billion in order to begin righting its wrongs.
November saw crippling backlogs at seaports. The Durban port, which is operated by Transnet, had seventy thousand containers stuck at the terminal, as per EWN, with an expected 21-day delay before they can be offloaded.
A Reuters report published this week indicated that retailer and PEP owner Pepkor had an estimated R700 million worth of stock sitting at sea due to the backlog at the port, which according to Transnet stems from multiple factors, including adverse weather and an acute underinvestment in new equipment and maintenance, which has now caught up with the embattled entity.
On Friday, the Minister of Finance Enoch Godongwana and the Minister of Public Enterprises Pravin Gordhan agreed to supply Transnet with a R47 billion “guarantee facility” effective immediately to support its recovery, including paying off its debts. Government believes that these funds will be enough to fix the entity and get the ports operating again.
“Transnet plays a central role in the South African economy and the government’s goal of inclusive growth. However, the entity has suffered significant operational, financial and governance challenges in recent times and is struggling to fulfil this strategic role,” the National Treasury said in an announcement.
“In recognition of the seriousness of these challenges, the National Treasury and the Department of Public Enterprises have been working with Transnet to find a solution to the company’s immediate and longer-term problems, and the decision to grant the guarantee facility is a result of these discussions.”
Of the R47 billion, Transnet will begin by taking R22.8 billion and paying off its debts, and in terms of what else the company will spend the money on – National Treasury, the Department of Public Enterprises and Transnet itself have agreed on “strict conditions” that will apparently be continually reviewed and amended.
These conditions will have to be met by Transnet over time if the company would like to use more and more of the funds.
“Minister Pravin Gordhan highlighted the fact that Transnet is critical to the South African economy. A well-functioning logistics company is particularly important given the geographical distribution of economic activity in the country, our reliance on commodity and other exports, as well as our distance from key export markets,” the announcement reads.
Transnet will also continue to explore further divestment of non-core assets, reduction of current cost structure, and finding alternative funding for infrastructure and maintenance requirements which continue to cost South Africa millions of Rands.