South Africa’s state-owned rail and ports operator said its full-year loss widened as theft and vandalism resulted in muted growth in shipments and as it provided for lawsuits.
Transnet SOC Ltd. posted a loss of 7.3 billion rand ($408 million) in the year through March, compared with a restated 5.1 billion-rand loss in 2023. Its freight-rail business — the largest operating unit accounting for 44% of revenue — delivered 151.7 million tons of cargo during the period, up 1.5% from the prior year. Fuel-pipeline volumes fell 2%, while port-container movements improved 2.9%, it said.
A South African court in June ordered that Transnet pay Sasol Ltd. 6.2 billion rand in damages and interest and TotalEnergies SE almost 3 billion rand, saying that the state-owned company overcharged the firms in an alleged breach of a 1991 oil-pipeline contract.
Transnet said it’s provided 9.3 billion rand in its accounts for the claims, interest and legal fees. The company appealed the decision on July 8.
Transnet is almost a year into a turnaround strategy that it announced in October 2023 to overhaul its rail and port services and tackle the impacts of years of mismanagement, theft and vandalism. The challenges, including underinvestment in infrastructure and external shocks including floods and extreme weather events, have added to operational problems that have crimped economic growth.
The Auditor General of South Africa, which verified Transnet’s accounts, said “material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern.”
The company’s management said the turnaround plan is starting to bear fruit, with further improvements in rail volumes expected in the current financial year.
Transnet, with total debt of 226.5 billion rand, has repeatedly said its growth plan needs significant capital to implement. That led to South Africa’s National Treasury providing the entity with a support package in the form of a 47 billion-rand guarantee facility in December.
The Treasury attached 33 conditions to the package, and Transnet has complied with 23 of them, Chief Executive Officer Michelle Phillips said at a briefing in Johannesburg. Of those remaining, the company is on track with eight, but may struggle to meet two related to the company’s plans to establish a rolling-stock leasing company, she said.
As part of an effort to bring in private participation, Transnet issued a tender for a partner in April 2023 to establish a locomotive-leasing company. It had to cancel the transaction because of non-compliance in the bid request.
“We’re hoping that we will be going back to the market by December of this year, but we think that we may have a challenge meeting that guarantee condition,” Phillips said.
Earlier this year, the Treasury reduced the amount of debt relief it provided to state power utility Eskom Holdings SOC Ltd. after it failed to meet conditions for the funding.
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Transnet has used the Treasury guarantee facility to secure a 5 billion-rand loan from the New Development Bank, part of an 18 billion-rand program that the lender formed by the BRICS group of economies has approved for the company. It plans to use the funds to modernize and improve South Africa’s freight-rail network.
The African Development Bank in July approved a loan of 1 billion rand for the first phase of the company’s five-year capital investment plan that requires 152.8 billion rand.
