TRANSNET, South Africa’s ailing state-owned freight logistics company, received a R5.8bn government bailout to repair infrastructure damaged by the floods in KwaZulu-Natal in April this year and to increase locomotive capacity.
Delivering the medium-term budget policy statement in Cape Town this afternoon, Finance Minister Enoch Godonwana said Transnet is an important enabler of growth in the country, but the recent strike, shortage of locomotives and spare parts, infrastructure deterioration, vandalism, and criminal activity weigh heavily on the logistics sector.
In his policy statement, Godongwana said R2.9bn will be allocated towards fixing damaged infrastructure caused by severe flooding in KwaZulu-Natal in April this year, while the balance will go towards addressing the locomotives shortage.
“The state rail and ports operator suffered severe and widespread damage to assets, installations and operations from the heavy rains and flooding in April 2022, resulting in unexpected repair costs and loss of revenue.
“While the Port of Durban is now operating, major repairs are still required to fully restore Transnet Freight Rail operations in KwaZulu-Natal,” Godongwana said.
Transnet said at a briefing yesterday the state-owned company reached agreements with original equipment manufacturers to obtain the spare parts for 311 idle locomotives. The locomotives shortage was partly caused by a legal dispute between Transnet and CRRC E-Loco of China and Alstom.
Transnet spokesperson Ayanda Shezi said in a statement the parastatal welcomes the capital allocation to support Transnet in dealing with the unexpected and unforeseen expenditure as a result of the KZN floods in April. “The balance of the funding will go towards the rehabilitation of rolling stock including funding for the return to service of long-standing locomotives.”
The extra allocation to Transnet will be partially funded through higher-than-expected tax revenue to the tune of R84bn, thanks to improvements in income tax collections. South Africa’s mining houses are a significant contributor to company tax income in the past two years, thanks to high commodity prices.
However, Transnet’s capacity constraints have cost mining companies billions in revenue and export volumes in the past two years. On top of the revenue losses, the recent Transnet strike, which lasted just under ten days, cost mining companies more than R800m in lost revenue per day.
Godonwana admitted in his speech that the strike action will weigh on the mining sector’s fourth quarter production output, as major export harbours operated at much lower capacity.