Transnet going from zero to hero

This is key to faster economic growth in South Africa, with companies increasingly struggling to get products to market due to logistical inefficiencies. 

These inefficiencies have been coupled with increased transport costs as companies shift to road transport to get their products to South Africa’s ports or to market within the country. 

It has been estimated that the deteriorating performance of Transnet’s ports and railways costs South Africa around R1 billion a day in lost economic activity.  

However, there are signs of this being turned around, with Transnet’s performance improving and crucial reforms being implemented to make the sector attractive to private investment. 

The Operation Vulindlela (OV) task team housed in the National Treasury has been driving reform in the logistics sector for the past few years. 

It aims to modernise and improve the performance of the freight logistics sector, enabling export growth and reducing transport costs. 

As with South Africa’s electricity sector, the OV team has recognised the need to attract private sector investment. 

As a result, Transnet has begun the process of making concessions available to run various terminals at its ports and operate some of its rail corridors. 

In its latest progress update, the OV team said the Transnet Rail Infrastructure Manager (TRIM) was established on 1 April to facilitate the private operation of some of the company’s railways. 

This is a significant step towards private companies running rail corridors, investing in maintenance and locomotives, and ultimately bringing their products to market. 

TRIM has begun making slots available across the freight rail network to private train operating companies and has received 98 requests for access so far. 

This follows the release of the Network Statement and differentiated rail access tariffs in December 2024. 

TRIM is currently reviewing these applications to determine how the slots will be allocated to the various operators. 

The OV team expects to announce conditional slot awards by 15 August 2025. These will be subject to the completion of relevant permits and contracting. 

A Private Sector Participation Unit has also been established within the Development Bank of South Africa to facilitate and fast-track private sector participation in logistics. 

Since launching a request for information for private sector projects in the rail and ports system on 23 March 2025, the Transport Department has received over 100 requests. 

Over 50 requests relate to the iron ore and manganese corridor, 48 for the coal and chrome corridor, and 63 focus on the container and automotive intermodal corridor. 

This shows significant progress in the opening of the logistics sector to private participation, which should translate into enhanced investment in infrastructure and improved performance. 

Work still needs to be done

Despite this significant progress, major challenges remain at Transnet and in the logistics sector more generally. 

The utility’s financial health has rapidly deteriorated in the past few years, necessitating the involvement of the private sector and requiring another bailout from the state. 

Ratings agency Moody’s warned in May that Transnet would run out of money within three months for its operations and debt servicing. 

This was unless it got another government bailout, with Moody’s saying the utility’s capital structure was unsustainable and a lack of operational improvements. 

As a result, the government had to step in with a R51 billion taxpayer-funded bailout to keep the utility operating in the future. 

The company will be able to access the funds immediately to support its capital investment program and meet its debt obligations. 

Due to this deteriorating financial situation, the OV task team wants to complete the establishment of TRIM and the National Ports Authority as subsidiaries of Transnet. 

This would ensure their independence and, to some extent, protect them from the utility’s declining financial health. 

Crucially, this would enable them to invest in infrastructure, attract private investment, and operate sustainably without a massive debt load. 

The OV team said in its latest update that this will be coupled with further reforms in the sector, with slots on the rail network yet to be allocated. 

Apart from driving the implementation of existing plans, the OV team is looking to finalise the 2025/26 Network Statement and Rail Access Tariff. 

This will create the conditions for private-sector participation and ensure certainty for investors in the sector. 

The task team will also assist Transnet in reviewing requests for information on access to various rail corridors operated by the utility. 

Following this, it will launch requests for proposals for private sector participation in rail and ports by the end of August 2025. 

The ultimate aim of the reform will be to create a National Rail Bill to establish a competitive rail sector, where private companies operate alongside Transnet in an open logistics sector. 

Issued on Daily Investor by Shaun Jacobs | https://dailyinvestor.com/south-africa/93943/transnet-going-from-zero-to-hero/