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Container|Efficiency|Financial|Freight|Locomotives|Logistics|rail|Rolling Stock|rolling-stock|Sustainable|Terminals|Transnet|Equipment|Operations
Container|Efficiency|Financial|Freight|Locomotives|Logistics|rail|Rolling Stock|rolling-stock|Sustainable|Terminals|Transnet|Equipment|Operations
container|efficiency|financial|freight|locomotives|logistics|rail|rolling-stock|rolling stock|sustainable|terminals|transnet|equipment|operations

'There is nothing we can do.' Gordhan bemoans 'unreasonable' Chinese rail company

Minister of Public Enterprises Pravin Gordhan

Minister of Public Enterprises Pravin Gordhan

9th November 2023

By: News24Wire

  

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"Transnet needs help," chairperson Andile Sangqu told MPs on Wednesday in an appeal to the government to take on some of its unsustainable debt burden and fund its turnaround plan.

Transnet has a R135-billion debt burden with large redemptions due soon, including R8.3-billion in the first quarter of next year and R6.8-billion in the third quarter.

Sangqu told Parliament's Standing Committee on Public Enterprises:

The debt obligation of R135-billion is more than Transnet can handle. The interest costs [are] R13-billion, and Transnet does not have the capacity for it. It needs help. Irrespective of the improvements we make to our financial and operational numbers, we have got to get some assistance. The debt is one of the main contributing factors to Transnet's loss-making situation.

Transnet made a loss of R5.7-billion in the past financial year, mainly due to the poor performance of its rail freight division, where volumes and revenues have plummeted over the last three years and costs have risen.

A turnaround plan produced by Sangqu's board two weeks ago proposed that the Treasury take over R61-billion of Transnet's debt. The plan further said that to be sustainable, Transnet also requires an R47-billion equity injection. 

Finance Minister Enoch Godongwana did not allocate any assistance to Transnet in the Medium-Term Budget Policy Framework, saying that he wanted to interrogate the turnaround plan first to avoid throwing good money after bad. Godongwana also said that he wanted Transnet to demonstrate alignment with the Presidency's national logistics roadmap. 

Sangqu defended the turnaround plan, saying that it had followed "a rigorous and iterative process" with the assistance of independent experts, and that he hoped to have a fuller discussion with MPs and government on the plan to get the requisite funding. 

Asked by Democratic Alliance MP Sandra Graham-Maree how Transnet planned to cover looming debt redemptions, including the short-term rollover of R4.4-billion by the Public Investment Corporation (PIC) on Monday this week, Minister of Public Enterprises Pravin Gordhan said he hoped that Transnet would soon realise efficiency improvements and therefore increase revenue. However, there were also "constructive discussions" between the various parties, including the Treasury, on Transnet's debt crisis as a solution had to be found. This is something that Godongwana had also acknowledged.

One of the issues hobbling Transnet Freight Rail's performance has been the issue of "long-standing locomotives" which could not be repaired due to a dispute with manufacturer China Railway Rolling Stock Corporation (CRRC), which has refused to supply spare parts. The number of long-standing locomotives grew from 106 to 315 over the past financial year, a quarter of the company's locomotives.

While Gordhan has consistently expressed optimism that the matter would be resolved, he told MPs that talks were "gridlocked".

"There seems to be a gridlock that we can't get past, and there is nothing we can do. The goalposts keep getting shifted in an unreasonable way by the company over there," said Gordhan. 

To reopen a relationship with Transnet, CRRC has previously told SA government officials that it required the SA Reserve Bank to unfreeze its bank accounts, which were frozen due to the transaction being tainted by corruption. 

Transnet's port operations are also in crisis due to a lack of critical equipment, which is responsible for delays. This week, shipping companies MSC and Maersk announced a hefty congestion fee for SA containers of $210 per container. 

Acting Transnet CEO Michelle Phillips said that the company was desperately searching for critical equipment around the world as it did not have the time to wait for new orders to come through.

"The focus is to avoid the imposition of the surcharge. In all of our port terminals, you will find that our equipment has exceeded its lifespan or is close to doing so. We should have bought the equipment three or four years ago. We did not. Now we are in a space where we have to buy equipment and we need it yesterday. When you order this type of equipment it takes 18 to 24 months because it gets manufactured before they are delivered. What we have done is go to the market, and to the original equipment manufacturers and request if there is anything around the world that can come to SA," she said.

Phillips said she hoped that the Treasury would "come to the party" and allow an emergency procurement as this was "wartime" and there was a need for special measures. 

 

Edited by News24Wire

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