Transnet improving – but still short of targets – BusinessTech
State logistics group Transnet, says that, although there has been an uptick in the volume handled by its railways and ports and its revenue, these improvements still fall short of its self-set recovery goals.
Along with a change in Transnet leadership, top executives have attributed much of these improvements (albeit slightly below its targets) to legislative reforms which have ultimately enabled the private sector to have a foot in the game.
This was outlined when Transnet provided an update on its recovery process during a media briefing at its Johannesburg headquarters on April 26.
The company reported that for the financial year that ended on March 31, 2024, it recorded:
- A 1.5% year-on-year improvement in total rail volumes, reaching 151.7-million tonnes;
- A 12.8% year-on-year increase in revenue to R77.69 billion;
- A 2.2% improvement in container handling to 4.15-million twenty foot equivalent units.
Important to note is that these are preliminary estimates and the official audited year-end financial results are yet to be released.
The improvement—seen as crucial for an SOE that is around R130 billion in debt and has a port and railway infrastructure backlog of over R50 billion—was slightly below its Recovery Plan targets (between 1 – 2% below).
Engineering News reported that group CEO Michelle Phillips said that some of these improvements are because “we’ve had to improve on our equipment and rolling stock availability.”
“We’ve been able to achieve a return to service of an increased number of locomotives [and we have] also seen, in the ports, delivery of some critical port equipment,” she added.
According to Transnet chairperson, Andile Sangqu, although Transnet is “not out of the woods yet,” these results mark a “significant improvement” in the SOE’s rail, ports and balance sheets.
Sangqu said that for even further improvements to be made, Transnet has reaffirmed its “commitment to attract private sector participation across the business.”
Recovery Plan
In 2023, a National Logistics Crisis Committee was established comprising stakeholders in government and private business leaders.
Additionally, following the appointment of a new board in July 2023, a phased Transnet Recovery Plan was introduced, which aims to stabilise the operational and financial performance by March 2025.
This plan emphasises structural reforms in rail and terminal operations, largely through encouraging involvement from the private sector to improve the efficiency and, ultimately, the financial performance of its rail systems and ports.
Rail reform
Years of compounding rail inefficiencies at Transnet saw freight volumes decline to 150 million metric tons in financial year 2022/23 from 226 million tons in the 2017/18.
While Transnet recorded an improved 151.7-million tonnes in the rail volumes at the end of March 2024, this figure still fell 1.8% short of its recovery plan target of 154.4-million tonnes for the 2023/24 financial year.
Group CEO Michelle Phillips said this is due to losing “close to a million tonnes in one of the derailments that we experienced towards the end of the year.”
Sangqu said that this improvement, albeit modest, can be attributed to changes in the legislative and regulatory regime in which the company operates, as outlined by the National Rail Policy and the Freight Logistics Roadmap.
Sangqu said a major boost has come from “private sector rail operators who see the long-term benefits that [the improvement of freight rail] will have on their own business development and on the economy as a whole.”
Legislation required publishing a draft Network Statement (as it did in late March 2024), which, according to the operator, “signifies the beginning of a process for Transnet to open access to more operators on the network” by detailing how the SOE plans to embrace the private sector as a partner for delivery in its 21,200km rail network.
This is proposed to be done by selling rail slots on its network to third parties or private sector players, allowing them to introduce their electric locomotives, independently rail their goods to markets, and move traffic off-road and onto rail.
“We also anticipate that new users may introduce alternative technologies and innovation that will make the system more effective and improve service quality [while] access fees will be used to maintain the rail network to a standard required for safe and reliable operations,” said Sangqu.
Port reform
Sangqu acknowledged that international comparisons strongly suggest that South African ports are failing to achieve competitive outcomes and have created serious challenges for the economy.
Sangqu referred to the World Bank’s Container Port Performance Index 2020, published in 2021, where all of South Africa’s commercial ports cluster at the bottom of the 351 ports evaluated based on objective data from shipping lines.
In its quest for the recovery of its embattled ports, Sangqu said that Transnet “would accelerate private sector participation (PSPs) and strategic transactions.”
Transnet affirms its “commitment to attract private sector participation across the business is going to continue,” said the chairman.
The recovery of the embattled Port of Durban (which deals with approximately 31.4 million tons of cargo each year), along with the expansion and modernisation of the container capacity at ports through PSPs, is consistently emphasised by Sangqu as one of Transnet’s top priorities.
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