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S.African Transnet receives new government guarantees worth more than $5 billion

The transport ministry announced on Sunday that the South African government will provide Transnet with an additional 94.8 billion Rand ($5.34 billion), as a guarantee facility, to help the state-owned logistics company's recovery plans.

The facility is on top of the 51 billion rand guarantee that the government announced in May for Transnet. This includes 41 billion rand for the company's financing needs for the financial years 2025/26, 2026/27, and 10 billion for debt service and capital investment.

In a statement, the ministry stated that the new guarantee includes 48,6 billion rand for all debt redemptions in the next five-year period, as well as an additional 46,2 billion rand against any further credit rating actions.

Transnet's turnaround strategy is supported by the government. It aims to return freight rail volumes to 250 millions metric tons annually at the end of this period. These volumes dropped to 152 millions metric tonnes in the 2023/24 fiscal year from a high of 226,000,000 metric tons during 2017/18.

Transnet is unable to provide reliable rail freight and port services because of equipment shortages and maintenance delays after years underinvestment. The widespread theft of cables and vandalism has further restricted its capacity.

Andile Sangqu, the company's chairperson, said that the debt of the company had risen from 138 to 145 billion Rands at the end 2023/24 year. The company's loss increased to 7.3 billion Rand in 2023/24 from 5.7 billion Rand the previous financial year.

Transnet's problems have cost mineral producers, primarily coal and ore producers, billions of rands in lost revenue. Transnet's freight volume is dominated by these exporters, who account for 70% of its total.

A lack of rail capacity has forced most South African chrome exports to reach the ports via road. This increases costs and damages roads as well as the environment.

(source: Reuters)