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National Treasury Extends Support Package to Transnet

Published

5 months ago

December 2, 2023

In a collaborative effort to support the recovery plan of ports and freight rail company Transnet, the National Treasury has granted an immediate R47 billion guarantee facility. According to SANews, this financial support package addresses Transnet’s primary liquidity concerns and meets its debt obligations. The announcement came through a joint statement from the National Treasury and the Department of Public Enterprises.

The provided guarantee facility amounts to R47 billion, with an initial drawdown of R22.8 billion allocated for settling maturity debt and addressing immediate liquidity needs. Notably, the government has opted against an equity injection for the current fiscal year, expressing confidence that the guarantee, coupled with the swift implementation of the Transnet Recovery Plan, will effectively resolve the challenges the state-owned entity faces.

A Guarantee Framework Agreement involving the National Treasury, Department of Public Enterprises, and Transnet will be established with stringent conditions. Continuous review and necessary amendments to these conditions will guide further drawdowns, contingent upon Transnet meeting the specified criteria. The agreement must be finalised within 14 days to mitigate fiscal risks and ensure consensus on the facility’s conditions.

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The statement also outlined ongoing collaboration between the National Treasury and Transnet to explore additional operational and financial revitalisation initiatives. These initiatives include the potential divestment of non-core assets, reducing the current cost structure, and exploring alternative funding models for infrastructure and maintenance needs, such as project finance, third-party access, concessions, and joint ventures.

Emphasising Transnet’s crucial role in the South African economy, the government acknowledged the company’s recent operational, financial, and governance challenges. The grant of the guarantee facility results from ongoing discussions and collaborative efforts to find solutions to Transnet’s immediate and longer-term problems. The government also underscored the need for broader logistics sector reforms to prevent future similar challenges.

Ministers Pravin Gordhan and Enoch Godongwana expressed optimism regarding the guarantee’s potential to assist Transnet. Minister Godongwana emphasised the importance of Transnet’s commitment to meeting stringent conditionalities and promptly implementing reforms. Minister Gordhan highlighted Transnet’s critical role in the South African economy, citing the significance of a well-functioning logistics company given the country’s economic distribution, reliance on exports, and geographical distance from key markets.

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