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Wednesday, July 24, 2024

Transnet Bail-Out Request Raises Concerns

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Durban – As the South African government grapples with the daunting task of rejuvenating the ailing state-owned entity, Transnet, concerns have been raised about the potential implications of absorbing its massive R130 billion debt.

Despite the urgency of the situation, critics argue that this move may have detrimental consequences for the nation’s fiscal health.

President Cyril Ramaphosa has taken measures by establishing a national logistics crisis committee.

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This committee has been tasked with scrutinizing Transnet’s underlying issues and formulating viable solutions for immediate intervention.

These developments come as Transnet reported a substantial loss of R5.7 billion in the fiscal year 2022/23 and a staggering 23.6 million-ton decline in rail freight, leaving the entity with only 149.5 million tons of freight.

The Durban Chamber of Commerce and Industry, represented by its Chief Executive, Palesa Phili, voiced its concerns in a letter addressed to Public Enterprises Minister Pravin Gordhan back in September.

The letter called for the minister’s intervention in Transnet’s affairs and the removal of Transnet’s CEO, Portia Derby, and her executive team.

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The chamber alleged that Derby and her team were jeopardizing local businesses due to the port’s inability to provide efficient service delivery.

Read | Under Fire Transnet Group CEO Portia Derby resigns

In the letter, the chamber expressed, “We would like to bring to your attention our concern regarding the current chief executive of Transnet, Ms. Portia Derby, and her executive team. The business community of eThekwini has reached a point where we can no longer tolerate her behavior.”

Subsequently, Derby, Transnet Freight Rail CEO Siza Mzimela, and group CFO Nonkululeko Dlamini have all resigned from their positions.

The Democratic Alliance’s (DA) Ghaleb Cachalia weighed in on Transnet’s plea for a bailout, drawing parallels with the financial struggles of Eskom, another state-owned entity.

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He pointed out that Transnet’s situation mirrors Eskom’s difficulties, showcasing an inability to service its debt and a dire need for additional borrowing to maintain minimal operational capabilities.

Cachalia explained, “Taking their cue from Eskom’s debt relief scheme, where a whopping R254 billion in debt will be transferred to the national balance sheet, Transnet wants the same.”

He disclosed that Transnet’s plea was formally submitted to both Public Enterprises Minister Pravin Gordhan and Finance Minister Enoch Godongwana during a joint presentation on the turnaround strategy of state-owned entities (SOEs).

The DA remains steadfast in its opposition to the absorption of Transnet’s debt, expressing concerns that such a move would recklessly expose taxpayers to the financial consequences of governmental mismanagement.

This stance underscores the broader debate over the South African government’s strategy for stabilizing ailing state-owned entities and addressing their mounting debt burdens.

Read | Cape Town Container Terminal Statement Confirms Dire Situation Highlighted by Transporters

As the nation grapples with these economic challenges, the decision regarding Transnet’s debt bailout remains a pivotal point of contention, with stakeholders from various sectors expressing their reservations and apprehensions about the potential consequences of such a move.

The road ahead promises to be fraught with political and economic complexities as the South African government seeks to strike a balance between financial stability and the need for urgent intervention in its state-owned enterprises.

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