Transnet’s Freight Rail Division, one of the major contributors to Transnet’s revenue, has to pay R1 billion a month to service its debt as it continues to drag the entity into financial decline.
This was revealed during a meeting with the Portfolio Committee on Public Enterprises and Minister Pravin Gordhan who updated the committee on Transnet’s business operations, rail concessions, maintenance and infrastructure development.
Leading the department, Gordhan began by explaining that both internal and external issues have led to Transnet’s poor financial performance.
He told the committee that he has since asked the Transnet board to investigate various contributing factors to these challenges so that the board and the executive can improve the financial forecast of its various business operations in the coming financial years.
He reassured the committee that each Transnet division was engaged in various initiatives to achieve this.
However, he said that due to years of infrastructure maintenance neglect, the Freight Rail Division has increased the net operating cost from R14.5 billion to R28 billion.
Transnet is now in need of huge capital investment for it to run optimally and must pay R1 billion per month to service its debt, the committee heard.
Some areas of improvement were noted by the committee. The committee welcomed the news that Transnet has curbed irregular expenditure significantly through a process of reform in its internal controls environment and staff have received training to comply with the new regulations.
The committee also heard that Transnet’s turnaround strategy hinged on several things, including the container segment, expansion of port terminals, improvement of rail tracks and the reintroduction of its rolling stock of locomotives to business operations, which is currently sitting idle at a huge cost to the company.
Transnet has since embarked on a public and private sector partnership to invest in its value chain and assets to unlock value to the market.
IOL