South Africa’s transport parastatal Transnet may need up to R25-billion in funding over the next five years from the financial markets, Transnet group treasurer Swazi Tshabalala told the parliamentary public enterprises portfolio committee on Wednesday.
Tshabalala — who was accompanied by Transnet chairperson Fred Phaswana and chief executive officer Maria Ramos — said that in every one of the financial years from 2005/06 to 2009/10, Transnet would have to borrow money in the financial markets.
Noting that Transnet was committed to capital investment during this period of over R40-billion, she said about two thirds of this would be generated from the different businesses in the Transnet stable — Spoornet, the National Ports Authority, the South African Port Operations and Petronet.
The major Transnet subsidiary — South African Airways — ultimately is to become a stand-alone state owned enterprises under the Department of Public Enterprises.
Tshabalala said over the five-year period there was about R13-billion in loans and bonds maturing.
“If you add about R12-billion shortfall from operations of the business and this R13-billion then the overall Transnet funding requirement will be R25-billion over the next five years to executive its strategy,” said Tshabalala.
“It is important, however, to point out that this is in some sense… the worst case scenario. It does not reflect any key turnaround issues. What is not reflected in that number [R25-billion]… is cash from the disposal of non-core businesses,” said Tshabalala.
Tshabalala noted that Spoornet was trying to reduce operating costs and introduce efficiencies in the business. She noted that Transnet had lost R21-billion in the financial year 2004/05 when one excluded the embedded derivative which saw profit before tax of R3,5-billion — but this was pointed out to be a once-off advantage.
In terms of the report by Transnet to the committee, Spoornet was the only core business that was “underperforming”.
Noting its nine billion rand worth of assets — out of about R72,6-billion of assets held by Transnet as a whole — Tshabalala said that this should be generating a 20% return which could be translates into about two billion rand at its bottom line.
“If we have an additional two billion rand [each year] over the next five years that will reduce [by about R10-billion] our funding requirement in the next five years,” she said. – I-Net Bridge