In its budget review, the treasury flagged Transnet’s high debt levels, saying it needs to make faster progress on its plan to improve operations and finances
The treasury will not provide bailouts to struggling state-owned enterprises in the 2025 budget and will instead focus on improving governance at these entities, it reiterated on Wednesday.
Public and state-owned entities, including Transnet and Eskom, have posed a major risk to South Africa’s fiscal position, the treasury said in its 2025 budget review tabled in parliament by Finance Minister Enoch Godongwana, noting that most of the country’s contingent liabilities emanate from them.
“For over a decade, most state‐owned companies … have not met the legal requirements to maintain sustainable profitability, manage risks effectively and generate returns while ensuring prudent use of public resources,” the treasury said.
“Various initiatives, including turnaround plans agreed with government, are under way, but progress has been mixed. Notably, Eskom and Transnet are implementing recovery plans agreed to during 2023/24.”
Transnet posted a loss of R7.3 billion for the 2023-24 financial year — worse than the loss of R5.7 billion in the prior year — largely due to increased finance costs, while additional debt and higher interest rates pushed finance costs to R14.3 billion in 2023-24, placing further strain on cash flows, according to the review.
The treasury said, instead of bailouts for state firms, the government would apply itself to improving governance and transparency at these institutions.
“In addition, government will support critical capital investments through different mechanisms, including credit guarantees, on-lending and grant funding, where appropriate,” it said.
In its 2023 budget review the treasury announced the government’s decision to provide Eskom with debt relief amounting to R254 billion to strengthen its balance sheet, restructure the business and invest in maintenance.
On Wednesday, it said that, by 31 March this year, the government would have advanced R140 billion in debt relief to Eskom. This, it said, was a reduction of R4 billion from the original amount projected up to this point “owing to the utility’s failure to meet the deadline for the disposal of the Eskom Finance Company”.
“As the agreement moves towards closure, government has decided, in consultation with Eskom, to simplify the final phase of the debt relief — a change that also reflects some improvement in the utility’s financial position flowing from the interventions to date,” it said.
“The final R70 billion debt takeover will now be replaced with two advances amounting to R50 billion: R40 billion in 2025-26 to redeem debt maturing in April 2026 and R10 billion in 2028-29 for debt maturing in May 2028. In summary, over the five-year period, government will have provided Eskom with loans to the value of R230 billion to assist the utility in repaying its debt.”
Over the next three years, an estimated R1.03 trillion has been allocated to spending on public infrastructure projects by state-owned companies, as well as national, provincial and local governments.
This includes R402 billion for road infrastructure, with R100 billion in investments by the South African National Roads Agency, while R219.2 billion will go towards energy infrastructure and R155.3 billion will be spent on water and sanitation infrastructure.
The treasury said, since 2018, Transnet had shifted funds from capital expenditure to debt servicing. But while this had prevented default, the shift had come “at the expense of maintaining and expanding critical infrastructure”.
It said the government had provided a R47 billion guarantee in December 2023, which the freight and logistics utility used to “refinance maturing debt and take on new debt”.
The government is supporting critical infrastructure projects, such as the expansion of the landside container terminal in Cape Town, while avoiding debt relief or general balance sheet support, treasury said.
Last month, Transnet received a R892 million fleet of straddle carriers and gantry cranes at the Port of Durban, part of the first batch of more than 100 units of equipment to be delivered to the port this year to boost its cargo-handling capacity and get it back on track.
Additional equipment to be delivered to Durban Container Terminals in 2025 include four ship-to-shore cranes, 40 haulers and 67 trailers, with arrival scheduled from April to December. Port Elizabeth Container Terminal will take delivery of 12 straddle carriers, while Cape Town will receive 28 cranes and straddle carriers in the 2026 financial year.