The implications of Transnet's R51 billion bailout for SA's logistics sector

ANALYSIS by the maritime sector has been mostly positive to the news that Transnet would be receiving a R51 billion bailout for Transnet announced by the Minister of Transport last week.

- YOGASHEN PILLAY

Transnet, in a statement, said that it welcomes the Minister of Transport's announcement of a R51bn government guarantee facility to support its sustainability and long-term growth.

"The facility will enable Transnet to refinance maturing debt and ensure the organisation’s continued access to adequate resources and facilities to be able to continue its operations as well as fund the capital investment programme for the foreseeable future."

Dave Watts, a maritime consultant, said that the communication from Transnet does not make clear how much of the R51bn guarantee will be used to roll over or refinance current debt and how much will be used for increased borrowing.

"Clearly the state guarantees are critical in enabling the organisation to continue as a going concern and provide ongoing services to the South African Logistics sector and broader economy."

Watts added that refinancing maturing debt is not paying debt off; however, it is essential that there is sufficient working capital to enable ongoing operations and capital investments.

"Investment in infrastructure and equipment will, in the long run, enable volume and revenue growth, providing the ability to reduce the corporation’s substantial debt burden.