Transnet’s Progress Falls Short of Targets Despite Revenue Growth

State logistics group Transnet has reported an increase in the volume of goods handled by its railways and ports, as well as a rise in revenue. However, these improvements, while significant, still fall slightly below the targets set by the company for its recovery. The positive trends come amidst a period of transition in Transnet’s leadership and a push for legislative reforms aimed at facilitating private sector involvement in the nation’s logistics sector.

During a media briefing held at its Johannesburg headquarters on April 26, Transnet provided an update on its recovery process, outlining key improvements achieved during the financial year ending March 31, 2024. Preliminary estimates revealed a 1.5% year-on-year increase in total rail volumes, reaching 151.7-million tonnes. Revenue also saw a notable 12.8% year-on-year surge, amounting to R77.69 billion, while container handling improved by 2.2% to 4.15-million twenty-foot equivalent units.

Despite these gains, Transnet fell slightly short of its Recovery Plan targets, reporting figures approximately 1-2% below expectations. The company, burdened with around R130 billion in debt and facing a significant infrastructure backlog exceeding R50 billion, recognizes the critical need for sustained improvement.

Group CEO Michelle Phillips attributed some of the improvements to enhancements in equipment and rolling stock availability. “We’ve had to improve on our equipment and rolling stock availability,” Phillips stated. “We’ve been able to achieve a return to service of an increased number of locomotives, [and we have] also seen, in the ports, delivery of some critical port equipment.”

Transnet Chairperson Andile Sangqu acknowledged the progress made but cautioned that the organization is still facing challenges. Sangqu emphasized the importance of continued efforts to attract private sector participation across the business to drive further enhancements in operational efficiency and financial performance.

Recovery Plan and Structural Reforms

Transnet’s journey towards recovery has been marked by concerted efforts to address systemic issues and enact structural reforms. In 2023, the establishment of the National Logistics Crisis Committee brought together government stakeholders and private business leaders to tackle the challenges facing the logistics sector.

Following the appointment of a new board in July 2023, Transnet introduced a phased Recovery Plan aimed at stabilizing operational and financial performance by March 2025. Central to this plan is the implementation of structural reforms in rail and terminal operations, with a focus on encouraging private sector involvement to enhance efficiency and drive financial sustainability.

Rail Reform

Years of inefficiencies within Transnet’s rail operations resulted in a decline in freight volumes. While the organization recorded an improved volume of 151.7-million tonnes by March 2024, this figure fell slightly short of the targeted 154.4-million tonnes for the financial year 2023/24. CEO Michelle Phillips attributed this shortfall to operational challenges, including derailments experienced towards the end of the year.

Sangqu highlighted the positive impact of legislative and regulatory changes, such as the National Rail Policy and the Freight Logistics Roadmap, in facilitating improvements. The introduction of a draft Network Statement signifies Transnet’s commitment to opening access to more operators on its network, thereby fostering competition and innovation in the sector.

Port Reform

Transnet acknowledges the need for significant improvements in the performance of South African ports, as evidenced by international comparisons and reports such as the World Bank’s Container Port Performance Index. To address these challenges, Transnet is prioritizing the acceleration of private sector participation and strategic transactions in port operations.

The recovery of key ports, particularly the Port of Durban, along with the expansion and modernization of container capacity through private sector partnerships, remains a top priority for Transnet.

In conclusion, while Transnet has made strides in its recovery journey, there is recognition that further efforts are needed to fully achieve the organization’s targets. The commitment to embracing private sector participation and implementing structural reforms underscores Transnet’s determination to enhance efficiency, competitiveness, and sustainability in South Africa’s logistics sector.