DA rejects Transnet debt takeover
1 December 2023
The Democratic Alliance (DA) notes the announcement by National Treasury that it issued Transnet with a R47 billion guarantee facility, effective immediately. The DA unequivocally rejects this guarantee as it heightens taxpayer risk exposure to the ANC’s mismanagement of our logistics and transport sector - which has reached crisis level. The ANC has broken the sector, and its centralized grip is tanking any hope of recovery.
Transnet already has an existing debt pile in the region of R135 billion, which attracts interest of approximately R13 billion per annum. The entity further managed to incur a financial loss of R5,7 billion in the previous financial year and a further financial loss of R556 million due to irregular expenditure.
No guarantee facility can address the root causes of this inefficiency and fiscal irresponsibility. In fact, the Government’s safety net will ensure that the chaos is perpetuated while placing a substantial burden on our already strained national budget and further balloons our growing debt bubble.
Taking a cue from Eskom’s debt relief scheme, where a whopping R254 billion will be absorbed onto the national balance sheet, Treasury has been strong-armed into granting Transnet the same.
Absent this debt relief from Government, Transnet claimed it will not be able to implement its recovery plan for turning around the entity’s dismal operational and financial performance. It even had the gall to preface its entire recovery plan on this very expectation, which is yet to be tabled in Parliament.
That Transnet’s recovery plan has much to be desired has been widely reported. The DA does not have any confidence that it will address the structural issues that beleaguer the entity.
The DA has further forewarned that Eskom’s debt-takeover would establish a dangerous fiscal precedent as other unviable SOEs would come clamouring for taxpayer-funded relief. We remain opposed to the absorption of Eskom’s debt as it recklessly exposes taxpayers to the financial ramifications of governmental mismanagement. The same applies to Transnet and every other dysfunctional SOE.
The DA has an alternative. Exporters who have capacity should be given unconditional access to Transnet corridors to transport their products. Moreover, Government must immediately suspend bureaucratic hurdles, such as BBBEE and localisation criteria, in all procurement processes within Transnet. The business units under Transnet have no validity in central management and ownership. They must also be unbundled, and innovative public/private partnerships must be sought to own and run these as a precursor to privatisation.
Failure to promptly engage in meaningful privatisation and open the market to private investment will condemn South Africa to a perpetual low-growth cycle. Any inertia threatens the prospects of achieving economic stability and places the burden squarely on the shoulders of future generations. Government must act now to initiate the shift away from the unsustainable model of state dependent SOEs towards a robust, privatised, and competitively driven infrastructure landscape.
Issued by Dion George, DA Shadow Minister of Finance, 1 December 2023
